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by burlesona 1806 days ago
Most Billionaires are only Billionaires because of the value of the company they own a huge number of shares in, and they’re busy running that company which consumes all their time and energy. They also can’t cash out their shares (or at least not most of them) without risk of losing control of their company, so they don’t actually cash in on their vast wealth. Instead they’re happy to be a Billionaire on paper and “merely” live as a Millionaire.

Edit since I’m getting downvoted: yes the ultra rich can and do live off debt with their stock as collateral, but that gets you to the “merely” living a luxury lifestyle point. It’s not a viable mechanism for funding SpaceX, Blue Origin, Virgin Galactic, etc, which is the kind of “interesting stuff” this thread was talking about.
3 comments
v7p1Qbt1im 1806 days ago
Not really. They just get loans at incredibly low interest rates, using their equity as collateral.

They can deduct dept/interest payments from taxes and never actually have to sell a lot of their stock. That way their wealth can accumulate and they don‘t really generate income. Almost like the tax code is skewed in their favor.

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jdavis703 1805 days ago
How does the interest deduction work? I thought mortgage interest was the only interest people can write off their taxes.
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v7p1Qbt1im 1803 days ago
I’m not really familiar with US tax laws tbh. But even if you can’t you would only ever need to liquidate equity to pay the interest. Only those payouts would count as income.

Maybe an accountant can chime in.

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heliodor 1806 days ago
You too can take out a loan against some collateral and have the same tax treatment.
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v7p1Qbt1im 1803 days ago
You can yeah. But you’re not gonna get anywhere near the rates/types of loans you can get as a billionaire.
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heliodor 1803 days ago
The parent comment was complaining about unequal tax treatment, not about interest rates.

The interest rates aren't particularly important in this concept. Just that you have enough collateral so that you can life off the loan while the collateral appreciates in value, so that you're not forced to sell it.

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dempseye 1806 days ago
They have the ability to borrow vast amounts against the value of their equity.
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alisonkisk 1806 days ago
This is not true. They can sell a fraction of shares, or get loans against collateral, and have $billion of cash is to spend.
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