they clearly have access to some kind of money to pay for their extravagant lifestyle
They borrow money, and then invest it wisely, such that it grows faster than the interest rate of the loan, plus whatever the inflation rate is. If you do that well enough, then you have enough ‘margin’ remaining for the ‘extravagant lifestyle’ stuff, while still being able to pay back the loan.
There’s nothing really nefarious going on in this process. There is a risk being taken that the stuff the funds are invested in do indeed increase in value at a percentage rate higher than the interest rate. Lenders aren’t in the business of hemorrhaging free money to anyone–they are getting repaid, or else they wouldn’t be lending in the first place.
Putting your wages in a retirement index fund is essentially the same overall process (you’re also betting on the index fund, over the long term, growing faster than the rate of inflation), just at a lower scale.
There has to be some fair way of taxing that wealth the way income is taxed.
If you buy something for $5 and it becomes worth $100 without you doing anything (e.g. you buy a rookie baseball card, then the player has an amazing season or something, highly increasing demand for your card), wealth was created. Your net worth went up $95. Should you owe any of that $95 to the government, though? I mean, the $5 you spent to buy the card in the first place is income that was already taxed, in the paycheck of the job that paid it to you.
The thing that makes it very hard for a “fair wealth tax” to exist, is the fact that until you sell your asset(s) to someone else, their ‘worth’ is only hypothetical. If that was the last $5 you had that you spent on that card (silly example, I know, but just for the sake of argument), and now there was a wealth tax you had to pay, you would have no way of paying it without losing the card. The notion of having to sell off stuff you own to pay taxes assessed based on the estimated value of said stuff, is what makes it unfair, I’d say.
They borrow money, and then invest it wisely, such that it grows faster than the interest rate of the loan, plus whatever the inflation rate is. If you do that well enough, then you have enough ‘margin’ remaining for the ‘extravagant lifestyle’ stuff, while still being able to pay back the loan.
There’s nothing really nefarious going on in this process. There is a risk being taken that the stuff the funds are invested in do indeed increase in value at a percentage rate higher than the interest rate. Lenders aren’t in the business of hemorrhaging free money to anyone–they are getting repaid, or else they wouldn’t be lending in the first place.
Putting your wages in a retirement index fund is essentially the same overall process (you’re also betting on the index fund, over the long term, growing faster than the rate of inflation), just at a lower scale.
If you buy something for $5 and it becomes worth $100 without you doing anything (e.g. you buy a rookie baseball card, then the player has an amazing season or something, highly increasing demand for your card), wealth was created. Your net worth went up $95. Should you owe any of that $95 to the government, though? I mean, the $5 you spent to buy the card in the first place is income that was already taxed, in the paycheck of the job that paid it to you.
The thing that makes it very hard for a “fair wealth tax” to exist, is the fact that until you sell your asset(s) to someone else, their ‘worth’ is only hypothetical. If that was the last $5 you had that you spent on that card (silly example, I know, but just for the sake of argument), and now there was a wealth tax you had to pay, you would have no way of paying it without losing the card. The notion of having to sell off stuff you own to pay taxes assessed based on the estimated value of said stuff, is what makes it unfair, I’d say.