DAVE ROSS

Ross: How a tax loophole has let the wealthy create their own American aristocracy

Jul 9, 2021, 7:06 AM | Updated: 10:31 am
Wealthy, taxes...
(Getty Images)
(Getty Images)

President Biden has made it clear he wants wealthy Americans to pay more in taxes, which will likely set off a big fight on the grounds that the government has no business going after taxpayers just because they’re wealthy.

Well, no one wants to hurt law-abiding wealthy people.

So I called my favorite tax accountant Don DeSantis, who explained to me that wealthy people get that way using a strategy known as “buy, borrow, and die.”

Basically, you buy assets that appreciate over time, you accumulate five million, 10 million, 100 million, and when it’s time to cash in … you don’t sell your investments, because that would mean you owe taxes on the gain. Instead, you take out a loan.

So you take out a loan to get your cash – and magically, that cash is tax-free. Why?

“Because a loan is never income,” DeSantis told me.

Right – because you have to pay it back. Except … you don’t pay it all back, or at least not right away. The key is to pay the minimum and spend your untaxed loan proceeds on another money-making investment. Sure, you could blow the cash on something frivolous …

“But presumably, those are gonna be business deductions,” DeSantis pointed out.

So your non-taxed loan income can actually get you a business deduction, instead of costing you a single penny in extra taxes.

And this is why the strategy is called buy, borrow, and die: Because if you’re rich enough, you needn’t pay off the loan ever. The idea being that when you die, the underlying assets backing the loan pass to your heirs and, upon your death, the tax liability on the capital gains of those assets magically and legally disappears. So they have plenty of money to pay off the loan — or just keep it going.

Your heirs might have to pay an inheritance tax, but no capital gains tax, which is like starting the tenth inning with a runner on third.

And this is the system that many members of Congress will fight to protect. It’s a system intended to protect small business, but it’s also being used by the super-rich to create an American aristocracy akin to Downton Abbey without the pretentious accent.

Maybe it’s for the best. Our leaders would then be born into their positions; all that grubby campaigning would be unnecessary, and all that election fraud would just disappear.

Listen to Seattle’s Morning News weekday mornings from 5 – 9 a.m. on KIRO Radio, 97.3 FM. Subscribe to the podcast here.

Dave Ross on KIRO Radio 97.3 FM
  • listen to dave rossTune in to KIRO Radio weekdays at 5am for Dave Ross on Seattle's Morning News.

Dave's Commentary

Dave Ross

debt...
Dave Ross

Ross: The wealthiest nation in history is again toying with the idea of not paying its bills

The debt drama is going down to the wire. The warnings are flying, the air is thick with blame – but I remind myself that this is how it’s supposed to work.
9 hours ago
Trump...
Dave Ross

Ross: Now we know what they were planning

On Monday, it was revealed why former President Donald Trump had every reason to believe he would win the 2020 election.
1 day ago
trump, secret service...
KIRO Radio staff

Fahrenthold: Taxpayers paid $1.7 million to protect Trump’s four kids, three officials

There's quite a bit of taxpayer money that went to the Secret Service to protect not just the president, but a bunch of other people as well.
2 days ago
Texas abortion...
Dave Ross

Ross: You get a lawsuit, and you get a lawsuit

The way the Texas law is written, Dr. Braid could be sued hundreds of times, and sued successfully, since he’s basically confessed to providing an abortion.
2 days ago
space...
Dave Ross

Ross: Convincing billionaires that Earth is more exciting than space

Instead of trying to tax billionaires, why not find a way to motivate them to want to spend their money on something besides just space?
3 days ago
school bathrooms...
Dave Ross

Ross: The war on school bathrooms

Kids are vandalizing school bathrooms and posting their mischief on TikTok as some bathroom challenge. Soap dispensers, sinks, and toilets are gone.
6 days ago

Sponsored Articles

...
IQ Air

How Poor Air Quality Is Affecting Our Future Athletes

You cannot control your child’s breathing environment 100% of the time, but you can make a huge impact.
...
Swedish Health Services

Special Coverage: National Prostate Cancer Awareness Month

There are a wide variety of treatment options available for men with prostate cancer. The most technologically advanced treatment option in the Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform.
...
Marysville Police Department

Police Opportunities in a Growing, Supportive Washington Community

Marysville PD is looking for both lateral and entry level officers. Begin or continue your career in law enforcement for a growing, supportive community.
Courtesy of JWatch Photography....
Experience Anacortes

Summer Fun Activities in Anacortes

With minimal travel time required and every activity under the sun, Anacortes is the perfect vacation spot for all ages.
...
By Alaska Airlines

Calling all football fans: follow Russell on the road

Take your Northwest spirit that we’re known for on the road this season with Alaska Airlines.
...
By Marysville Police Department

Police Opportunities in a Growing, Supportive Washington Community

Marysville PD is looking for lateral and entry level officers. Begin or continue your career in law enforcement for a growing, supportive community.
Ross: How a tax loophole has let the wealthy create their own American aristocracy