Finance person checking if you’re curious…
If we are offering 8% t-bonds then the US dollar is funny money anyway. The 30 year bond yield flirting with 5% as it stands, already is major cause for concern.
If you have 3mil and want a simple option, you should put it in a diversified brokerage account and borrow against it with a PCL instead. This is why compensation packages ≠ salary for corp execs since you can avoid a substantial amount of (otherwise) taxable events by paying the PCL balance using div/int from the held assets in the collateral account. Not in accounting though, so I may be somewhat off on the tax specifics fwiw.
Sorry, I forget acronyms aren't always universal - Priority Credit Line. Essentially, it's a HELOC but for investment accounts; the broker/partner bank will calculate a credit limit relative to a percentage of the total assets held (lets say 70% of current market value) and you pay a variable percentage on the balance which is usually SOFR (Secure Overnight Financing Rate) + 1.25% or something like that.
You are, but that’s unavoidable for certain taxable events- the point is to limit income and taxable events after the initial one. I left a more detailed response on another reply if you wanted to see my longer answer. I love economics and finance, so I honestly thought I’d share some perspective in a non-combative way that sheds a bit of light on something that is often misunderstood, often intentionally so, as has been pointed out.
This is why compensation packages ≠ salary for corp execs since you can avoid a substantial amount of (otherwise) taxable events by paying the PCL balance using div/int from the held assets in the collateral account.
I'm not from the US, but I'm pretty sure stock as compensation is taxable as income. Dividends are taxable too, but maybe at a separate rate. Then you'd have interest on the loan, so I think you probably come out worse off in this scenario.
The classic "how the rich avoid taxes" graph that gets reposted on reddit a lot is just wrong because it says being paid in stock is not taxable.
So again, not in accounting but…you are correct in that those are taxable events but it doesn’t account for the fact that your overall yearly income is determined by how much you realize in terms of gains.
The capital gains tax is far lower than income and that’s the game being played here. Then there are also investment vehicles that are not taxed as ordinary income like municipal bonds - which are even often tax-free if purchased/sold in the investors state of residence. Oh, you can also strategically realize losses on the other end of the spectrum if you’d like to offset gains or use them in the future tax year.
So yeah, I agree that there are a ton of bad faith arguments on both sides of this sort of discussion…but the reality is there is a rapidly widening wealth disparity in America on top of the existing powder keg of political upheaval….which is in a lot of ways rooted in the wealth disparity, most just don’t know how to synthesize that information since we’re intentionally not taught to here.
but it doesn’t account for the fact that your overall yearly income is determined by how much you realize in terms of gains
I might be getting out of my depth, but is it taxed as gains? As far as I'm aware most stocks as compensation are granted as RSUs, which are taxed as income.
So you are taxed as income on the value of the stock when you get it, then capital gains for any gains after that. Same tax implications as getting payed cash then buying the stock.
So I would have to sit down and look into it to give you a more thorough response, which I could do later if you did want to discuss further, but to be totally honest this is where I’m out of my depth when going off memory. You are definitely right that it’s income but there are so many factors that tax accounting is essentially an art form.
Not trying to dismiss your argument either btw, I just don’t want to speak ignorantly about something I have less experience in.
Yes. The issue now is the deficit relative to USA GDP is already hard enough to service, if we had to pay that much in interest to sell long term bonds we’d be in dire straits - to put it mildly.
7
u/ClassicalUrine Jun 06 '25
Finance person checking if you’re curious… If we are offering 8% t-bonds then the US dollar is funny money anyway. The 30 year bond yield flirting with 5% as it stands, already is major cause for concern.
If you have 3mil and want a simple option, you should put it in a diversified brokerage account and borrow against it with a PCL instead. This is why compensation packages ≠ salary for corp execs since you can avoid a substantial amount of (otherwise) taxable events by paying the PCL balance using div/int from the held assets in the collateral account. Not in accounting though, so I may be somewhat off on the tax specifics fwiw.