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BHM, intercst on TMF talks about this a lot, his sarcastic comment about "Only suckers work for a living" rings true in a lot of ways. Long term Capital Gains are treated much more favorably than W2 income. Qualified Dividends are treated more favorably than W2 income. I'm not very savvy with the TMF search function, so I couldn't find his post, but he gives an example of how a married couple living off of long term capital gains can pay little or no Fed tax, while a married couple making the same in W2 income will be in the 20% + tax bracket ( not an exact percentage number, going off of memory ). This sure sounds like a rigged tax system to me, lol.Really rich people don't even pay capital gains. If you're Warren Buffet, you don't pay any taxes because you employ the "Buy, borrow or die" strategy. The WSJ laid it out:
wsj.com - Buy borrow die how rich americans live off their paper wealthhttps://archive.is/ew1BrFor borrowers, the calculation is clear: If an asset appreciates faster than the interest rate on the loan, they come out ahead. And under current law, investors and their heirs don’t pay income taxes unless their shares are sold. The assets may be subject to estate taxes, but heirs pay capital-gains taxes only when they sell and only on gains since the prior owner’s death. The more they can borrow, the longer they can hold appreciating assets. And the longer they hold, the bigger the tax savings.
“Ordinary people don’t think about debt the way billionaires think about debt,” said Edward McCaffery, a University of Southern California law professor who says he coined the buy-borrow-die phrase. “Once you’re already rich, it’s simple, it’s easy. It’s just buy, borrow, die. These are planks of the law that have been in place for 100 years.”,BBD strategies involve taking out
loans against the unrealized gains they have from other assets. If you have a stock that in a hot market is rising 5-6% then you're better off keeping it (and thus not paying capital gains on it) and taking out a loan at an interest rate less than that.
