[andoando]

Most of the wealth being in stock is really tricky. You can't really tax stock ownership, but at the same time stock can be leveraged against business deals (Musk for example bought Twitter with largely stock, without having to sell it first and therefore being subject to tax), and you can take out loans with stock as collateral.

[arrosenberg]

It's not that tricky. All you have to do is make it a taxable event to collateralize stock.

[twoodfin]

Should we similarly tax collateralizing real estate as in home equity loans?

[arrosenberg]

Sure, if you exclude primary residence. We aren't trying to fuck with the middle class, just the uberwealthy. I'd be fine with only taxing collateralized stock on people with over $20M in net worth too. We just don't need to provide tax breaks to the rich to make them more rich.

[RhysU]

Now, rigorously define "net worth".

[arrosenberg]

It's such an odd argument - the wealthy always seem to know what their net worth is. We could just make them declare it. If they lie, straight to jail.

[ericd]

Do they? I think exactly the opposite is true - if you ask any sufficiently wealthy person, they’d need a team of people working for a bit to arrive at a very hazy net worth number. Private stock is extremely illiquid and doesn’t usually have a good mark to market, ditto most artwork. My impression is that even most public stock doesn’t generally have the depth of liquidity to absorb a founder selling any significant fraction in a short timeframe without cratering in value.

[selcuka]

> If they lie, straight to jail.

How do we know whether they lie without a solid definition of net worth?

I'm not defending billionaires and I believe they should be heavily taxed, and huge inheritances should be outlawed, but what's Elon Musk's net worth, for example? He surely doesn't have $369 billion in cash. Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? It's tricky.

[mindslight]

When the amount of equity pulled out from the loan exceeds the cost basis, why not?

[phkahler]

How? That makes little sense to me from an implementation standpoint.

[arrosenberg]

When I bought my home I had to sell $XXX,XXX of stock to make the down payment. If Jeff Bezos wants to buy the same house, he would use a line of credit from the bank, collateralized by his Amazon shares (or whatever source of wealth) and pay with that. I paid 15% in long-term capital gains, he pays 0%. Under my plan, he would pay 15% LTCG for collateralizing his stock,. If I had to pay it, then it's entirely fair and reasonable that we expect him to pay his fair share too.

[RhysU]

You could have done the same thing with a margin-enabled brokerage account, e.g. Interactive Brokers or Fidelity.

It's not particularly hard. Just have enough collateral to not get margin called. And, like the margin interest rate better than the tax hit. Shop around for rates. Notice, you don't have to pay the entire down payment this way.

If you have amassed 6 figures of stock and are buying a house, you're qualified to educate yourself on these topics. It's usually worth reading up anytime you incur that sizable a taxable event.

I am not saying this is a great idea, BTW. Just, it's an idea within many people's reach.

[arrosenberg]

If it's a bad idea, it's a bad faith argument - why would you suggest it? The tax laws shouldn't favor the gross accumulation of wealth, nor the starvation of the treasury, so the laws need to change to force the rich to pay their fair share.

[fn-mote]

> If it's a bad idea, it's a bad faith argument

I believe the GP is just cautioning rando HN readers that they should not rush out and make their down payment in the manner described, as opposed to liquidating some of their stock options for "real cash" like the GGP had to do.

They are just explaining a reasonable method that the (above) average HN reader could use to be in the same situation as Bezos of having a 0% tax on their down payment.

In the US, there's a pretty massive exemption (well, deferral) for capital gains tax on the sale of a primary residence, so once you have one home to work with, the down payment is (kind of?) tax-free anyway.

[triceratops]

Bezos gets a much better margin rate than you or I would ever get on IBKR. And IBKR doesn't margin call, they straight up auto liquidate. Bezos's lender would never do that to him.

[NewJazz]

And withdrawals from margin accounts should cause taxable events too. Honestly it is up to the industry to justify and propose a workable tax scheme that makes margin accounts feasible. Withdrawals triggering taxable events seems fair to me, though.

[_DeadFred_]

If I get something of worth, non-related to the stock/ownership, for the current value on my stock/ownership, I should pay taxes on that amount. I am using the stocks value to gain something. If I take out a loan for businesses needs, that is in the interest of the thing I own. If I take out a loan to buy a separate thing, I have leveraged the current value and have therefor realized the current value and should pay accordingly.

[NewJazz]

Lenders would have to report loan origination for secured loans where some specific asset classes are acting as the collateral.

[overrun11]

Why does it matter? It eventually gets taxed through estate tax and at a higher rate than income. This obsession with taxing them _now_ only makes sense if the point is to punish the the rich.