The Treasury Department and IRS issued a warning this week about an ETF strategy wealthy investors use to dodge capital gains taxes. Warnings are helpful. They give people time to stop doing the illegal thing they've been doing for years before it becomes officially illegal.
The strategy works like this: rich people move money around in ways that poor people can't understand, then pay less in taxes. Revolutionary stuff. Bessent and the IRS caught wind of it and decided to crack down, which in government terms means they sent a strongly worded letter explaining that they're thinking about maybe doing something eventually.
Here's what kills me. Retail traders spend their weekends watching YouTube videos about Fibonacci retracements and candlestick patterns. They're convinced the secret to wealth is learning whether a doji star means buy or sell. They lose 40% of their account on earnings plays. They revenge trade at 11 PM on a Wednesday.
Rich people? They just call their accountant and say make the taxes go away. The accountant says I'll put it in an ETF wrapper. Done. No charts. No technical analysis. No scanning for breakouts. Just structured financial products designed specifically to f*ck the IRS.
The wealthy have been using this strategy long enough for the government to notice, investigate, convene meetings, draft policy, and issue formal warnings. That's years. Probably a decade. And retail's still out here trying to day trade NIO because some guy on Twitter posted a rocket emoji.
Bessent's crackdown will result in exactly nothing. The strategy will evolve. It'll get a new name. Different wrapper, same tax avoidance. The lawyers will bill more hours. The accountants will send updated memos. And six months from now, rich people will still be rich and paying less than you while you're over here stress-testing your stop-loss strategy on a paper trading account.
Photo by Brett Jordan on Unsplash
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