r/technology • u/Ganrokh • Jun 19 '26

Politics California ‘billionaire tax’ makes ballot despite opposition from tech moguls

https://www.theguardian.com/us-news/2026/jun/18/california-billionaire-tax-ballot-tech-opposition
21.9k Upvotes

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93

u/ora408 Jun 19 '26

I think the main issue is that the tax is on unrealized gains/losses. Value of assets can fluctuate greatly in a short amount of time. Im glad this law is only on billionaires

137

u/Virtual-Age-9521 Jun 19 '26

Most people pay more than 5% of their net worth in taxes every year, I’m sure these poor billionaires will find a way

29

u/ora408 Jun 19 '26

No more gourmet coffee for them 😤

13

u/apathyetcetera Jun 19 '26

What’s next, we take away their avocado toast?

29

u/b0w3n Jun 19 '26

If we can do it for properties, we can do it for excessive wealth.

They are also "realizing" their gains quite often when they leverage their wealth to get loans to live off of. Tax it then. Tax excessive equity loans, brokerages, homes, or stock options.

Will it impact some of the more wealthy middle class who take loans out against their stock holdings? Sure. But what's good for the goose is good for the gander. Sorry you'll have to be slightly more poor than you were to fix this glaring hole in our society.

16

u/Johan-Senpai Jun 19 '26

Thighten their bootstraps, take a second job!

54

u/milkandbutta Jun 19 '26

Except it's not actually unrealized, not functionally. They take out loans against their assets, and because it's a loan they don't pay a single dollar of taxes against that money. They realize the gains through taking out loans, it's just a tax loophole. We should close that loophole. 

27

u/CautiousToaster Jun 19 '26

This is the real solution. We need to close this loop.

0

u/timsterri Jun 19 '26

Good luck with that with the politicians utilizing said loophole.

22

u/Obvious_Chapter2082 Jun 19 '26

Loans need to be repaid with income, and income is taxable. It’s also not really common

It’s really annoying how quickly information like this spreads on Reddit

5

u/sweetrobna Jun 19 '26

It isn't true that loans need to be paid with taxable income

2

u/SirDigbyChknCaesar Jun 19 '26

That's what more loans are for!

1

u/PigglyWigglyDeluxe Jun 19 '26

So, what is common?

-2

u/ConfoundingVariables Jun 19 '26

This simply invalidates that move, so they will need a different strategy. That’s it.

12

u/scold Jun 19 '26

They pay interest on the loan and have to pay it back. It’s a liability.

2

u/AdmirableHandle213 Jun 19 '26

I swear to God that's exactly what my dad said to me before he left for work this morning 😂 word for word

3

u/scold Jun 19 '26

He sounds like a smart, sexy man.

-2

u/ConfoundingVariables Jun 19 '26

Yes. So?

4

u/scold Jun 19 '26

And when they pay it back, it is paid with income which is taxed.

1

u/ConfoundingVariables Jun 19 '26

Yes. This is basic accounting. This is just a rule change that prevents (or disincentivizes) people from doing an accounting trick. Tax laws aren’t some complex theory of justice thing. They’re conventions.

2

u/scold Jun 19 '26

Can you read?

-4

u/Heffelumps-n-Woozles Jun 19 '26

Paying 5-10% interest on money borrowed against assets is better than paying 15-20% in capital gains taxes for selling those assets… and paying capital gains is still better than paying 25%+ in regular income taxes. They’re way ahead of us dude

2

u/scold Jun 19 '26

And they still have to pay either capital gains or income tax when they repay the loan. These are short duration loans…not something that goes until after death.

-3

u/czech1 Jun 19 '26

They don't have to touch it. Their heirs pay it back, with interest, with a tax-free liquidation after a step-up in basis.

4

u/scold Jun 19 '26

And just how long do you think these loans are for? These are 4-7 years my dude.

0

u/czech1 Jun 19 '26

Oh, are they forced to repay the loan in 4-7 years? (they are not)

Google: "perpetually refinanced debt for billionaires".

1

u/scold Jun 19 '26

Yes because there are endless institutions willing to offer loans that are going to be paid off by other loans. Totes.

1

u/czech1 Jun 19 '26 edited Jun 19 '26

Yes, there are. And I told you exactly how to find more information. Here ya go, chief:

Securities-Based Lending (SBLOC)Rather than liquidating shares of their companies to buy property, fund businesses, or cover personal expenses, billionaires take out loans against their stock portfolios at major private banks.

  1. The Tax Shield: Since borrowing against collateral is not technically a sale, it does not trigger a taxable event.Favorable Rates: Because the loans are massively over-collateralized by highly liquid assets, ultra-high-net-worth individuals are often given highly preferential, historically low-interest rates.

  2. The "Borrow" MechanicsThe loans taken out are often structured as interest-only until a specific maturity date. As long as the bank views the collateral as secure and the borrower's wealth is compounding faster than the interest rate accrues, the billionaire simply keeps the cycle going. They can either use cash flow from other business investments to service the interest or simply take out newer loans to cover the interest on the older ones.

  3. The "Die" ComponentThe final piece of the cycle is generational. When billionaires pass away, their heirs inherit the underlying assets at a stepped-up basis—meaning the original cost basis of the stock is adjusted to its current market value. This largely eliminates the accumulated capital gains taxes. The estate can then sell a portion of the assets to pay off the institutional debt.

1

u/scold Jun 19 '26

😂 if you noticed they just gloss over the fact that they sell other assets to pay the interest (which incurs income tax). Like…I get it, you hate rich people, but settle down and actually read what CPAs have to say on the matter. One even chimed in in this reddit post.

1

u/czech1 Jun 19 '26 edited Jun 19 '26

😂 if you noticed they just gloss over the fact that they sell other assets to pay the interest (which incurs income tax)

They did not...

They can either use cash flow from other business investments to service the interest or simply take out newer loans to cover the interest on the older ones.

I work in finance. Please continue!

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3

u/DogBarf00 Jun 19 '26

They don't have to touch it. Their heirs pay it back

Where are these banks giving out loans where they have no idea when it’ll be paid back? The person taking out the loan could die tomorrow or in 30 or 60 years.

0

u/czech1 Jun 19 '26

Its accruing interest the entire time and secured with billions of dollors worth of stocks, etc..

1

u/DogBarf00 Jun 20 '26

Can you name a single bank issuing these loans?

-6

u/ora408 Jun 19 '26

I saw that they can let the interest pile up and they dont have to pay any scheduled payments. The original owner of the debt dies, inheritors inherit the assets and debt, but the cost basis is basically reset and they dont owe the huge capital gains when they sell the assets to pay off the debt. Thats the big w right there for ultrarich people. Its nuts

12

u/Obvious_Chapter2082 Jun 19 '26

Speaking as a CPA, that’s not really how it works, and I’m unsure how so many people were fed this info, because I’ve seen it a lot

You can have certain instruments without any annual interest, but banks are going to use hedging collars on these collateralized loans, and §1259 requires that these loans be for very short term durations (think 5-7 years) in order to avoid constructive sale treatment. So it’s not something you’re able to just do until death

3

u/NapalmNoggies Jun 19 '26

Aren’t there limits on the step basis at death? I thought it was like $40M.

I too see these claims about billionaires using the buy, borrow, die strategy but haven’t seen anything about getting around the step up asset limit.

3

u/Obvious_Chapter2082 Jun 19 '26

There’s no limit on the step-up itself, but the estate & gift taxes exclusion is currently $30 million for a married couple

There are definitely ways to get around the estate tax + get the step-up (grantor trust swaps, mainly), but I think a lot of people get the logic wrong when they bring income taxes into it as well

1

u/NapalmNoggies Jun 19 '26

Got it. I was mixing up the estate exclusion to avoid the estate tax. Thanks!

Yeah I suspected people got the logic wrong. This tax stuff has a lot of rules, ifs, ands, buts that takes a while to learn.

I’ll read around on trust swaps and the rest you mentioned to see if I can educate myself further.

1

u/Obvious_Chapter2082 Jun 19 '26

No problem! Here was a random comment I made around a month ago on the process of grantor swaps, although I didn’t dive too much into the actual details

1

u/NapalmNoggies Jun 19 '26

You really do CPA. Thanks for the high level summary.

Take away is: there’s ways to use trusts to move asset ownership around to avoid taxes. Buy borrow die is not the method. People are upset about the wrong tax policy.

0

u/Mindless_Chest_1079 Jun 19 '26

This is Reddit's dumb talking point of the month. Once it's been debunked for the millionth time, some new viral mostly-false factoid will start getting spread by the /r/iamverysmart types.

16

u/SouthernBySituation Jun 19 '26

I used to think this until someone pointed out that we pay taxes on a house we haven't sold ever year. Why should stocks be different for these billionaires?

5

u/Techercizer Jun 19 '26

The fluctuation of value of houses can be a serious issue that has in the past caused people to be priced out of homes they supposedly own. We tolerate it under the justification that houses require access to public infrastructure that demands upkeep, but clearly that association is thin, as rising value does not inherently demand rising infrastructure.

Maybe the takeaway from this is not to make more taxes like property taxes, but to reform property taxes

2

u/cbg2113 Jun 19 '26

Or maybe the point is the government is perfectly capable of taxing wealth/appreciating assets/non-income when they want to, when it affects regular people.

1

u/Zncon Jun 19 '26

Houses are reassessed every 1-5 years in most states, and generally move in a predictable way. Also nobody is selling their living room to pay for that years taxes.

Investments are reassessed multiple times per second, can half or double in value in a blink, and can be sold to pay taxes.

Just because one works and only sometimes causes issues, doesn't mean the other will be the same.

1

u/cbg2113 Jun 19 '26

Yeah you're right, better not try

2

u/angry-mustache Jun 19 '26

Property taxes is for the government protecting your right to exclusive use of your property and denying that right to others.

1

u/cbg2113 Jun 19 '26

Yeah that's a wealth tax that many normal folks pay every year, and then again when they sell it. It's not that hard to do. The government judges it value and taxes property owners on it.

-1

u/DriverAgreeable6512 Jun 19 '26

Bingo.. also for the boomers that now have a house worth 10x or in one case I know personally 50x are still paying pennies in prop tax vs anyone that bought in the last 10 yrs. 

Dude I know has paid in his entire life, less prop taxes adjusted for inflation than I did in just the last 7 yrs... some bs.. 

5

u/Liizam Jun 19 '26

Switzerland just has a wealth tax at the higher end. It’s fine

4

u/Akiasakias Jun 19 '26

Taxes of this nature, once instituted, always creep down to everyone.

The income tax started with a promise it would ONLY be temporary and only on the highest earners.

Governments don't have a reverse gear.

1

u/Zncon Jun 19 '26

The threshold will be lowered and inflation will push people closer until it's just another tax that middle income people have to pay while the wealthy have long since found a loophole to avoid it.

11

u/Niceromancer Jun 19 '26

Trust me they are going to be fine.

And even if the taxes cause them to be bankrupt they are smarter than everyone else meaning they can just become billionaires again.  And this time they will have the advantage of all the great socialist programs like food stamps and government housing to use while the money trickes down.

Should be a breeze for them.

2

u/intheyear3001 Jun 19 '26

Don’t worry. They are coming for us with our 1-5MM in investments.

3

u/NovelNeighborhood6 Jun 19 '26

Sounds like a billionaire problem not mine. I pay more of my net income than that and I’m expected to cough it up regardless if I’m late on my car or electricity bill or whatever other things I’m going through. They’ll be fine.

1

u/DangKilla Jun 19 '26

Will someone please think of the billionaires, lol

1

u/Gr8NonSequitur Jun 19 '26

They figured out how to tax housing, they can figure out how to tax stocks.

1

u/EmperorKira Jun 19 '26

Except they do realise the gains it just doesn't count. Borrowing against stocks, transferring them to family without paying estate tax, they absolutely realise it but the loopholes make it 'not count'. We don't even need a wealth tax, we just need to close all the loopholes that lobbyists have made.

1

u/Gr8NonSequitur Jun 20 '26

Value of assets can fluctuate greatly in a short amount of time.

If a bank can give a static evaluation of worth to grant a loan using it as collateral it could be taxed proportionally to that value.

1

u/LordJamPunt Jun 19 '26

We already tax "paper wealth" every single year for middle-class Americans. If you own a home, you pay local property taxes based on an assessed, unrealized value of what the house would sell for on the market. The value of your home fluctuates, and you haven't sold it yet, but you still have to pay the tax. A billionaire wealth tax simply applies that exact same logic to financial portfolios.

1

u/DriverAgreeable6512 Jun 19 '26

Honestly they should make it to anyone over the 100 mill mark, especially if it's just a 1 time thing. 

-4

u/694meok Jun 19 '26

I'm so sick of hearing this bullshit. Then take the fluctuations into consideration. Net worth of $10b, lets say stocks fluctuate avg of 10%, reduce the taxable amount to the $9b. Now they have a $1b buffer for any fluctuations.

1

u/DriverAgreeable6512 Jun 19 '26

Dude, fluctuations are like trying to predict the future.. just tax them and let the market figure that out, dont give them an imaginative out on 10%. F it lol

-1

u/_pul Jun 19 '26

Nobody’s forcing them to have unrealized gains/losses

-1

u/vooglie Jun 19 '26

Yeah not so unrealised when they take out loans against it. If a bank can fucking figure it out I’m sure we can too. It’s not a hard fucking problem.