A fascinating reddit post was mentioned here about a month ago - about the mildly famous (if a little macabre) 'Buy, Borrow, Die' cycle used by the obscenely-wealthy to - multi-generationally - avoid tax obligations.
https://old.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
HN comments: https://news.ycombinator.com/item?id=41408772
This is something people love to rage about, yet it's not one with an obvious fix. The counterpoint is that this leaves money invested, which means others invest in other things, and still entails interest payments. It exists in part because you don't want someone who inherited his parents' house and wants to move in to go broke trying to pay taxes, or have to re-mortgage it, with an even stronger case with family farms.
And it exists in part because there are so many legitimate cases for doing it, even as a wealthy person: pretend you're a relatively successful businessman whose company has appreciated to $50mm. In this world, you can't just leave your gains unrealized and borrow against them. So you can
- Try to find somebody to sell to, which is a sketchy move. Of course, as your company continues to appreciate, you will be forced to continue reducing your ownership stake. Over time, this will make keeping a family business in the family largely impossible.
- Try to find money to pay taxes. This means less money for R&D, for expansion, for your employees.
- Just dump the whole business to private equity and move on.
These all suck, and the government generally collects money on assets as they move not assets at rest. I see no way to resolve it that isn't suckier than the status quo and so am left with the conclusion that people who agitate for such changes are more resentful of the rich than they are worried about the justice or lack thereof of tax avoidance.
The obvious fix is to not step up basis on death.
The estate tax already means that the estate of a person who dies may need to sell / divide / split stuff to pay the government. There already is no fundamental protection for an asset passing unscathed from a parent to a child. I don't see how not stepping up basis qualitatively changes this.
And your argument of "you want a child to be able to inherit a family business / house and keep the family business protected" is incredibly axiomatic and the antithesis of a tax. While it's inherently consistent, you're making the same general argument as "all taxes are theft".
Yes taxes may be theft in one view, but under our current society, raising revenue for the common welfare is also a virtue, so we can't have have it both ways.
It's a funny argument the one about the family farm. In this case it's not even about inheritance tax. It's a sob story about a guy who couldn't inherit the farm because his dad owed the state money because they had let him not pay tax on his capital gains for a long time.
Sorry for not tearing up.
You can't just arbitrarily set the status quo that way, can't just sneak a premise that the state has default a right to collect a piece of arbitrary appreciation on an asset (as all assets are used for speculation) when the owner hasn't actually gotten cash from that, and that any government that doesn't tax that is just cutting someone a break on something rightfully owed. The state of nature is no tax, and as it's unpleasant, we create societies and fund them with taxes that we must deliberate and determine to be just and reasonable. You don't get to argue from the point that your preferred taxation regime is simply how things should be and that how things are is therefore wrong, especially not without a justification.
I'd also point out that people's assets have gone up in nominal terms in the past few years, but for many that's not reflective of an increase in purchasing power. Much of that increase is due to excess inflation from the profligate overspending of our past two administrations, so the cycle currently looks like this: government prints money and causes inflation -> your assets are "worth more" -> taxman says "give me a piece of that" even though your real wages have fallen or have just barely recovered to pre-2020 levels. And of course, even if we index to inflation, that will necessarily hit the poor harder: food and energy are deemed "too volatile" to include in headline CPI, but as necessities, they comprise a larger part of poor households' spending and so inflation will hit them harder than the numbers suggest.
It also rarely applies to farms. https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threa...
> The counterpoint is that this leaves money invested, which means others invest in other things,
This is a bad argument. Taxes are also money invested, in schooling, infrastructure, etc.
It's a very common fallacy of people criticizing public spending to point to the stock market and say "Look! Imagine how rich we would be if we had just invested the public spending instead." Completely falling into the trap of discarding the value growth of public investments just because they are not measured and advertised the same way.
> Taxes are also money invested, in schooling, infrastructure, etc.
Not presently. Most tax dollars are spent elsewhere and infrastructure/education get less than 7%: https://fiscaldata.treasury.gov/americas-finance-guide/feder...
Even that spending is not effective. Drive California roads and you’ll often see fixes that aren’t much better than the damaged roads they replaced. And let’s not talk about our wonderful train projects…
In theory, this money would make a lot of difference. In practice, it’s heartbreaking.
It's invested. In infrastructure, schooling, endless wars on foreign soil, etc. You not agreeing with the quality of the investment is a separate issue. You probably don't agree with every investment in the private sector either.
This is something people love to rage about, yet it's not one with an obvious fix.
In Canada, assets are deemed to have been disposed of upon death (or gifting) so the estate pays capital gains taxes on the accrued profit. There are a few exemptions for political reasons, e.g. to allow farmers to pass appreciated farm property to their children tax free, but they're sufficiently limited that they don't cost very much.
Seems like an obvious fix to me -- when the cost basis is stepped up, taxes are due -- and in practice it seems to work pretty well.
Family farms are a good example but there are still plenty of others like a family business. I wouldn't care to see an increasing fraction of assets fall into institutional ownership simply because people are taxed out of owning them intergenerationally. There's a massive difference between "the government will tax you for part of your value" and "the government will, over a sufficient time, tax you entirely out of even a growing asset."
If the concern is how much the policy costs the nation, then I don't think that's a sufficient reason to change things either. The top 1% in America hold about 31% of a total $140 trillion, or $43 trillion. This is, in a very optimistic case, around twenty years worth of the current federal deficit. Given the trajectory it's taken over my entire lifetime I find it unlikely it would last more than a decade. If the concern is cost, we have a "money out" problem in the US, not a "money in" one, largely driven by our ballooning mandatory spending (much of which goes to a radically outsized group of old people, whose entitlements neither party will touch despite their outsized ownership of wealth) and the high interest expense that's caused. Even if we outright confiscated every dollar of the 1%'s net worth, that wouldn't represent a remotely sustainable solution. Hence my comment about most of these policies looking more like schadenfreude than a sincere desire to fix things.
Amd this is why there are no mid-sized family businesses remaining in Canada, except for the occasional farm. Billionaire oligopolies are all that remain as only they are sustainable in the tax farm once known as the great white north.
Billionaire oligopolies are everywhere, this isn't a uniquely Canadian problem. TFA points out we live in an era of Gilded Age inequality.
Attach a lien to the property. If it’s a small business, the government’s share of the step up is put against the business. There will still be shenanigans. But it avoids forcing liquidation wile preserving the state’s interest.
It's absolutely wild the extent to which our tax code pushes taxes away from capital and towards labor. I thought that culturally we were supposed to value working for a living, but our tax code clearly favors owning things for a living, and not by a small margin.
I don't know which is worse, though: the situation itself or the clown car that pulls up every time someone proposes maybe shifting some of the tax heat away from work and towards assets, with useful idiots tripping over themselves and each other as they pile out of the car to explain how this is actually good and anyone who things our economy is overweight "rich get paid for being rich" and underweight "poor get paid for working" is actually just envious and there are no structural problems at all. Ignore "the wedge," just stop being envious! Nothing to see here!
>This is something people love to rage about ...
Yes, people get angry about this, but no one has provided any statistics showing this is actually a common loophole.
The basic idea in the reddit post is that there were lenders giving multi-decade loans at a tiny interest rate (only payable upon death with also sharing a % share of the gains).
Maybe there are lenders who have lots of capital and also don't understand the time value of money, but no one has actually provided the names of these lenders, etc.
According to this: https://finance.yahoo.com/news/jeff-bezos-sell-5-billion-185.... Bezos has sold around $13.4 billion in stock in 2024. If he could easily avoid millions (maybe billions) of dollars of capital gains tax by this one simple trick, why didn't he?
You missed the obvious one - borrow against the asset to pay the tax.
A caveat is that this strategy requires owning assets with a lot of liquidity. One of the points raised during the whole “taxing unrealized gains” episode is that the vast majority of assets (~70%) held by the ultra-wealthy effectively have very little liquidity. As a consequence, they can’t really be used as cheap collateral for secured debt.
ah missed this one, thank you!
Can you explain to me what a post about avoiding taxes has to do with a post about not avoiding taxes?
I don't expect you were genuinely seeking an answer, however I'll point out that the crux of the mystery described in TFA was that it was such a rare event - someone tremendously wealthy didn't avoid this tax - that it was note-worthy.
we regularly get comments like this, and people on HN still question the value of a liberal arts education
Are you joking? How is here is an extreme case of X doesn't relate to an extreme case of -X?
Matt Levine touched on this briefly today, and I liked his two cents:
>It’s kind of cool? Like you could imagine a hierarchy, in roughly ascending order of wealth:
>Too poor to pay taxes.
>Rich enough to pay taxes.
>Rich enough to not pay taxes.
>Rich enough to not even bother with not paying taxes.
In 2021/2022 there were 60 people in the UK who probably fall into that last group. Together their taxes accounted for about 1.4% of the UK tax bill despite being something like 0.002% of the population.
Are you familiar with the concept of noblesse oblige?
Further does this include all taxes or just income taxes which are only a portion of revenues used to make less well off people look like moochers.
For instance, in the US, there’s social security and Medicare taxes -- and payroll tax, the social security and Medicare tax contributed on behalf of employees by employers. Renters also pay their landlords property taxes. Sales taxes, tariffs, etc are all born by end users.
Renters do not pay property tax in the US. That liability is entirely on the owner.
Your statement is technically correct. It's also technically correct to say that diners, not restaurant owners, pay sales taxes.
The reality is more nuanced. Introducing a sales tax on restaurant meals affects both diners and restaurant owners: restaurant owners can't pass on the whole increase to diners, and diners cannot afford to go out as much.
Similarly, property tax levels influence landlords' decisions to enter or exit the rental market, impacting housing supply and, consequently, tenant rents. 'Paying' a tax has two distinct meanings:
- Who bears the economic burden after the tax is introduced
- Who is legally responsible for paying the tax
These two concepts are not always aligned.
This is a silly distinction because by that standard you could equally say that my employer pays my rent because they are the source of income which I use to pay it.
Property tax in the US is a liability of the owner. This is in contrast to other systems like the UK where it is a liability of the occupant.
The incidence of taxation is a well-studied concept in economics, with a solid theoretical foundation and empirical evidence backing it.
You dismiss its application as a 'silly distinction' and repeat the fallacy that the incidence of taxation falls on the party who is legally liable.
If you don't believe me, and don't want to read up on 'tax incidence', consider what would happen if sales tax were paid by retailers instead of customers. Would the flow of money change at all? Would any party be worse off or better off?
This is an entirely ridiculous argument. Who actually ‘writes the check’ is actually important in a discussion about who writes the check, despite the fungibility of money. Renters don’t pay the owners property taxes in the US, even if they pay rent. Full stop.
Why this matters is because in some cases, owners can end up ‘under water’ with even rent not covering property taxes in the US.
In other places, that may not be possible.
What percentage of the wealth did they control?
Pretty obscene that somebody could have so much wealth that $7,000,000,000 is just the tax bill. Also weird that it's framed as a "gift."
The article highlights that it’s not actually that hard for the ultra-wealthy to avoid a massive estate tax bill through proper tax planning and investment strategies. What’s striking here is that this individual wasn’t even the richest person to ever die, yet he paid the largest estate tax in history, likely by choice.
Interestingly a lot of the larger philanthropic organizations are just as administration heavy as the US government and suffer from the same mission creep and the same obfuscated, bureaucratic decision making process, etc. Not to mention the leadership is often richly compensated (i.e. $1M in salary) and non-elected.
In fact we should probably celebrate gifts to the US government more than we do.
> we should probably celebrate gifts to the US government more than we do.
I had the idea that we should put a donation box on tax forms. The 100 top donators get on the “US 100” list (like Forbes) but it’s based ONLY on how much you donate, not how much you claim to be worth.
It’s one thing to claim to be rich to a Forbes reporter, it’s another to have the (tax) receipts to back it up.
This is sorta genius. I could totally see Musk and Bezos engulfed in an ever escalating leaderboard feud:
https://www.forbes.com/sites/kenrickcai/2021/09/28/elon-musk...
reminds me of the way dubai auctions off the 3 digit car license plates, then hotels do things like only letting low number license plates park out front
Billionaires flaunt their wealth via yachts, mansions, space rockets and super-PACs. Which to me seems way more fun than getting your name on a tax list…
I think it's a great idea. It would generate good press for the donors and some billionaires care a lot about that. Guys like Buffett would do it. It's basically free money for the government.
Most tremendously wealthy people don’t want to be known for being tremendously wealthy. Unless being known for being tremendously wealthy is a part of your wealth accumulating strategy, the attention it brings is almost entirely negative. Being tremendously wealthy without millions of people constantly chirping about clawing as much of it away from you as possible, or demanding an explanation from you every time you wipe your ass is a far better outcome, and most people who are savvy enough to become billionaires are savvy enough to figure that out pretty quickly.
My hunch is that taxes are the most efficient 'charity', even with the bloat, and everyone's too busy sniffing farts in their corner to see it.
Not only that but it’s also the structure that enabled the riches in the first place. I don’t see why more people don’t do this.
Mostly because of a very successful propaganda campaign by people who sought to loot the post-war economic boom
Generally speaking, the sad truth of a complex economy is that coordination is hard, and there's usually a short-term privatized gain to be had by someone willing to poison the future and the commons. No amount of benefit to humanity overall or even the specific society such a person lives in will convince a person who simply doesn't care about anyone else. Fortunately for humanity, a very small minority of people actually operate like that. Unfortunately for humanity, some of them have managed to accumulate a lot of power
Well said! I feel better already
No thanks, I’d rather keep more of my paycheck.
The ultra rich don’t get paychecks. If you’re thinking in terms of “paychecks” you’re not who they are talking about when they say “tax the rich.”
100% this. This reminds me of what my SO says: if you have to work, you are not in the upper class. I don't think I agree with this statement fully (I personally think that top decile by income is already upper class), but I feel like I'm becoming more open to re-evaluating my opinion...
Anyone can make a voluntary contribution to the United States Treasury: https://fiscal.treasury.gov/public/gifts-to-government.html
I always wondered if there was a way to effectively "burn" one's entire wealth, creating a small deflationary event that would increase the value of existing dollars. How could one do this? Donate to the Federal Reserve? Or would you literally have to cash everything out and burn it?
According to my understanding, burning US dollar bills, donating to the Fed (if such a thing is possible) and donating to the Treasury are approximately equivalent in their effects.
What puts a lid on how much money the Fed creates is the desire to keep inflation to reasonable levels, preferably 2% per year. Your burning your cash allows the Fed to create more while adhering to their inflation target. Someone please correct me if I am wrong, but my understanding is that although the Fed decides how much money is created, the Fed is not allowed to keep or to spend newly-created money, but rather must give it to the Treasury (perhaps through some complicated or non-obvious mechanism) which makes it available for the government to spend.
At least one way they do this is to buy treasury bonds. It is not clear to me what happens to the interest though .
In fact, dragons are important stabilizing influences in dungeon economics. The hoard of gold isn't inflationary until the adventurers liberate it and start buying wands and stuff.
Reminds me of something I read years ago about how Ultima Online would create "gold sinks", super expensive items that served no purpose other than help remove gold from the economy and prevent inflation.
This is a problem with all kinds of virtual world economies. Players accumulate so much gold that some substitute becomes more useful. Diablo II had the Stone of Jordan, for example.
I guess the trick there is they don't spend it. The money leaves the virtual economy. IRL that's impossible.
A big part of modern monetary theory is taxing the newly printed money and putting it towards (wasteful) government programs to "burn it" in a sense.
Predictably, politicians who support MMT only did the printing part and skipped that bit once inflation started.
That does not feel like burning the money, more like propping up the private sector (naively, government's deficit is going to be private sector's surplus if you don't actually reduce the amount of money in circulation).
How does that burn the money? If the government is spending the money, it's going to federal employees and purchasing good and services from the general economy.
Why is that obscene? Presumably the person created something very valuable to the world. Sure there are zero-sum ways to generate wealth (e.g. suing people, theft, front running trades) but generally that kind of wealth comes from actually generating something that people value.
The word “Presumably” is doing a lot of heavy lifting there. That Econ101 justification is harder and harder to keep up as you learn more about both economics and the real world.
For detailed counter arguments, see Branko Milanović Global inequality: A New Approach for the Age of Globalization, James Kwak Economism: Bad Economics and the Rise of Inequality, Walt Bogdanich & Michael Forsythe When McKinsey Comes to Town: The Hidden Influence of the World's Most Powerful Consulting Firm, and many other books.
If you need to pull out a library of texts and appeals to authority to rebuke OP…yet aren’t able to actually communicate a rebuttal yourself…I would argue your position is more of a religious one than one based on an understanding of the “real” world.
Hasn’t it largely been finance and inheritance related, until very recently when tech joined the scene ?
Given the way everything is being made into its crappier form, it’s arguable that even tech isn’t “adding value” anymore.
I'm sure the value they created trickles down?
The article says that he made it by stock trading. It is, at best, difficult to articulate how that could be creating value rather than capturing it. Many of the world's billionaires made their money that way.
Doing something positive-sum is a way to become a billionaire, but many people are very handsomely paid to ensure that their clients are on the good side of zero-sum transactions.
He did it through offering a _money management_ service to large institutions and wealthy individuals.
That money management service includes, amongst other things, picking stocks. But that's the tactical "what". The value-added element is that he preserved and grew that wealth instead. It turns out that is hard to do, and is indeed a positive sum service to customers. They get to relax _and_ make money. Great outcome.
Yes, he was capturing value for his clients, and getting paid some of that. That isn't the same thing as doing something that increases the amount of wealth in the economy, which was my point.
The entire point of the stock market is to get capital to companies to allow them to do things that may increase wealth (could be local, state, country or globally). Successfully doing this means the companies he supported did well.
Taking money away from mismanaged companies, and giving it to well-managed ones, is a net positive of stock trading. Another net positive of stock trading is making buyers and sellers available all day, for anything on the market. Yet another benefit of stock trading is to make it more difficult to manipulate the market - there's a reason why pump and dump scams only occur with assets that see very little attention (i.e. are low-volume).
> Taking money away from mismanaged companies, and giving it to well-managed ones, is a net positive of stock trading.
Where "well-managed" means "good at delivering money to its shareholders", which is at best obliquely related to a positive impact on the world. (Also, I'm skeptical that the stock price in itself makes that much of a difference to what the company is able to do.)
> Another net positive of stock trading is making buyers and sellers available all day, for anything on the market. Yet another benefit of stock trading is to make it more difficult to manipulate the market - there's a reason why pump and dump scams only occur with assets that see very little attention (i.e. are low-volume).
In other words, the benefit-to-the-world of stock trading is that it makes it easier to trade stocks? And both of these are the result of unprofitable trading as much as profitable trading, so they can't be the proof that the money comes from the value delivered!
Not GP, but if I recall correctly, "taking money away from mismanaged companies" only occurs if the companies choose to do another issuance of shares in the future to raise equity, or stock options in the future to compensate people, in which case they would have to issue shares at a lower valuation, or issue more stock options to provide a similar benefit, than if they were a desirable company.
But stock trading also penalizes well-managed companies in slow-growing or more mature industries by giving them a higher cost-of-capital, just as it would if they were poorly managed. It seems a haphazardly blunt instrument for allocating liquidity to value generation. It piles on where rewards seem ready to be reaped, and makes it harder for mature sectors to renew or reinvent themselves.
Does the quality of management of a company actually dictate its positivity to the world at large? Seems like a quite unrelated signal.
The world's not all tobacco advertising and chemical spill coverups, there are also dishonest mechanics and dirty restaurant kitchens.
Do you really think a single individual could make $7B of profits from stock trading? They'd need to be trading $30-100B. Point72 manages $35B and has almost 3,000 people on staff.
> Presumably the person created something very valuable to the world
Or they are a rent-seeker, or a straight-up thief that sucked a lot of value out of the world. (Or one of their ancestors did, etc, etc.)
Or they robbed Peter to create value for Paul, and took a share of the difference.
These are all tried and true mechanisms for wealth generation. Without any information, you shouldn't assume that their contributions were net-positive.
Gift tax is a tax on gifts. It's not a tax that happens to be a gift.
https://www.irs.gov/businesses/small-businesses-self-employe...
It's not real money. They aren't holding all the gold like a dragon. Or maybe they are, but that isn't hurting anyone, it's wealth not consumption. They consume the same number of calories as a poor person. They breathe the same amount of air. Maybe they have a few extra bedrooms, but their consumption could easily be less than a millionaire.
>Also weird that it's framed as a "gift."
https://www.irs.gov/businesses/small-businesses-self-employe...
https://www.irs.gov/businesses/small-businesses-self-employe...
>The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.
If you think wealth is zero-sum game you are in the wrong forum: https://www.paulgraham.com/wealth.html
He/She could have made their money by inventing something that saved millions of lives, you know nothing.
What it's really obscene is how the government can collect that kind of money like is nothing and it squanders it in bureaucracy.
Peak HN. (I feel comfortable saying that considering the link to a pg article and “you are in the wrong forum”)
In the face of calling out someone else’s ignorance by saying we are all ignorant then going on to assume the thing you like is wonderful while assuming the thing you hate is terrible.
Classic. PG would be proud.
Paul will share all his wealth with the boys. nomdep is on the top of his list, like the pup waiting to suck the mother's tit.
Wow, at the very top? I'd imagined I would be in the middle at most
The link you shared is kind of deranged. I get where it comes from, but if that is basically your world view, a little getting out wouldn't hurt you.
> Classic. PG would be proud.
That’s bad?
This $7B is enough to fund the US Federal government for about 8 hours
A single person funding a government for >330 million people even for only 8 hours is pretty impressive.
Gives off malcador holding the golden throne for a short time energy
Or less than 2.5 days of interest payments on the federal debt
Yes, what a colossal waste - would have been much better going to charities.
One of the funny takeaways here is: there are so many more billionaires out there, who spend considerable effort to remain off these lists and otherwise anonymous. I work with one, and he's not on ANY of the Forbes or Bloomberg lists, though articles about his projects and investments obviously make the news. That's, as the article alludes to, the funny thing about private equity: it does a very good job _staying_ private.
And then there are those who try very hard to get on the list. I know at least one famous one.
Does the IRS know?
The IRS doesn’t track assets, so unlikely. They don’t really even know how wealthy small business owners are
> There are many complexities, but one popular technique is to put assets into trusts that allow the returns to accrue for heirs without taxation. Nike founder Phil Knight, for example, put his company’s stock in a series of trusts to benefit his children. The trusts pay him a modest return, but the rest of the gains avoid incurring estate tax, including Nike shares that were worth $6.1 billion in 2021, Bloomberg reported.
…
> Behn’s clients typically want to maximize the money they leave for their children or establish a philanthropic legacy; some seek to do both.
I’m sure that the numbers on these schemes work out favorably on paper, but if you lived through WW2 I wonder if you might be willing to pay a premium to give your immediate heirs maximum flexibility, knowing that the future is unpredictable.
What are the odds of something like WWII though, compared to the odds it’s all spent by the second generation?
> Last year, observers with the economic equivalent of a radio telescope detected a radiating anomaly on the February 28, 2023, daily balance sheet of the US Treasury Department: a $7 billion estate- and gift-tax payment.
Where can one find this daily balance sheet?
What does being rich even mean? For us it might be the total sum of shares, realestate, cash, minus debts. If you're hiding your wealth then what does it mean to "have" that wealth if no one knows it belongs to you? I guess it comes down to the wealth you can control in your favour, but then how is that different to being in congress?
> but then how is that different to being in congress?
Less work, less risk, the ability to corruptly influence multiple people in congress by proxy rather than scrounging around for funds from corrupt private individuals out to influence policy in their favour.
Wealth is a proxy for having options, even if you do not exercise them. There are thus many forms of wealth, and some do not translate directly across domain boundaries.
Arnold Schwarzenegger famously explained that he remains committed to a demanding bodybuilding regimen even long after becoming fabulously wealthy precisely because his physique is a form of wealth that cannot be bought at any price, and is available to almost anyone who wants it badly enough. A billionaire facing an acute and aggressive terminal cancer diagnosis has all the options anyone could want, but one.
I don’t really understand the question, because based on the details in the article, SOME people knew he was wealthy, but he wasn’t a public figure
Most people aren’t public figures, wealthy or not
He had a job, a bunch of kids, multiple wives, and a 250 M divorce, among other things.
Obviously some people knew this. It just wasn’t in the public interest, like 99.99999% of things that have ever happened :-)
Yes, there are many forms of power. Different forms are sometimes fungible to various degrees (varying across time and space). I would expect that financial wealth is the most fungible form of any of them under usual circumstances.
> What does being rich even mean?
To me it means living in a country where the government's debt ain't more than 30% of the country's GDP. So I moved to such a country.
Obviously moving countries will change lots of things about your life. Do you attribute any of those changes to low government debt? I have personally always thought about it as more of a long term problem rather than a present day issue. Would be curious to hear your reflections.
The reference to Piketty with its implication that Sarofim represents some hidden class of billionaires is particularly annoying. He was prolific in Houston's social business scene for decades and married the Brown heiress, who was similarly known (along with her father). He threw some of the best Christmas parties and wasn't exactly a recluse, so I see relatively little reason to connect him to that idea. His son Christopher is very similar. He was worth upwards of the author's estimate but a generally good guy who doesn't really deserve the "evil billionaire" label which the author quietly assigns.
My takeaway: Forbes rich list amounts are basically fictional. Do you think they are devoting the kind of resources it would take to unravel each billionaire's finances? Clearly not. If it's mostly large sharehioldings they might be in the ballpark in some obvious cases.
How about the rich list is just a list of rich people that also desire others to know of their riches.
Probably more that it's easier to figure out wealth from public stocks compared to private businesses and real estate.
Famously, there was the Saudi billionaire who would pump up the price of his stocks in the months prior to when they published the rich list.
Al Waleed bin Talal. Shrewd businessman, but also one of the most fragile egos out there.
> Some tax attorneys I spoke with theorized that the $7 billion payment was in fact a gift tax paid as part of an estate-planning strategy designed to avoid an even larger payment down the road, a strategy they expect to be common ahead of the Trump tax expiration.
State of the Union
I've always thought based on the number of $10+MM condos in NYC that sit unoccupied (i.e. 2nd or 3rd or more homes), that there must be an order of magnitude more billionaires out there than we know about, and this certainly gives credence to that.
I hope this is educational for people, indeed the forbes rich list is inaccurate and there is no way to know how much anyone is worth, with just 5 minutes of planning it all goes opaque if you so desire
Although there is the aspect of the immigrant being grateful for American opportunities, its far more likely that Fayez Sarofim didn’t expect to die and had these naked assets outside of the trusts and nonprofits. Since he also had trusts and nonprofits.
He was 93 when he died. I think he knew his time was coming soon.
inaccurate or incomplete ?
The latter is to be expected. Forbes only covers certain type of wealthy people for logistical if not also political reasons.
It does not cover powerful people who control enormous wealth but ownership maybe murky what is personal wealth and what is state owned, royal families or dictators like Putin or Kim Jong Un or their extended family will never make the list.
Beyond those kind of people, the murky and opaque ways that money can hidden also means it is hard to track estates that did not come from publicly made fortunes (ex: from listed company etc) that can be somewhat easily tracked.
Even when public like Bitcoin and crypto, Nakomoto 's estimated ~1.1M bitcoins is worth $70B today, nobody knows who he is. There haven't been any transfers from those addresses, however that doesn't mean a part of that enormous fortune is outside the bitcoin ecosystem as real money, the owner of the wallet could be using them as security for large loans like Elon (or other rich people typically do ) does with their stock without actually selling it to minimize tax.
On the other hand perhaps the keys to that 70B have been lost, in which case bitcoin has deflated even more than expected.
ok but yes inaccurate was the accurate word choice
I wasnt talking state actors and unlinked crypto fortunes
Just wealth from opaque sources and opaque vehicles
All limited partners in Venture/Hedge/PE funds are opaque for example
I'm sure their is a hidden joke about interest payments for the federal debt. Wonder what the gov will do with the cash they found in the couch.
This may be off-topic.
>Billionaires are like black holes. We deduce their existence from the fundamental laws of capitalism, see their gravity pull politics into their orbit, even detect signals of their existence in the public markets.
I dont know about others. This is very beautifully put. But I am wondering if anyone has an counter argument. Because this basically means money > power;
> "As gravity pulls politics into their orbit."
It may be true in US or other democratic nations. It certainly isn't true in Russia or China. If what was described was fundamental laws of capitalism, Could we argue those nations where power is greater than money are not capitalism?
If so, what is the opposing force against the laws of capitalism? And are there anything in physics such as opposing force of the laws of gravity? Without going into Space Time?
The pull of oligarchs is more real in Russia than anywhere else in the world.
> The pull of oligarchs is more real in Russia than anywhere else in the world.
It may have been true at some point. But, Putin put an end to it. He killed oligarchs when they fell out of line. There are some ex-oligarchs living outside of Russia, no longer super rich, after Putin took away their wealth.
The more money you allow into politics, the more politics becomes about money.
There is no counter argument because you haven't even made an argument to counter. It's just the same tired old "government is in the pocket of billionaires" canard that people who don't know how anything actually works throw out without ever actually providing any evidence of it.
> But I am wondering if anyone has an counter argument.
Confiscating all the US billionaires' wealth wouldn't even lower the US's debt by 20%.
France's public spending is 60% of the GDP, the situation in France is totally catastrophic (6% deficit atm) and... We should listen to Piketty because he's only ever worked public jobs and... He's french? And came up with an ultra-simplistic formula using bogus data?
I mean... If Piketty says it, obviously government spending representing 60% of the GDP ain't enough. Let's make it 100% and called it a planned economy. Because we saw a lot of fully functioning communist societies on earth?
Ponder this.
what a weird argument. > Confiscating all the US billionaires' wealth wouldn't even lower the US's debt by 20%.
so in other word confiscating the wealth of < 1000 people would reduce the US (a nation of ~300 M people) debt by nearly 20%. In other words we could significantly reduce the budget (much less interest payments) by taking away the wealth of ~0.0003% of the population. That seems like a no-brainer in terms of policies (the government makes decisions that takes peoples wealth away every day).
And guess who's going to renounce to US citizenship and/or start companies outside the US after that? Are entrepreneurs still going to immigrate to the US knowing that their wealth will be confiscated once they become successful? Who is going to fund the startups? etc.
If the US were to implement such measures, get ready for an exodus of talent and capital.
Yes, and after we confiscate their assets, we turn them into delicious meat pies. Surely this is not unethical because each billionaire can be turned into meat pies to feed many dozens of us at a tremendous feast.
I was having this discussions the other day where my boss thinks these wiki list and Forbes list are some sort of ground truth.
The Forbes list only include people who Forbes want it to be listed and / or are public record. For example Michael Bloomberg is included but he is not even on the Bloomberg billionaires list, simply because Forbes want to expose him. And there were plenty of Billionaires in China who wasn't listed before lots of information becomes public. And I would imagine the same for Brazil, India or lots of other countries.
These list can only include people by their stock market cap or worth. It doesn't include people who are in the property market and basically own or operate via private equity. And there are plenty of billionaires in the property market. Along with many other asset that we dont even know or aware.
Another thing, if a person with $10B net worth of stock for 25 years, and the stock has been paying 3% dividends per year. You will still see him listed as $10B net worth. In reality he has $10B of dividends already. ( Although in US I think dividends are taxed ). And that is excluding any investment he made with those dividends and operate completely in the dark.
Basically because the ultra wealth are so opaque I argue that inequality is actually much wider than we thought or what we could calculate.
This amount will be sufficient to operate the US military for just under four days.
How much of that would be spent directly on wages for people working for eh US military and how much sent to external firms?
On the other hand how much is sent to external firms where most of their expenditure is in the US and thus comes back rather swiftly in taxes, and how much is siphoned off to overseas stores of wealth.
Elon Musk or another person pre-paying some of their future estate tax, don't buy the other angle.
The author certainly makes this a plausible explanation. And yet I am thinking- if this is indeed the case, why we did not see similar payments this size more often?
Tax avoidance strategies aren't exactly advertised so it could be a novel tactic; and it probably would require an absurd liquid net worth to be worth pursuing (it might even preclude Texas billionaires like Michael Dell or Christy Walton)
Interesting enough read, but the post title is misleading. It was hardly a gift, it was an estate tax payment.
Not everyone is a greedy narcissist only out for themselves!
Left does not mean gift, it's a common term which applies when politely referring to the a recipient of an inheritance.
Left means a gift via inheritance, which is the exact opposite of an estate tax (it's not a gift or via inheritance, it's a tax on the value of an estate and paid before distribution).
They could have squandered the money or given it away.
They could could have blown it on building a pyramid to house their corpse.
The government is not entitled to the assets.
They aren’t entitled to their assets. They only have worth because of civilisation. How well do you think bill gates would survive in a mad max utopia that Randians fantasize about?
Given the fact, as stated in the article that there are a myriad of legal ways by which millionaires and billionaires can skip paying the estate tax, it could very well have been the result of an intentional decision not to evade this by some socially-conscious dying billionaire citizen.
There is also a fair bit left after taxes: "Based on estimates of the average tax rate on estates, the February 2023 payment implied the death of someone possessing a fortune between $17.5 and $40 billion."
I was severely disappointed when I realized that, I thought some billionaire had gone nuts with https://www.treasurydirect.gov/government/public-debt-report...
and in the 3 seconds it took to read you comment, the interest on the debt increased more than this "gift"
It takes about 30 seconds for the US National Debt clock (https://www.usdebtclock.org/) to tick off $1 million, so almost 2.5 days to tick off $7 billion. I'd say $7 billion covers much more than 3 seconds of interest.
even in your "correct" math, your comment doesn't really improve the ridiculously small amount of moving of a needle that this would make
It does improve it, by several orders of magnitude. If your point is strong enough to make without exaggerating, then use of hyperbole can only stand to distract from the point.
I mean... so I just noticed the "US Total Interest Paid" clock. That takes about 45 seconds to tick over $1 million, so $7 billion covers ~1% of the interest payments in a year.
That seems like a sizable contribution for a single person in a country of 330 million.
Great, so now all we need is another 99 people with similar donations and we could cover the interest for a year. Then you need to continue to do that every year forever because you have yet to make any movement on the principle
Why do you care? The country has never paid back this debt, will never pay back this debt and no-one expects it to.
That's my point. It is ridiculous to think that $7b is anything but a drop in the bucket. While $7b is a big number to mere mortals, it is chump change in terms of national debt.
Oh okay, that makes sense, and I agree with you. That said, paying tax is still important for a number of reasons; and ultimately the national budget is a large bucket made up of small drops.
What is your point exactly? That's sort of saying the weight of the heaviest man ever alive (>300 kg) is a drop in the bucket if we compare to the total weight of people in the US, which is true but also completely irrelevant (in fact that comparison actually makes it even clearer how out of proportion the $7B are for a single person).
This person is being called out as unique because they "allowed" this money to be collected rather than doing the normal thing people with this type of money do and find ways to avoid the tax.
So if you're so gung-ho positive we can make a dent in the debt, then why not make sensible comments about making changes so the tax is not so easily avoidable instead of nonsensical fat people comments
This wasn’t a donation. This was a fee for providing a society that allows him to accumulate so much.
"Even if I was wrong by many orders of magnitude, I'm still correct!"
Satoshi?
I can't imagine something more useless than an estate giving money to the US federal government rather than secreting it away via legal tax loopholes and re-investments in new industry.
TIL that in 2024 people are still trying to claim that trickle-down economics works. Given all the wealth at the top these days, I'll expect my trickle-down check in the mail any day now.
Giving $7B to the gov changes zero. Not a single function of the government will change not a single thing. They should have just thrown it in the trash. At least go pay off student loans with a lottery until the money is gone or something, that could help. Maybe pay all the mortgages in a small town or something. What they did by giving it to the gov is the same as setting it on fire in the front yard. It’s kind of upsetting.
The logical conclusion of this line of thinking is that you must then believe there to be a moral obligation to always pay service people in cash and avoid paying taxes at every possible opportunity.
Do I understand your position correctly?
Don’t put your words in their mouth.
Giving government money doesn’t really change the way government operates. The government has the budget for the year and that’s the spending for the year. If government needs something done, an item gets budgeted, money is borrowed, and paid out to get stuff done. Giving money to the government only offsets the debt; nothing else changes from that besides the number in the spreadsheet.
Plus they'll have increased the deficit by $7B by the time the ink dries on the tax payment check.
Who claims that “trickle-down economics” works? The term was literally coined as a joke about how it doesn’t work.
You think investment = trickle down economics? Is your 401k trickle down economics?
401k is a massive Ponzi scheme where people working today hope that people in the future will value their work.
Imagine a world where you had 15 billionaires and 5 people working. How much are are. Those billions worth when they are fighting each other to have one of the 5 useful people wipe their ass in their care home?
Me in developing country sure see that billionaire's wealths already trickle down to developed country's citizens.
How can you be sure it’s not wealth trickling up instead?
I don't think you can consume your way to a higher standard of living. The only way to sustainably increase the standard of living is to increase productivity. This can only come from investment into hard capital and into human capital (education).
So to me, it would be very hard to make an argument that it trickles up. It has to come from investment. And investment in the private sector is usually done by rich people, because you need money in the first place to invest and also because investing well makes you rich.
Except for the fact wages and middle class wealth has not kept up with productivity for ages in most western countries.
Also considering that the super-rich in developing nations are not that far behind the super-rich in developed nations, why hasn't their wealth trickled down and uplifted those developing nations? The reality is that developing nations have even higher wealth inequality, so refuting your argument.
Government has put up a bunch of roofs, troughs and channels to catch all the trickle. How much of your salary goes to something required by government? People making money by doing or making things other people want is not evil. Government setting up fences to protect the current winners is the problem.
Agreed, they should have just set $7 billion on fire in the middle of the street. This is an inconsequential amount to the US gov, but a tremendous amount to schools, communities hit by devastation or other terrible events, non-profit hospitals, etc.
You literally listed all things that are funded by taxes (schools, FEMA, medicare/medicaid). Sigh.
Do you really think those taxes are spent wisely? Maybe. Maybe not?
There is really a point to both opinions. BobAlice maybe lives in a place where tax funds are actually well spent.
