So we get to pay 40%+ tax on our income on a yearly basis while they get to pay a mystery amount that may or may not be factored into debt costs that can also be deferred for a while? Yeah that sounds fair.
> debt costs will adjust accordingly and pass on to wealthy still
Let’s think about some the factors that may influence this imaginary debt cost:
- whether asset is an appreciating asset
- risk management strategy of the bank
- whether account manager wants to have competitive terms so that the wealthy customer won’t find a better deal
And so on.
How is this not a mystery cost? Sure the bank in some distant future might some tax when it decides to liquidate it. But by that time, the assets would have been in pools for such a long time that we’d never know exactly how much “tax” was paid.
I’m not going to say I know the solution to this problem because I honestly don’t think there is a way to fix this. Tax avoidance will always be there.
They do not have to be. For instance, it is common to never completely pay off the mortgage in Switzerland to avoid one-off taxation. Instead, the eventual taxes are included in the cost of the debt.
An interest only loan doesn't suddenly mean there's no repayments. The hint is in the name, you still have to repeat the interest on the loan. Payment terms may vary but if you think that banks across the US are sitting on interest only, asset backed mortgages for the ultra wealthy's most expensive purchases, and taking no payment from them then I don't think we're going to be able to come to an agreement on this topic.
But ultra rich people actually don’t. They can just incur debts using their wealth and use that instead.