[chii]

> consuming their unrealized gains.

they are getting loans using their unrealized capital gains as collateral. And these loans are not interest free, and would have to be paid back at some point in the future. And in order to pay the interest on the loan, they will have to realize _some_ gains as income. So that gets taxed.

Is it better that these billionaires don't obtain their mansions and yachts, or that they do and don't get taxed?

[satya71]

Govt doesn’t get any money from the interest paid. The underlying asset can eventually be sent offshore, put in trust or whatever, and never be taxed.

[sparky_z]

If the underlying asset goes away and never gets realized then where does the money to pay back the loan come from?

[chii]

So you're saying that they'd bankrupt themselves, rather than pay off the loan?

And i'm sure the banks lending out the money will want to have a way to hold on to the collateral.

[sparky_z]

No, I'm saying that they wouldn't bankrupt themselves. They would realize assets (or take income) to pay off the loan, and that's when they would get taxed. The story that rich people don't pay taxes because they just take out loans and never sell the assets doesn't make sense to me for that reason.

[chii]

of course they do - these interest payment isn't investment cost that can be claimed.

And the interest payment is profit to the banks/lender, and thus, they pay tax on profits (less expenses).

[jjeaff]

They are paying less than half a percent interest in most cases. So the interest doesn't really factor in.

[chii]

If the banks are willing to lend at this low rate, so be it. It simply means money is cheap.

[jjeaff]

They are usually only willing to lend at a rate that low to the wealthy only. Because it is lower risk, but mostly because they want to ingratiate themselves to the super wealthy because it can lead to future, more profitable deals.