How the Rich Pay Less Tax

Workers pay taxes twice: first when they earn income and again when they spend it. Wealthy investors, by contrast, can avoid recognizing taxable income altogether. By borrowing tax-free against their assets (company shares, property, etc.) instead of taking a large salary or realizing capital gains, they can access cash without triggering an income tax bill. Paying an 8% sales tax on a new sports car can be far cheaper than selling appreciated stock or paying themselves enough income to buy it, which could also trigger income or capital gains taxes exceeding 20%.

Private yachts and jets are often owned through corporations, LLCs, or other legal entities rather than directly by individuals. Depending on the jurisdiction and how the asset is used, this structure may provide tax advantages, such as deferring or reducing sales taxes, VAT, or other business-related expenses. Simply owning an asset through a company, however, does not automatically eliminate those taxes.

Why do banks agree to this? Publicly traded stocks are highly liquid collateral. If the market declines, the bank can issue a margin call and, if necessary, liquidate enough shares to protect its loan. Banks also require conservative Loan-to-Value (LTV) ratios, for example, lending only 50% of the collateral's value, to create a substantial safety buffer.

At first glance, this strategy seems to have an obvious flaw. If someone continuously borrows to fund their lifestyle, won't they eventually have to sell their assets to repay the debt, triggering decades of deferred capital gains taxes?

Under current U.S. law, the answer is often no. When someone dies, most appreciated assets receive a "step-up in basis," meaning their tax basis is reset to their fair market value on the date of death. As a result, when the estate sells the shares to repay the bank loans, there is little or no capital gain remaining to tax, even if the assets appreciated enormously during the owner's lifetime.

That does not mean the estate escapes taxation entirely. Very large estates may still owe the Federal Estate Tax. However, the estate tax is calculated on the net value of the estate:

Net Estate = Total Assets − Total Liabilities

Outstanding loans reduce the taxable estate because debt is deductible. The estate can then use the proceeds from selling the stepped-up assets to repay the bank, leaving the remaining wealth to pass to the heirs with little or no capital gains tax on the appreciation accumulated during the deceased's lifetime.

The bank does not walk away completely tax-free. Over the decades, the billionaire’s loan has been accumulating interest. If the billionaire borrowed $100 million and the total debt grew to $150 million by the time they died, that extra $50 million is pure profit (interest income). The bank must report that $50 million as taxable corporate income and pay standard corporate income taxes on it. The billionaire never paid income tax on the borrowed $100 million, but he paid interest to the bank after his death.

The strategy is powerful, but it is far from risk-free.

A severe market downturn can trigger margin calls. If the borrower cannot provide additional collateral, the bank may force the sale of shares. Since the owner is still alive, the original cost basis applies, potentially creating a large capital gains tax bill. Selling additional shares to pay that tax can trigger even more taxes, creating a vicious cycle.

Borrowing costs are another major risk. These lines of credit typically carry variable interest rates tied to benchmarks such as SOFR. If interest rates rise while asset returns stagnate, the cost of servicing the debt can eventually exceed the portfolio's growth.

Liquidity is also critical. Interest payments must be made continuously. If a borrower's wealth is concentrated in a company that stops paying dividends or if banks become unwilling to extend additional credit, they can become "paper rich but cash poor," forcing them to sell appreciated assets and incur the taxes they had hoped to defer.

Finally, the entire strategy depends on the tax code remaining favorable. Because "Buy, Borrow, Die" has become widely discussed, proposals to limit or eliminate its advantages frequently appear in tax reform debates.

When markets appreciate steadily, borrowing costs remain manageable, and tax laws stay largely unchanged, Buy, Borrow, Die can preserve significantly more wealth than repeatedly selling appreciated assets. But the strategy rests on three pillars: rising asset values, continued access to cheap credit, and favorable tax rules. If any of those pillars fail while the borrower is still alive, leverage can quickly transform from a wealth-preservation tool into a substantial financial liability.

Sunshine: What your skin feels vs what it sees

We naturally associate sunlight with warmth. When the summer sun hits our skin, our immediate instinct is that the heat itself is what burns us. However, sunlight is a complex spectrum of electromagnetic radiation, and our body’s sensory perception can easily trick us into a false sense of security.

1. The Illusion of the Cool Breeze

Sunburn is caused by UV radiation, not by the temperature of your skin. It is a radiation burn caused primarily by UVB radiation, with UVA also contributing to skin damage. UVB has a shorter wavelength and enough photon energy to break chemical bonds in cellular DNA. The resulting cellular damage triggers the inflammatory response we recognize as sunburn. In contrast, the sensation of warmth comes from infrared rays.

If you are swimming in a cool pool, feeling a chilly breeze, or using a cooling mist, your skin temperature remains low, but the UV radiation hits your skin cells at essentially the same rate. Neither pool water nor mist blocks UVB rays significantly. Water provides only modest protection near the surface. Significant UV reduction occurs only after substantial depth (roughly around a meter, depending on water clarity). Because cooling masks the sensation of heat, it often leads to a more severe burn by tricking you into staying outdoors far longer.

This is why people often get badly sunburned while skiing or mountaineering, despite air temperatures below freezing. At high altitudes, the thinner atmosphere absorbs less UV radiation, and snow can reflect up to 80% of incoming UV, substantially increasing exposure.

2. The Vitamin D Synthesis Balance

Despite the risks of radiation, solar exposure is vital for human health. UVB radiation is the sole trigger for synthesizing Vitamin D. When UVB photons hit the epidermis, they split a chemical bond in a compound naturally present in your skin (7-dehydrocholesterol), instantly converting it into Vitamin D3. 

Because standard window glass blocks 99% of UVB, you cannot produce Vitamin D by sitting next to a closed window, despite how bright or warm it feels. Your skin requires direct, unhindered exposure to the sun. 

Fortunately, it doesn't take much: In summer around mid-latitudes, exposing your arms and legs to midday sun for just 10 to 15 minutes a few times a week is often enough for Vitamin D synthesis, maximizing metabolic benefits while keeping cellular DNA damage low.

3. The Biological Trade-off: Pigment and Heat

Darker skin contains a high concentration of eumelanin, a dark pigment that acts as a built-in physical shield. Eumelanin absorbs and scatters UV radiation, offering a natural protection factor equivalent to roughly SPF 13–15. However, basic physics dictates that darker surfaces have a lower albedo (reflectivity) and absorb more light across the visible and infrared spectrum. 

Because darker skin absorbs more visible light, it can reach somewhat higher surface temperatures under strong sunlight. However, this difference is moderated by increased blood flow, sweating, and other thermoregulatory mechanisms, keeping core body temperature essentially unchanged. This likely reflects an evolutionary trade-off in which protection against UV-induced DNA damage outweighed the modest increase in cooling requirements.