From Inequality.org
The great painter Diego Rivera would not appreciate what our richest are using for collateral.
No widely acclaimed artist in the 20th century baited and battled the rich with as much gusto as Diego Rivera. The Mexican painter's Great Depression-era confrontation with Nelson Rockefeller, then the twenty-something grandson of the world's single richest individual, captured front-page real estate all across the United States and far beyond.
The Rockefeller family had hired Rivera to paint the artistic centerpiece of the newly constructed Rockefeller Center in New York. Rivera's resulting mural contrasted the "debauched rich" with workers on the rise. Right-wingers went apoplectic. Young Nelson, getting hammered, asked Rivera to remove an image of Lenin from the mural. Rivera refused, offering instead to add a portrait of Lincoln.
The Rockefellers would eventually have Rivera's mural plastered over, but not before E. B. White, the beloved author of Charlotte's Web, penned "a classic of light verse" on the face-off for the New Yorker. His poem's most famous couplet had grandson Nelson excusing his censorship:
And tho your art I dislike to hamper,
I owe a little to God and Gramper.
Today, some nine decades later, Rivera's artwork has a different sort of relationship with America's rich: His paintings are helping 21st-century American moguls live lives of tax-free luxury.
How can art like Rivera's be subsidizing the super rich? These awesomely affluent are using their art collections and any other assets they may hold, everything from classic car collections to shares of stock in the companies they run as collateral for loans from America's biggest banks. Why would billionaires need loans? The simple answer: They don't need loans. They need tax breaks, and they can get them by borrowing at exceedingly low interest rates off their mountains of assets.
Take Elon Musk. In 2019, he took out $61 million in mortgages on five properties he owned in California. About that time he also had some 40 percent of his personal shares in Tesla pledged as collateral for still other loans. Musk's millions in borrowed cash have been bankrolling his lavish lifestyle and new investments. These millions have also been providing a sweet end-run around Uncle Sam at tax time.
If Musk had sold some of his Tesla shares or surplus California properties to raise fresh cash, he would have owed capital gains tax on his sale earnings. But by borrowing for the cash, he let his Tesla and California property assets continue to increase in value and, at the same time, sidesteps any taxes.
Billionaires Clarissa and Edgar Bronfman have been playing the same borrowing game, only with their art collection. Diego Rivera's 1928 Dance in Tehuantepec, the Architectural Digest notes, sits at one end of their Park Avenue triplex living room. The Bronfmans have been using their Rivera and other artworks as collateral for their own borrowed cash.
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