This may seem true “on paper” but in reality manipulations with stocks and loans systematically allow to avoid paying taxes on much of operations (through legal loopholes). As I understand it.
I am not ready to give elaborated answer by myself right now, but here is googles AI summary “Based on recent analysis of tax data, U.S. billionaires pay a much lower effective tax rate on their true economic income—often estimated between
3.4% and 8.2%—compared to the average American taxpayer, who pays closer to 13-14%. While they often face high statutory rates on salary, most billionaire wealth comes from unrealized capital gains (the rising value of stocks and assets), which are not taxed unless the assets are sold”
If the 3.4%-8.2% number comes from counting unrealized capital gains, which the phrase “most billionaire wealth comes from unrealized capital gains” leads to me believe is the case, then the 3.4%-8.2% number is simply a lie.
One loophole seems to be taking a loan against stocks that a billionaire owns. This way one does not receive an income which would be taxed. All while stocks can continue to give dividends and are immune to inflation. This can be googled with public statistics.
This demonstrates that Musk pays a very small amount of income tax, but the whole structure of what he’s doing sort of implies that the feds would take their cut at some other point in the chain
I’m also pretty sure it’s inappropriate to equivocate between loans and income? maybe if we had some reason to believe that musk would never need to pay the loan back, I could see it. but it would be a really bad idea to tax liabilities.
It may initially seem so, but in fact this strategy even gets called “buy, borrow, die”. In the end loan is practically closed without taxes as well, and feds don’t get their cut. Main factor seems to be that value of assets grows overtime, which hacks tax formula.
… Actual “buy, borrow, die” planning is enormously complicated and involves dozens of tools and techniques implemented over the course of many years.
First, this type of planning is generally not economically feasible unless the taxpayer has a net worth exceeding around $300M. Why? If you’re worth less than that, you’re not going to be able to command attractive financial products from investment banks. …
One may say that such system is obviously flawed and is unlikely—but most probably it’s just a consequence of the fact that billionaires are heavily involved in law making process. (Lobbying, networking-corruption, etc)
The organizer of the march (Derik) specifically spoke about buy, borrow, die in interviews with the press, and in his closing speech, as a loophole that exists and must be closed. The marchers were not without nuance (except Annie ofc.… >.>) I’m less concerned than most, partly because it requires a low-interest environment (this was a much bigger deal during the era of 0% interest rate) and partly because “die” is a crucial part of it. Seems like a losing strategy to me on it’s face, and one that won’t last much longer as we fix aging. But regardless, this can and probably should be fixed by eliminating the step-up basis on extremely large estates.
I think you’re underestimating how clever finance people can get, or the degree to which they can turn anything into a financial instrument. Holding a loan at a low but still attractive interest rate, secured by many times the value in diverse stocks, with no and/or token monthly payment that settles only with the debtor’s estate or on default? I think they could work with that and package it up without much difficulty.
But yeah, your fix is the obvious one, don’t let people update the basis of assets tax-free at inheritance, or at least cap the tax dodge in some way.
This may seem true “on paper” but in reality manipulations with stocks and loans systematically allow to avoid paying taxes on much of operations (through legal loopholes). As I understand it.
I am not ready to give elaborated answer by myself right now, but here is googles AI summary “Based on recent analysis of tax data, U.S. billionaires pay a much lower effective tax rate on their true economic income—often estimated between
3.4% and 8.2%—compared to the average American taxpayer, who pays closer to 13-14%. While they often face high statutory rates on salary, most billionaire wealth comes from unrealized capital gains (the rising value of stocks and assets), which are not taxed unless the assets are sold”
If the 3.4%-8.2% number comes from counting unrealized capital gains, which the phrase “most billionaire wealth comes from unrealized capital gains” leads to me believe is the case, then the 3.4%-8.2% number is simply a lie.
Quoted phrase is just a big simplification.
One loophole seems to be taking a loan against stocks that a billionaire owns. This way one does not receive an income which would be taxed. All while stocks can continue to give dividends and are immune to inflation. This can be googled with public statistics.
Articles like one below also partially describe what goes on with taxes in big companies like Tesla. https://itep.org/tesla-reported-zero-federal-income-tax-in-2025/
This demonstrates that Musk pays a very small amount of income tax, but the whole structure of what he’s doing sort of implies that the feds would take their cut at some other point in the chain
I’m also pretty sure it’s inappropriate to equivocate between loans and income? maybe if we had some reason to believe that musk would never need to pay the loan back, I could see it. but it would be a really bad idea to tax liabilities.
It may initially seem so, but in fact this strategy even gets called “buy, borrow, die”. In the end loan is practically closed without taxes as well, and feds don’t get their cut. Main factor seems to be that value of assets grows overtime, which hacks tax formula.
https://smartasset.com/investing/buy-borrow-die-how-the-rich-avoid-taxes
Or this explanation
One may say that such system is obviously flawed and is unlikely—but most probably it’s just a consequence of the fact that billionaires are heavily involved in law making process. (Lobbying, networking-corruption, etc)
The organizer of the march (Derik) specifically spoke about buy, borrow, die in interviews with the press, and in his closing speech, as a loophole that exists and must be closed. The marchers were not without nuance (except Annie ofc.… >.>) I’m less concerned than most, partly because it requires a low-interest environment (this was a much bigger deal during the era of 0% interest rate) and partly because “die” is a crucial part of it. Seems like a losing strategy to me on it’s face, and one that won’t last much longer as we fix aging. But regardless, this can and probably should be fixed by eliminating the step-up basis on extremely large estates.
I think you’re underestimating how clever finance people can get, or the degree to which they can turn anything into a financial instrument. Holding a loan at a low but still attractive interest rate, secured by many times the value in diverse stocks, with no and/or token monthly payment that settles only with the debtor’s estate or on default? I think they could work with that and package it up without much difficulty.
But yeah, your fix is the obvious one, don’t let people update the basis of assets tax-free at inheritance, or at least cap the tax dodge in some way.