Estate tax only starts at 13 million, but a shit ton of poor Republicans are worried about it…
It’s amazing how many Republican voters foam at the mouth about inheritance taxes when it won’t ever affect them or anyone they know. Temporarily embarrassed 14-millionaires.
It’s one of the few taxes that I think are completely valid. When you’re dead, you don’t need your income anymore, so there’s really no negative impact to you. Yeah, it impacts your heirs, but you can provide for them in other ways, like paying for their education, giving them gifts while you’re alive, etc.
Let’s not act like they don’t get anything, it’s just taxed.
Yup, and current rates are quite reasonable.
You don’t know that
How to get rich
Step 1: have enough money to buy assets
It’s just that easy
I think you accidentally wrote rich dad poor dad
This is why billionaire defenders who say people like Musk and Bezos aren’t really that rich because they have little liquid funds and they can’t sell stock are bullshit. They have nearly infinite money with these loans us normal people can’t get. The closest thing we have are mortgages against the only thing of value many people own.
I feel like I’m too poor to understand what happens between steps 2 & 3 without having a job. How are they paying the loans off? Where does that money come from? And if they have an income in order to pay the loan, why get the loan to begin with?
Hypothetical: Assets like land and housing are reliably expected to only increase in value.
Once one loan runs out, the assets are worth more and a new loan will be potentially considerably more than the previous.As a second hypothesis, I suspect that fractional reserve banking plays heavily into this.
I don’t think fractional reserve banking is necessary here. Fractional reserve banking just makes it easier for banks to make loans, it has little to do with rich people taking advantage of tax law.
For example, the most obvious loan is a margin loan, which doesn’t require any fractional reserve banking whatsoever. Quite often brokerages will offer margin loans backed by the assets themselves and force you to sell if you go under a certain loan to value limit, which means the risk is incredibly low. Banks will then use the loans as a replacement for savings accounts to earn reliable interest on cash assets, so it doesn’t need to be tied to reserve rates. However, if reserve rates are lower, they’d probably take advantage.
In fractional reserve banking, banks make loans with deposits, and they make more loans using those loans as assets, and federal rules stipulate that they need you have a certain percentage of the loan values liquid (i.e. so depositors don’t lose their money). With margin loans, they don’t use savings deposits to make loans (there are no savings deposits, everything is invested in a fund), they instead use brokerage assets. So there’s no fractional reserve system at all because the only ones impacted are the brokerage themselves.
The current loan gets rolled into the next loan and becomes a revolving door of credit. As long as you don’t spend faster than the assets appreciate you’ll always end up ahead.
you take out more loans. as long as the interest you pay is lower than the gains you’re making in the stock market or wherever, you’re ahead and not paying taxes.
This is all good and well, until a 2008 happens. That’s why strategies like this are only reliable if you have generational wealth to start with. You have to be able to withstand massive risk.
Massive is relative. If you have $1M and need $40k to live on (4% rule), a 50% downturn is massive. If you have $10M and need $100k to live on, a 50% downturn still leaves you plenty of room.
You don’t need generational wealth, you just need a enough that the general “rule of thumb” is way more than you’d ever need to spend. That can be amassed in one generation.
I was thinking that too. Works as long as asset appreciation > interest.
We’re in a higher interest rate world with a recession on the horizon, so this strategy may not work moving forward
This is why we need a wealth tax. Anything over 10 million, 5%. Every year!
Loans are not taxable income is something that got left out. So you take out loans at interest rates lower than taxes. But yeah, this is all correct. We got offered a ridiculously low rate loan against our retirement funds, might as well have been zero, with no due date. Just a constantly revolving line of credit. Didn’t take it.
