This post makes the mistake of counting unrealized gains as income. That's not how taxes or investments work. Unrealized gains are NOT income. That's how they mistakenly come up with the number that he pays less than 1% in income tax. Investments, in general, are not income (unless held less than 12 months or if they pay dividends).

Imagine you had to pay income taxes every year on the unrealized gains of your 401k, house, and car value. You too would be said to be paying a very low income tax rate. But again that's not how income taxes work because none of those things are income.

If Bezos were to sell those shares and actually realize those gains then he would be rightly taxed but that would also likely tank the stock as his 8% ownership is significant enough to drop the price drastically. 55% of Amazon is owned by 401k and other retirement accounts so if the price tanks average Americans take a huge hit.

Bezos does sell shares, all the time actually. You can see this in the SEC filings. And he is rightly taxed on those realized gains. But he's not going to sell all of his shares as that would be damaging to Amazon, the workers, retirement accounts, and his own investments.

Instead, the money stays in the company paying worker wages, buying new facilities, etc. This is even better for the economy because it keeps the funds in circulation. This generates even more tax revenue than if he did a 1 time sale of his investments. That's why unrealized gains don't get taxed, because its financially a worse outcome than keeping the money in circulation.

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dwa3592 an hour ago | parent | next [-]

>>This post makes the mistake of counting unrealized gains as income. That's not how taxes or investments work. Unrealized gains are NOT income.

Rich people always borrow money on the stocks they own. In effect, those unrealized gains help them borrow money which they spend like income. I will spend part of my paycheck to buy a cup of coffee and they will spend part of the loaned money to buy the same cup of coffee. They can also buy a house with that money. All they need to do is keep paying the 4-5% interest rate on that loan meanwhile the underlying stock appreciates at 15-20%.

Is this a loophole that rich people enjoy? Absolutely. Does this loophole need to be closed - absolutely.

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phyzix5761 19 minutes ago | parent | next [-]

The interest rate charged generates taxes, the purchases they make with the credit they borrow generate taxes, and the money they leave in their investments generate taxes through capital usage like paying employees, paying vendors, building facilities, etc. The government taxes every little thing so don't think that money is not generating taxes at all. It actually generates more federal and state taxes by staying invested and that's why unrealized gains are not taxed. The tax revenue outcome is better that way.

	▲	dwa3592 12 minutes ago \| parent [-]
		Good attempt at manipulation. Why don't you link some studies here which say it will be better to leave the tax system as is than taxing the unrealized gains somehow.

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smallmancontrov 25 minutes ago | parent | prev | next [-]

Yes, "collateralization counts as realization" is the bare basement minimum of what we should do to fixed up the tax code, but I'm less offended by the scenario you described -- which involves skin-in-the-game capital allocation decisions, the whole point of capitalism -- than I am by the far more common situation where the assets just sit and grow and are rewarded for their sloth by a complete absence of tax on the one activity billionaires are best at: sitting back and getting paid for being rich.

Property tax on stock is a better place to aim.

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eudamoniac 19 minutes ago | parent | prev [-]

What is the loophole? That banks are allowed to give out loans to trusted clients? Are you proposing that banks can no longer loan to rich people or what? Why does the source of the collateral being a stock matter? A normal person gets a loan based on his home value, assets, other factors, all of which might appreciate faster than the interest rate. When does it become a loophole?

You really don't want loans to be taxed as income, that would cause a lot worse problems than rich people existing...

	▲	dwa3592 7 minutes ago \| parent [-]
		Let me simplify it like i would for a 5 year old. The loophole is that they never pay taxes on the unrealized gains bc they lived on the borrowed money their whole life. They will never sell their stocks, so there will be no taxable event. When they die they will leave their wealth to the children which effectively erases the unrealized gains. So no one pays taxes on that huge chunk of money. Google "buy,borrow,die".

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smallmancontrov an hour ago | parent | prev [-]

This post makes the mistake of assuming that everyone is on board with the "unrealized gains are totally different from income and should never ever be taxed a penny because that would be communism and implode the economy and kill kittens" hustle. It's a good hustle, because it takes precision to argue against and it's built around a kernel or two of truth, but these two kernels are firmly planted in a gigantic monumental turd of tax avoidance by the obscenely wealthy.

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phyzix5761 an hour ago | parent [-]

Would you rather they hoard the money under their mattress or invest it back into the economy? Like I explained, the reason unrealized gains are not taxed is because they generate more tax revenue than if the individuals pulled out the money, made a 1 time lump sum tax payment, and hoarded the rest. Its not tax avoidance at all. Its a way to multiply tax revenue as that capital is used through numerous transactions that all generate federal and state income and sales taxes.

	▲	8note 39 minutes ago \| parent \| next [-]
		id rather some portion go to taxes and also result in diluting the ownership and control over the biggest more important industries. then have the government spend that tax money on services and infrastructure that also increase overall money circulating in the economy
	▲	smallmancontrov 39 minutes ago \| parent \| prev [-]
		It's exactly the other way around. The USA is not a developing economy, we do not suffer from a lack of capital and abundance of investment opportunity, we suffer from an abundance of capital and lack of investment opportunity. The average American billionaire has no idea what to do with a marginal dollar, so he just bids up assets with it and maybe punts on spaceships or something. The average American, in stark contrast, spends the dollar satisfying very real as-yet-unsatisfied consumptive wants and needs, at which point the dollar gets spent and taxed and spent and taxed again and again and again. That's understatement: the velocity factors are 0.7x and 5x, last I recall. You can read the balance of explanations off interest rates, you can read it off of valuation metrics, you can read it off of judgement calls about the quality of the marginal investment opportunity. You can't read it off the anus of a billionaire or the turd of self-serving think tank propaganda it pinched out, though, and that's where you are clearly looking for it.