How Rich People Hide Their Money
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- เผยแพร่เมื่อ 21 พ.ค. 2024
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The Treasury Department estimates that the ultra-wealthy are skipping out on over $160 BILLION of taxes every year. The methods they use can be shady, but many are perfectly legal.
Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson, AFC®
Directors: Katie Graham & Andrew Matthews
Written by: Taylor Behnke
Executive Producer: Amanda Fox
Produced by: Katie Graham
Edited & Animated by: Dano Johnson
Fact checker: Yvonne McGreevy
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Director of Programming for PBS: Gabrielle Ewing
Assistant Director of Programming for PBS: John Campbell
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Two Cents is a production of Spotzen for PBS Digital Studios
sources:
www.cbsnews.com/news/tax-evas...
www.cnbc.com/2024/02/12/jeff-...
www.cnbc.com/2021/09/09/top-o...
www.ed.gov/news/press-release....
www.npr.org/2022/08/25/111941...
www.propublica.org/article/bi...
www.propublica.org/article/th...
www.vox.com/money/23634085/bi...
www.whitehouse.gov/omb/briefi....
www.wsj.com/articles/elon-mus...
www.vanhollen.senate.gov/news...
www.nytimes.com/interactive/2...
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Offshore accounts can be used to avoid taxes, but they're not foolproof. There are stricter regulations now, and hiding money can backfire if not done properly.
That's true. Improperly hiding assets can lead to hefty fines and penalties. Plus, there's the risk of the hidden assets losing value.
And even if you manage to hide your money, it's not necessarily working for you. It's outside the legitimate financial system, so you might miss out on potential growth opportunities.
Exactly. A strong portfolio should be transparent and well-diversified across different asset classes. This helps weather economic storms.
The problem is that people don't have the knowledge needed to succeed in a challenging market. Only highly qualified professionals who had to experience the 2008 financial crisis could help to earn a high in these challenging conditions.
You are right, The US economy is a complex beast, and a financial advisor can help you navigate it. I need guidance because I'm an adult, but I'm not sure if their services would be all that helpful.
Great video, The first $100,000 invested was amazing. But when you hit $300,000 it’s like smashing the glass ceiling! I cried.
I completely agree with you! My first 100k took a long time and wasn't that special to be honest with you. Once I hit 300K that is the game changer in my opinion. At this point my money is basically making me a pretty good yearly salary. When I go to sleep at night I know my money is making decent money with the help of my FA
Nice. People often underestimate financial advisors' importance. Over 50 years of data reveal that those who work with advisors typically earn more than those who go it alone. I've been fortunate to work with one for 13 years, resulting in a $1 million portfolio, largely from early investments in AI and other growth stocks.
I've been considering but haven't been proactive. Can you recommend your advisor? Could really use some assistance.
Angela Lynn Schilling is the licensed advisor I use. Just research the name. You’d find necessary details to work with to set up an appointment.!
I looked up her name online and found her page. I emailed and made an appointment to talk with her. Thanks for the tip"
Congress isn't debating the loopholes because most of them benefit from the loopholes.
Just like what Trump has said before.
@@SV-kr9fu It's almost like Trump knew what they were doing, because he's better at it... that's why he now owns half of them.
And so can you
@@Winner01562 Like most people I don't have enough money to even begin using the loopholes. And my point was WHY they wont fix the loopholes.
@@Winner01562 poor guy, believing what the rich tell you.. no matter how much people work, 99.99% of them will never come close to making enough to afford and actually benefit from those loopholes
One lesson I've learnt from billionaires is to always put your money to work, and diversifying your investments. I'm planning to invest about $200k of my savings in stocks this year, and I hope I make profits.
You are right. The best approach I feel is to diversify investments- by spreading investments across different asset classes like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown.
That makes sense. I’ve been using a financial market expert for two years now and I own a six-figure diversified portfolio from investing in stocks. I want to diversify more this year, though.
Being heavily liquid, I'd rather not reinvent the wheel. Since this strategy works for you, how can I contact your advisor?
I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an email shortly.
“I hope” doesn’t sound very hopeful.
Putting well-earned money into the stock market can be over emphasized for first-time investors, unlike a bank where interest is sure thing! Well, basically times are uncertain, the market is out of control, and banks are gradually failing. I am working on a ballpark estimate of $5M for retirement, and I have a good 6-figure loaded up for this, could there be any opportunity for a boomer like me? I'm nearly 60.
If you're new to investing or don't have much time, it's best to get advice from an expert. Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation.
Carol Vivian Constable is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment..
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
Considering who funds the legislators' campaigns, I'm not expecting any tax law changes anytime soon....
Just like what Trump has said before.
@@SV-kr9fu and he's one of those benefactors. The 2017 tax law specifically had a carve out to allow losses in real estate investment to be harvested for 20 years, had from 5 years.
@@sonicpsycho13 : Yes, he also admitted to having taken advantage of the loopholes. And if you were in his position, you would have done the same (I would too).
@@SV-kr9fu This is what puzzles me. He acknowledges the issue, yet has no intention of doing anything about it. And you praise him for simply acknowledging it as if it means anything.
@@Andres43280 : Well, he has rich donors too, just like the other guy.
I am not voting for him, because I like him; I just agree with most of his policies more than the other guy's policies.
I learnt to manage my money through investments and it really works for me. They say money can't buy happiness but poverty can't buy anything.
There are so many ways to manage money and prepare for a relaxing future, we just always have to keep doing our best because whatever we plant now, we will harvest later, good or bad.
Investing wisely can significantly impact financial stability, offering peace of mind and more opportunities. While money can't buy happiness, managing finances well now will determine future outcomes. Let's continue making smart financial decisions.
As a novice, how do i get into investing properly and be profitable?
Angela Lynn Schilling is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment._
I looked up her name online and found her page. I emailed and made an appointment to talk with her. Thanks for the tip
Well I feel stupid going to work
We all should
If you're only feeling stupid now, great. I've being stupid for about 15 years when I found this out and continue to work.
Why do you feel stupid?
Well that's the first step to any of the other way to dodge taxes.
Your hard work will eventually paid off 😅one day
Step 1: Be company chairman
Step 2: Own lots of stock
Step 3: Take out a loan using investments as collateral
Step 4: Use loan to buy more investments and assets
Step 5: Play "Where in the world is Carmen Sandiego?" metaphorically speaking
Step 6: ?
Step 7: PROFIT!
More like Cayman San Diego
Ok and how do they pay off their loans if they buy luxury goods with it?
Become too big to fail
@@j.b.2561they don’t have to, they only have to pay the monthly interest which is why some CEOs pay themselves so little salary; it’s just enough to pay the interest on the loans and to pay very little in taxes while the rest of their income is in the form of stocks. Then they just rinse and repeat.
@@j.b.2561
Get a bigger loan 😂
Then repeat until you kick the bucket
3:24 Giving Jeff Bezos the smile was a nice design touch.
Gotta love a guy who made a ton of money off his home state of Washington and then when it came time to pay some of it back he decided to leave and show them the finger.
@margaritoamargo6347 but he's from Florida and good on him. WA states greedy that's why retirees often leave. I'll never forget when they thought about putting a toll on I-5. It's crazy.
It's the Amazon logo, not a smile.
It's the Amazon logo, not a smile.
@@margaritoamargo6347 So are you saying that Jeff Bezos payed no taxes when he lived in Washington state? You should get in touch with the state dept of Revenue and let them know.
Now show us the justification where its 100% legal for politicians to do insider trading but an average consumer could spend life in prison for doing the same
It's not justifiable and should be illegal. However, there's a difference between insider trading and trading with public knowledge. The problem can lie in determining what's insider knowledge and what's publicly available knowledge.
In 2020, plenty of people could have acted on the assumption that pharmaceutical stocks would rise significantly once covid hit the news cycle.
There are plenty of people in Congress (legislators and staff), who are our were just regular people. They have 401k's, 529's, IRA's, mutual funds, etc. We can't make simply investments or owning stocks illegal for them.
Money. And the ability to give that money to those that look away
it's not legal for politicians to do insider trading. Insider trading laws apply to everyone. Do you care to cite your reference that politicians are exempt from inside trading laws?
They need to have middle-class tax loopholes. Like tax-free savings accounts for buying houses or cars.
They actually have that here in Australia. It doesn't help 😅
Yea fak the lower class, loop holes for everyone except the poor
Canada have it for houses
it exists, its called negative gearing in Australia lol, could be something else in other parts of the world. It's not perfect as it causes a certain type of behaviour and could blow up if uncertain times occur and the economy moves out of its normal band range but for majority of the time it helps middle class dodge a significant amount of taxes
We need lower-class tax loopholes too
You keep calling it capital gains BEFORE the investment is sold. That is incorrect - it is unrealized gains. It cannot be taxed because it has no “real” value until it is sold.
There was a crucial detail missing from this video. Estate taxes. Anything inherited over 13.6 mil will owe estate taxes. This is actually decreasing back to 5.49 mil for tax year 2026. So basically, dying is only a "loophole" for the rich not the ultra rich.
There are also some pretty crucial details about hobby vs. business losses that got left out too. If a business has losses too many years in a row, the IRS can rule that it's a hobby and disallow the losses. There's more rules that determine what counts and what doesn't, but it's not a free for all like they describe.
@@shelbygardner1193right but isnt that the reason they sell such businesses? The constant exchange means such record cannot be established. That or they simply pheonix the business
theyll just put it in an irrevocable trust
My husband and I were fortunate enough to be able to pay off our mortgage early. We were both still working, and took the payment amount that we had been using to pay off our mortgage faster and we put it straight into investments. We were able to retire early because of almost 7 years of putting away what would have been our mortgage payment as well as maxing out our 401K/403B plans. Thankfully we were taught by both of our parents the value of living within our means. Thank you for your advice. I know it will help people. we are interested in investments that could set me up for retirement , I mean I've heard of people that netted hundreds of thousands during these crash, I listened to someone on a podcast who earned over $650K in less than a year, what's the strategy behind such returns?
Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.If you're new to investing or don't have much time, it's best to get advice from an expert.
Even with the right strategies and appropriate assets, investment returns can differ among investors. Recognizing the vital role of experience in investment success is crucial. Personally, I understood this significance and sought guidance from a market analyst, significantly growing my account to nearly a million. Strategically withdrawing profits just before the market correction, I'm now seizing buying opportunities once again.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. I will be retiring in two years and I might need some management on my much larger portfolio. Don't want to take any chances.
Leicia Zavala Perkins is the licensed advisor I use.Just research the name. You'd find necessary details to work with to set up an appointment
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
Also don't forget that the interest expense paid on the massive amounts of debt that billionaires owe is actually tax deductible because it's secured against an asset! Same way that homeowners can deduct the interest on their mortgages, but billionaires get to take full advantage of this tax break as well. However, if you just have a personal loan from the bank, sorry! No deduction for you. Interesting how that works, isn't it?
I don't think that matters so much. The rich are not going to carry a debt and lose money in the interest. I believe how it works is that the rich will pay off those loans almost immediately. So there's little to no interest cost and the proceeds from cashing in the investment is not taxed because it is used to pay off a debt. The video didn't make that very clear.
@@jbluther How are they getting the money to pay off their loans if all their wealth is tied up in assets? Yea the video just skimmed that part. I need more info
Yep everything is completely and totally biased and unjust. This rigged "system" is despicable and the "trickle down" mafia is out of hand with their corrupt "citizens united" buying the Supreme Court to shred the 1st and 4th Amendments and farm us all as the livestock of the one percent
@@jbluther I think most are doing the opposite as long as earning > interest - tax deduction on interest + capital gain tax, which is the case most of time. so it makes every sense to borrow against their stocks instead of selling the stocks in terms of profit, company control, and tax implication.
@@Zizzarazzo They don’t pay off the loans, period. You pay the (very low) interest on the loans which is a heck of a lot less than taxes, as well as being tax deductible. The lender gets the principal back when you die, but it’s a fraction of your wealth by then due to compounding. Say I borrow $1M on my $5M investment and live off $100k/year for ten years, tax free. When the money has run out, I owe $1M… but my portfolio is now worth $20M because it doubled every 5 years. I borrow $5M so I can spend $500k/year for 10 years, and I’m carrying a $6M note - and my portfolio is $80M. I keel over and my heirs get $74M that I was never taxed on.
Step 1: Be a billionaire
Thank you for your research. I find your videos are well done. RIght now I'm keeping an eye on Eledator
feel like hiding money implies economic corruption.
the game was rigged from the start
@user-cl1rq1sg8m It's not a game, it's a massacre.
That's what happens when the game is "rules for thee, written by me"
It's not corruption if the rules completely allow for it to begin with. That's why the rules (laws) need to change
@@judgetwelve
I love when people complain about this, they leave out the fact that they live in a Democracy and this rule applies to everyone, even the homeless bum. And so there's nothing stopping everyone from using it, but essentially the rich behave like the students that get straight As in school and then they complain at them getting straight As, whilst they themselves are bringing in Fs or Ds for their own grades. Maybe get better financially educated and stop your whining, all this information is publicly available and there are thousands of TH-cam finance channels explaining it, but nobody wants to do jack other than complain about their piss poor understanding of "loopholes".
And yeah it's a piss poor understanding of loopholes, because everything would be a loophole under their definitions use. Using your children under the EITC as a deduction to pay less taxes and get tax credits? Loophole. Using childcare and medical insurance payments to pay less taxes? Loophole. Using student loan debt and school costs to pay less taxes? Also a loophole. Every loophole they complain about the rich using, they also have access to use, this is not an exclusively "rich only" club.
The only difference between the rich and the poor is that the rich have more money to work with and the poor have less money to work with and so the compounding interest rates on poor people's wealth will be smaller than those of rich people. The poor can very much do "Buy, Borrow, Die", the poor can open up LLCs and use them as ways to lower their own taxes (I'm not gonna delve deeply into this), they can move to a different state to avoid taxes, the poor can do strategic sell offs of assets at a loss to pay less taxes. BUT THIS ALL REQUIRES EFFORT FROM YOU.
Taxes are so overly-complicated, it's ridiculous
Amen!
The vast majority of Americans can file a one page "EZ" form. (edit: I was wrong)
@@THE-X-Force The EZ form was discontinued in 2018. Although the regular 1040 form became a little simpler at the same time.
@@PrometheusMMIV Thanks for correcting me. I haven't personally filed in a long lonnng time. Seems crazy they got rid of it then .. I remember the guy in charge at the time saying it was going to be reduced to the size of a postcard. They even made mock-ups. I suppose I shouldn't be surprised.
More complicated means more people leave money behind
You definitely have my sub. This content is next level. For me Eledator was the turning point. Please keep doing what you do and keep being you, love it.
Doesn’t seem quite right to tap the like button, since I hate the reality you’re exposing…but I appreciate you exposing it, so I did go ahead and tap.
Given the enormous influence the wealthy have on Congress, via lobbying and cultivating personal relationships, I’m not terribly hopeful any loopholes will be closed.
The system was designed to favour the rich, these loopholes are designed to further aid them, With inflation at 3.70%, I'm looking to enter the market now and ride it out as the economy improves. I'm putting together a $350,000 portfolio with Stocks and ETF's. Do you have any recommendations with solid cash flow?
Knowledgeable Investors know where and how to put money during a crisis in order to reduce risk and maximize returns. See a market strategist with experience if you are unable to manage these market conditions.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850K.
Great gains! Can you share your advisor details? I'm gaining more cash flow from my job and want to invest in stocks and alternative assets to build wealth.
Great gains! Can you share your CFP details? I'm gaining more cash flow from my job and want to invest in stocks and alternative assets to build wealth.
'Amber Dawn Brummit' is the licensed advisor I use. Just research the name. You’d find necessary details to work with to set up an appointment.
The "Loophole"
>Takes out a US$40 Billion loan from banks at 2% interest and uses their hundreds of billions in stock value as collateral
Average worker: *surprised Pikachu face*
Where did you get it's at 2%. Tbills average 5.5%
This guy went from Ned Flanders’s to Tame Impala. Living life at the extremes fr
looks horrible
a glowup from all that PBS cheddar! 😎
what do you mean, it's the same guy that appears at 1:01?
I thought they had changed it, cause for real it ain't anything like the one I remembered
😂😂😂
I thought she got a new husband
@6:20 No, losing money on a business is never a good thing. It would make zero sense to buy a business and lose $10M on it for the sake of saving $4M in taxes.
7:35 such a stupid idea - is the government going to give them money for their unrealized losses as well? And for people who think not my problem since i dont have a 100mil realize that normal income taxes started off as only for the super wealthy and now we all have to pay it.
it's just an all around poorly researched video. PBS Should be ashamed to be associated with this video.
If you can’t beat em, join em! I just tuned in to learn how to avoid taxes when I grow my income.
this is sad tbh
Removing stepped up basis makes a lot more sense than taxing unrealized gains
THIS THIS THIS. Taxing unrealized gains is totally idiotic, and this step up is the real loophole
They already did that.
Anything tucked away in an irrevocable trust and kept out of the estate doesn't get a step up in basis.
Anything that gets a step up in basis is counted against your estate tax exemption or hit with an estate tax if the estate is big enough.
Definitely need to tackle the no limits "trickle down" mafia aristocracy that shouldn't exist
@@ryann8348 You're absolutely not seeing the bigger picture. If you have 200K in stocks it might feel unfair to pay anything out of it, but this goes beyond just YOU! You are may feel that you "worked hard" to "earn" the ability to invest, but you fail to recognize how much you have been given as a matter of course. It is only the extreme outlier who have 40K in investments or more and were not given opportunity and resources beyond the wildest dreams of any real worker.
Relative. Neither of them makes much sense.
Using what income do they repay the loans in the "borrow"?
They might carry the loans indefinitely if the interest is say 2% and their portfolio grows by 6%. Also some of their investments might pay out dividends that they could use to pay down the loans. There are also situations that sometime arise with publicly traded companies that can result in a forced "sale" of their shares (often merger related) and associated taxes despite their best efforts not to voluntarily have a realization event - hopefully only a small portion of a portfolio is affected by this.
@@mikebarnes2294Thanks.
@@mikebarnes2294so they have to sell some stock to pay the loans?
So move to Florida got it
@@Life_42 Why is that? I'm curious the advantages of Miami and/or Florida?
Tennessee is better but your choice.
Not unless you want to ensure your house or not die from a hurricane
or Texas or Nevada. Probably worthwhile to note that because a state doesn't tax income or capital gains does not automatically make them a no-tax state; whatever is taxed will be taxed greatly or government services and support will reflect the lack of revenue. Property and sales taxes get used to make up the differences, typically. Florida gets an extra whammy with hurricanes, so now one cannot afford to insure real property and dwellings in an otherwise strong real estate market.
Money is not meant to control people rather it is meant to be put to work producing more money for you. You cannot build wealth without putting money in its rightful place.
You're correct!! I make a lot of money without relying on the government. Investing in stocks and digital currencies is beneficial at this moment.
Thanks for the advice! I'm new to financial planning and wasn't sure where to start. Any tips on finding a reliable financial adviser or resource to guide beginners?
As a beginner, it's essential for you to have a mentor that is verified by finra and SEC to keep you accountable. I'm guided by a widely known financial consultant Stacey Macken
Stacey demonstrates an excellent understanding of market trends, making well informed decisions that leads to consistent profit
I remember giving her my first savings $20000 and she opened a brokerage account for me it turned out to be the best thing that ever happened to me.
We experienced the pinnacle of our era, but it is now gone. Like what happened to Rome, the corrupt administration will bring this nation to an end. My condolences go out to anyone who is close to retiring and may be worried about whether their pension will be enough to pay the rising cost of living. Insane fiscal policy, poor regulatory policy, poor energy policy, and poor foreign policy
50 and early retirement. I'm very worried about the future and where we're all heading, especially in terms of money and how to get by. I'm considering making my first investment in the stock market, but how can I do so given that the market has been in a mess for the majority of the year?
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
I think this is something I should do, but I've been stalling for a long time now. I don't really know which firm to work with; I feel they are all the same but it seems you’ve got it all worked out with the firm you work with so i surely wouldn’t mind a recommendation.
Her name is “VIVIAN CAROL GIOIA” can't divulge much. Most likely, the internet should have her basic info, you can research if you like
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
Beautifully done you guys. I love all your videos. I like the fact that you don’t post too many videos and take time to make very valuable ones.
So if $160 billion more was collected from "the rich," we would have a balanced budget? No.
It would be closer to balanced though. That represents about 10% of the current deficit.
Some of these methods are truly for the rich. But some of them are used by normal, everyday Americans. Tax Loss Harvesting and Step-up Basis are not that uncommon.
Yeah especially since there is only a $3000/year carry over limit. The rich aren't benefitting that much from that
It's weird how much the male host changed, definetly prefered the mustache one
Skinny long hair makes him look skinny skinny. Long hair long face long torso. No balance for the camera.
@@yorbalindasonscreams hippie 😂
People want to keep their money. What an idea
But how do they pay back the collateral loan? Do they inherit the debt to their heirs too?
Depends what you use the loan for but usually there is a mix of loans, elon did it to buy twitter, he expects twitter to make money and essentially pay back the loan through twitters (X's) business revenue. What this means is he keeps his tesla shares, his new business (X) pays back that debt for him and at the same time it grows in value, so debts are paid off through reinvesting into higher earning assets. Most of these guys know how much of the loan to use for endulgence and how much to use for business. Also, in all honesty when you have 10's of millions of dollars through successful business earnings, you aren't dumb enough to blow it on a private yacht that costs 10's of millions of dollars. You usually get a house worth a million, maybe a car and a few of lifes luxuries. Then you would take some cash out against your shares at a low rate of 3% - 6% depending on your relationship with the bank and invest the rest in high yeilding funds which returns more than that. Your income from the investments can then pay for the 1-3 million you borrowed for consumtive uses like your car and house. So say you borrowed at 6% against your shares for 3 million for your house, then borrowed another 6% interest and take out 7 million to reinvest it in something that returns 12%, could be a new business, could be into the financial markets, then those assets grow and part of those returns goes back to pay back your debts. You use leverage to get richer without having to pay taxes at all. Then you rinse and repeat.
The loan is usually taken out at a cheaper interest rate than the inflation rate. Meaning the companys' free growth pays on the debt.
I was wondering the same thing.
@@jaywyse7150I don’t understand. Can you explain it differently please?
@@VideoSiteAccess The investor is a great credit risk, always pays the bill on time and gets best interest rate (the lender may do other, more profitable business with the investor for other reasons, too), say 2%. The investment that secures the loan is making 8%. After the loan interest the investor is still making a return of 6% and the lender, getting their interest payment as contracted, have no reason to call the loan for final payment - it's a perpetual source of secure income. One borrows incrementally against the collateral, say 5% or so every year.
You call it "collecting art", I call it "tax evasion"
The government set these rules, so it’s silly not to follow them if it saves you money.
0:41 You could've stopped at "The ultra wealthy don't earn much of their income."
But we wouldn't know the idea why. The Why matters a lot.
@@mguntbecause they own assets that earn money.
@@bigmyke2008 Doy or duh. Most rich people get rich by investing significant sums of wealth, living below their means, and carefully managing modest amounts of debt. It's simple math. If you spend less than the capital gains income you earn from assets, then you can possibly live off the interest. Also, as for rich people trying to avoid paying taxes, it's a simple matter of human nature. People are motivated to pursue their own self-interest and will likely pursue incentives that align with their best interest. Rich people want to keep more of their wealth and build even more from existing wealth because huge wealth is a status symbol and a huge quality of life improvement.
@@mgunt Because rich people are criminals. You rob a bank? You're a criminal! A bank robs the government and the economy? Perfectly "legal" apparently. "Stealing" food from a convenience store is a "crime" but stealing millions and billions from people's paychecks and the US economy? Acceptable apparently 🤷🏾♀🤷🏾♀😒😒
@@mgunt What's in the self interest of the average to below average masses out there? To find someone else to disproportionately pay for it?
Love how the income tax at the beginning was represented by like 10% of the cheque flying away 😄Americans don't know how good they have it tax-wise.
I've been watching Two Cents for a good while now and I found this episode the most interesting so far!!
It's almost like is not even profitable to be a worker. Workers should do some challenge called "not going to work anymore" it would be hilarious.
Fantastic, how we keep hearing that there is no public money for anything while this happens legally
The thing with regulations is that the rich always find the way to not pay taxes. They have an army of lawyers and financial advisors to help them continue doing that.
Everyone can afford a CPA. I have used one for my business as I grew from 40 to 80 k gross. Don't eat out for a few meals.
@@jrg305 Uh, not everyone can afford CPAs, credit counselors, fiduciary CFPs, or know about affordable financial advising services. I mean, I personally can get access to free 30-minute advising appointments with a fiduciary CFP, but not everyone knows how to find those kinds of resources. Some people don't have good internet access, even in 2024 America, or don't have the research skills on how to find helpful professional resources online.
Exactly. Rich people have the privilege to afford professional services on how to minimize tax burdens, help their children do well on the SAT or ACT, get admitted to an elite college through **legacy admissions**, and even save for their children's college expenses or pay top dollar to a college admissions adviser to help their kids win scholarships and fellowships. Poor people on the other hand, have to hope that their kids school, their local community, or library offers similar services for an affordable price.
@@mgunt I paid 1k last year to my CPA and I am not rich. I could afford that even when I was making less. Do you make less than like 30-35k a year? I mean at that point you're not really paying a ton of taxes anyway.
@@jrg305 But explain why poor or working-class people rarely use fiduciary CFPs and CPAs? I mostly see rich and highly educated people use those kinds of services.
Oh so that's why I have to declare that I'm not a US resident on local bank forms when I'm on the other side of the world.
How Phil hides his mustache
5:21 graphic on the right is the 2nd T-Shirt I need from this channel
Still waiting for the 1st one to drop (IRS's "Whatevs. Pay me") 😂
That Step up in Basis rule is astonishingly terrible. Here in Canada the capital gains are considered realized at death and the estate has to pay the taxes before distributing to the heirs (except to a spouse - things can be transferred directly to a spouse but the cost basis doesn't change). It makes for messy planning when someone wants to pass down the family cottage, but at least the taxes get paid.
Getting rid of the basis step-up probably wouldn't be constitutional in the US anyway. And any party supporting it would pretty much instantly hemorrhage voters in retiree states like Arizona or Florida. Old folks are not going to vote for someone who wants to get in the way of them leaving their assets to their kids. Young people may support that stuff (while they are young) but old people definitely do not. So you can pretty much write this one off as a policy wonk's pipe dream.
Isn't it something like 50% of the capital gain? I just saw something from The Plain Bagel that it may go higher. My dad is 92 has a condo and cottage both of which have gone way up in value thanks to NS real estate so not sure how things will work out tax wise.
This video is a little bit misleading, because they don't touch on estate taxes, which are similar to what you described. The heirs don't pay tax, but the estate certainly does.
@@shelbygardner1193 I did check that Plain Bagel vid. The tax would be now around 66% of the gain taxed at the estates rate but IDK. Sounds like there’s also an exclusion amount. Hoping when things do happen we can keep the cottage in the family.
I don't know what the exclusion amount is in Canada, but there's generally at least something. The US federal exclusion is pretty high, but a lot of the states' are smaller.
Thanks for the tips. It is the duty of a person to legally minimize their taxes. College loan forgiveness is just one example why paying tax is bad.
I literally just Googled this topic yesterday! Thanks!
In the borrow, buy, die strategy there is one thing I am unclear on. When they die, their estate has to cover the loans and probably have to sell assets to do so. Are the assets sold by the estate to cover the loans also on a stepped up basis, or do they pay the full capital gains tax?
well if the next of kin inherits the investments at 0 increased valuation as mentioned, they can sell part of them to repay the loans without having to pay any taxes since it was considered to have 0 appreciation in value once it went to the new owner.
Yeah they sell the stepped up assets
Also, loans, etc., that would get settled in estate gains figures are usually taken out by a shell corp, not the person themselves.
We would use life insurance to cover the loans when we die
Thanks for this thread.
so if we all do the same nobody nationwide pays taxes....
Thanks for the great summary!!
Reminds me of "The Tax Poem."
"Tax his land, Tax his bed, Tax the table at which he's fed.
Tax his tractor, Tax his mule, Teach him taxes are the rule.
Tax his work, Tax his pay, He works for peanuts anyway!
Tax his cow, Tax his goat, Tax his pants, Tax his coat. Tax his ties, Tax his shirt, Tax his work, Tax his dirt.
Tax his tobacco, Tax his drink, Tax him if he tries to think.
Tax his cigars, Tax his beers, If he cries tax his tears.
Tax his car, Tax his gas, Find other ways to tax his @ss.
Tax all he has, Then let him know, That you won't be done till he has no dough.
When he screams and hollers, Then tax him some more, Tax him till he's good and sore.
Then tax his coffin, Tax his grave, Tax the sod in which he's laid.
Put these words upon his tomb, 'Taxes drove me to my doom...'
When he's gone, do not relax, it's time to apply the inheritance tax."
i dont get how financing lifestyle with loans dodges taxes, you still have to payback loans by selling investments eventually. I get that you want the investment to grow at a higher rate of return than the loan but im missing something here.
Ditto. Trying to get an answer myself.
These topics should be learned in school.
In these 8-9 minutes you guys told us way more valuable things that we can get in one year of economics in school lol
Effing depressing as hell.
Student debt relief should not be allowed. Pay your debts.
Previous generations used to be parents by 18. Politicians now say 18 isn't old enough to decide to take a loan
just b aware that the otherwise illegal and usurios interest scheme and mis managment by student loan conglomerates is the only guarantee u get that your loan cant b paid off. even people putting in 20yrs of public service did not get loans paid.
nterest scheme
My takeaway is to not looks for ways to earn a pay check, but rather invest your time into your own business or even hobbies!
😂
I paid 1.09% two years ago, and 4.9% this past year. Most poor pay really low if any taxes..
Can confirm, these financial and legal tools are available to everyone, but you have to have the assets and proper structures first before you can benefit from the 400+ deductions available to business owners and real estate investors.
2nd part of my comments that seem to get deleted...
On offshore accounts.
Most people follow the law, even if they're opening accounts in other countries. The assumption is that they're trying to 'hide' their wealth, but in reality, there are multiple reasons for opening accounts in other countries. Most people doing this are following the law, but people invested in this narrative assume it's only to 'hide' their wealth. The penalty for doing anything illegal is steep. Very few people risk it.
As for all the legal loopholes, the key work here is legal. They're not 'hiding' their wealth. They're following the law. If anyone is to 'blame', it's legislators that pass 'flawed' laws.
how do you pay those loans? dont you eventually need to sell some assets?
That’s what I’m trying to understand.
Thank you guys.
Realizing that buying twitter was not only controlling the narrative, but also a big ass tax write off with extra steps.
The house always wins.
Regarding the "Buy, Borrow, Die?, If someone takes out a loan on their investment, but dont sell their stock, how do they make payments on the loan to pay it back?
Refinance. I.e. borrow a bigger loan to pay off the old one.
The investment could pay out dividends which could be used to make payments. Also I've heard its worth it to carry these loans since their interest rates are lower than the long-term expected return on a diversified portfolio.
@@fishroy1997 doesn’t sound sustainable unless you own large assets right?
@@mikebarnes2294 “carry” meaning to have the loan vs an investment account?
@@mikebarnes2294Thanks for your reply.
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I've always wanted to be involved for a long time but the volatility in the price has been very confusing to me. Although I have watched a lot of TH-cam videos about it but I still find it hard to understand
I'm not sure I trust a video that gets "capitol" gains spelled wrong at 3:09. Are we really taxing state capitols now?
Something tells me that Congress is taking as long as they are to close these tax loopholes because if they just close them immediately that makes a lot of their lobbyists angry and might put them out of a job.
this must have taken a lot of work. good job
This video is a PERFECT example of the economic illiteracy of PBS.
Example 1: Why is there a "step up" in basis on inherited stock?
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It's true that there is a step up in basis for inherited stock that applies to the inheritor's capital gains. But it's untrue that the step up isn't taxed (as the authors of this video either mistakenly or intentionally forget to mention). The step up in basis is taxed at the inheritance tax rate of 40% for the federal government alone. That 40% tax is paid on both the REAL increase in the value of the stock and the INFLATION driven increase. The inheritor pays lots of taxes even on inflation which massively enriched government to the detriment of citizens.
Why is that done? First, because a significant portion of the NOMINAL gain on a stock results from inflation. Inflation enriches government coming and going. People shouldn't be taxed for inflation which is why there is indexing on federal income tax. Second, there is a record keeping issue. Let's say, my Aunt Mini bought some stock in 1975. She passes away in 2025 and leaves it to me. For me to pay the tax on the gain, I would have to try and find her records from fifty years ago to determine what she paid for the stock. That would be a nightmare for taxpayers and even for the IRS.
Example 2: So called "tax loss harvesting".
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Let's say I invest in a factory that will last ten years. The proposition is that I will invest USD 20 MM and I will earn a profit of USD 50 million. My tax rate is about 50% (considering federal, state, local, and other taxes). So I pay USD 25 million in taxes. I would net USD USD MM leaving me with a 20% gain.
But here's the trick our friends from PBS (government funded) would like to use to get a free tax hike. Taxes are paid on an annual basis.
So in years one and two, while building the factory, I invested USD 10 MM and gained no revenue. I lost USD 10 MM each year, although I was hiring people, buying things, and helping the economy. Now my factory goes into operation. But for the first three operational years (years 3, 4, 5) I lose money. In years six through ten I make a fortune in profits. But those profits were only possible because of my investment and losses in the first five years.
The folks at PBS want to tax my on only my profits, ignoring my investments, costs, and losses. They won't let me reduce my profit by the USD 20 MM I invested or the USD 30 million in operating losses I took while getting the factory up to speed. They want to tax me at 50% on USD 100 MM. That is they are taxing me not only on my profits. But they're also taxing me on the amount I invested, my costs, and my losses. That is they want USD 50 MM in taxes. They want ALL THE PROFIT for government. THEY ARE GREEDY.
Here's the question. Would you invest (and risk) USD 20 MM just to hand over the all the profits to government? Neither would anyone else. The result would be no investment, no jobs, and no taxes paid. The effect of what PBS is suggesting was tried in the 1970s under Jimmy Carter. The stagflation that resulted was so bad that even liberal states like Massachusetts and New York voted to re-elect Ronald Reagan after he corrected the policies PBS is pushing.
Example 3: "Tax havens."
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"Tax havens" is the term smug leftists use to describe jurisdictions that don't tax their citizens into economic oblivion.
When you go to shop, you look for a store offering the merchandise you want at the lowest price. Stores with low prices are able to do so because they are efficient in how they spend their money. The smug leftists in this video would probably accuse you of choosing a "retail haven" if you shop at Target rather than Macy's.
This exposes the thinking of our smug leftist friends. They criticize states such as Texas, Washington, and Florida for having low taxes without even looking at how well those states are carrying out the tasks of government for their citizens. THEIR PREMISE IS THAT HIGHER TAXES ARE ALWAYS BETTER. To them the happiness or well being of the citizens counts for nothing. All that matters is the imposition of confiscatory taxes.
I see leftists on campus all the time. The two presenters have the same smugness as those on campus.
Well stated.
Step up basis is the biggest tax loophole ever
The “Score Beyoncé tickets” line will not age well lol
That guy’s transformation goes from High and Tight haircut and Mustache White cop that pulls you over to a LGBTQ guy who has a vegan restaurant.
He's doing his part for the Village People.🤑
I will tell you as a gay he looks worse with the long hair. I live in Austin and when guys look like that, which many do right now, I am turned off. Men have never looked good with long hair.
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I feel one Of the greatest challenges that we first timers face in the ma rket is that we end up losing all we have,making it difficult to find ourselves back to our feet. My biggest advice is to always seek the services of a professional just like I did when I ventured into it for the first time. Big thanks to Larysa Caba. I now make huge profits by weekly through her services while still learning to stand on my own.
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I just looked up her name online. she is licensed with credible certificates and has an amazing track record. Thank you for the message.
I feel this is quite an easy one. You already have her name which makes it easy for you. Just look up her name online. I’m sure you will come across her. That’s how I found her too.
New law that just went into effect is closing one or more of those loopholes. ' Corporate Transparency Act ', no more shell companies. Well can use a shell company, but each one must have a unique address down to the room in a building and a face+name that is running it which include all legal documents (so no more fake person running a shell company). So places like delaware can no longer stack 100's off thousands of businesses to a single street address.
They should be able to hide they’re money and so should you , no one should have to pay banker there’s income it’s not the American people fault that the government borrowed money from devil worships that’s on you I’m not paying for wars and sex trafficking I refuse just say have blessed day
I was literally just thinking about this subject these past few days. Thanks for the video
How to be smart with your money. ❤
It's nice to cash in early on a Two Cents episode
so informative!!! thank you for all your work Philip and Julia! 🤯
I have followed you both for years. I get a big joy when I see y’all post a video. Much love ❤
Great episode. The tax laws are confusing so that less people understand them. A Roth IRA or Roth 401k is a great way for the middle class to avoid paying taxes in the future on any gains that their investments make.
Ya gotta pay taxes when you pull that money at 76 😅
@@brooklyn3299that is normal iras not Roth. Roth is pre tax so no tax in future.
@@richardmenz3257 Still get taxed before contributing. You either get taxed in the front or taxed in the back 🍑 🍆
@@brooklyn3299 yeah but looking at the rate now taxes prob be higher later so locking in lower now is nice. But if gotcha. I mainly use Roth as a 2nd emergency fund. I have 28k in it that I can withdraw without penalties which you cannot do with normal IRA.
@@brooklyn3299The growth/gains is Tax Free in a Roth IRA & Roth 401K. In a Traditional IRA & Pre Tax 401K you pay taxes on the growth/gains.
The step up basis seems like the one to get rid of - after a certain $ amount the step up shouldn’t apply. Don’t force people to sell but they shouldn’t have the basis reset
It already does that since stepped-up basis was designed to avoid double taxation with estate taxes. If you pass down more than $14.61M, you pay a 40% estate tax on anything above that ($13.61M exemption + $1M max tax bracket). That 40% is taxes on your whole estate, not just gains. That's why billionaires create dynasty trusts and other corporate entities, which don't benefit from stepped-up basis, but do avoid estate taxes since a 20% capital gains tax beats a 40% estate tax.
The Step-up is basis is also administratively useful as it avoids needing to sort through a decedents records to determine what was paid for an investment purchased decades ago. (Imagine trying to do this back in the age of mostly paper records before computers became commonplace.) That said with better stock basis tracking and overall better information gathering I could see a strong case made for eliminating the step-up in basis (or limiting it to situations where estate tax is actually paid on the property being bequeathed)
Thanks for the tips.
Thanks for the blueprint
They need to get rid of stock buy-backs too, which used to be illegal. And also ban representatives from trading, since they have insider info.
The initial statement of the irs estimating that wealthy are skipping out on $160B a year in taxes implies that they are doing so illegally. Then the video walks through both legal and illegal ways in which wealthly people may avoid paying taxes with the same tone of "the wealthy are cheats" and never clarifying how much of that $160B number is attributed to illegal or legal means of tax avoidance. This feels borderline "misinformation" to me.
Also the buy, borrow, die segment implies that every wealthy person who borrow large sums of money is doing it solely to avoid taxes and never discusses other reasons they may have, like maintaining voting control of their company, or just betting that their equity will have a higher rate of return than the interest rate of the loan
Stepped-up basis only benefits working class people to top 1% rich people, not the ultra-wealthy. The whole purpose of stepped up basis is to avoid double taxation because you pay a 40% estate tax on any estate above $14.61 million ($13.61M exemption + $1M for max tax bracket). So paying estate tax and capital gains tax would be a double tax. For the billionaires, a 20% capital gains tax is much better than a 40% estate tax (which taxes both gains and what you put in), so they set up dynasty trusts and other entities to avoid estate taxes (but they don't benefit from stepped-up basis either). The only people who benefit are people who pass down less than the $13.61M exemption since they get pay no estate taxes and benefit from stepped-up basis. If you all remove stepped-up basis, you're only increasing taxes for yourselves on the house and stocks you'll inherit, while the billionaires will be unaffected.
Look, anyone can do a loophole easily. Take out a HELOC loan on your home. Or refinance a mortgage on your home or investment property. The cash out is tax free.
You two can talk how our government wasting our tax next.
Ukraine war. Funding Israel massacre. Funding our illegals that affect congress representation. Funding pfizer and moderna under "emergency" for gene therapies with high risk of clotting and myocarditis for something that kills 0.1%.
Not funding American veterans while funding other countries wars.
No no, it's spent on "programs and infrastructure" totally never wasted! Please watch PBS... 😂
@@jrg305 "Funding our illegals "
lol do you really think the government would be responsible with that $160B? They’re over 30 trillion in debt. It would last less than 10 days and nothing would improve.
The 'step up in basis' seems particularly frustrating because folks are avoiding taxes on money they didn't earn to begin with.
I actually feel an anxiety attack coming on from watching this video. I'm so sick of being poor and getting taken advantage of.. while so many others get to have inflated lifestyles that they don't even need. It's not fair
"How Rich People Keep Their Money from Being Taken"
I was gonna say "Swiss bank accounts" ----
This was well done. So much so, it pissed me off! 😂🥴