How do the rich avoid personal taxes? It’s simple: Let’s say Bill Gates earns $100/year in salary. He has this paid directly into a trust (so it’s not taxed until he removes it.) At the start of Year 1, he borrows $100 against the trust at 1% interest. Now he has $100, tax-free to spend. 1/ - ThreadSky

perpetuallyworse.bsky.social • 14 days ago

How do the rich avoid personal taxes? It’s simple: Let’s say Bill Gates earns $100/year in salary. He has this paid directly into a trust (so it’s not taxed until he removes it.) At the start of Year 1, he borrows $100 against the trust at 1% interest. Now he has $100, tax-free to spend.
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perpetuallyworse.bsky.social•14 days ago

Often, the money isn’t even paid back by future loans, and simply continues accumulating a tiny bit of interest every year until it’s paid by Bill’s estate. That means Bill’s just borrowing $100 each year, instead of an escalating loans ($100, $201, $303) I used in this example.
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perpetuallyworse.bsky.social•14 days ago

The key? Income goes into the trust, not his pocket. By borrowing against the trust, Bill avoids taxes on salary and investments. As long as the trust grows faster than loan interest, the rich stay rich—and pay almost no taxes.
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perpetuallyworse.bsky.social•14 days ago

What if Bill needs a car or invests in a business that costs more than he borrows? The loans or trust buy it for him. No taxable event occurs. He lives off loans and trust investments, not income, and the trust’s value keeps growing. This works indefinitely, for the rest of his life.
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perpetuallyworse.bsky.social•14 days ago

Bill keeps doing this: income goes into the trust, grows tax-free, and he borrows against it. He uses new loans to pay off old ones, avoiding taxable events. His only cost? The 1% loan interest. His effective tax rate? Virtually zero.
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perpetuallyworse.bsky.social•14 days ago

At the start of Year 3, Bill earns another $100, paid into the trust. He borrows $303 against the trust ($100 to spend + $203 to pay off the old loan). The trust now has $331 before he makes any investments.
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perpetuallyworse.bsky.social•14 days ago

At the end of Year 2, the trust has earned $21 from investing the trust, which now has a balance of $231. Bill owes $203 ($201 loan + 1% interest).
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perpetuallyworse.bsky.social•14 days ago

At the start of Year 2, Bill earns another $100 in salary, which paid into the trust. The trust balance is at $210. So Bill borrows $201 ($100 to spend + $101 for the old loan), and then invests the $210 for a 10% return.
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perpetuallyworse.bsky.social•14 days ago

Bill also invests the $100 in the trust, and earns 10%. At the end of Year 1, Bill has earned $10 for a balance of $110 in the trust fund and owes $101. He doesn’t pay taxes on any of this.
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