Re:Why is the stock market rallying when the economy is so bad?
by jcranmer on Sunday May 10, 2020 @08:01PM
(#23137468)
Actually, corporations do do things like borrow to pay dividends or buy back stock... because they get to deduct debt from their taxes. Individuals can take advantage of this with mortgages: your mortgage interest is deductible. [1]
Not all debt is equivalent: credit card debt and payday loans are examples of pretty punitive debt that really should be avoided. The return on investment from paying off debt is roughly equivalent from the interest on your debt; if it's lower than you can get by investing elsewhere, then it may make sense to invest elsewhere, especially when you factor in second-order effects like tax laws.
[1] For the record, I think the tax-advantaged nature of debt is absolutely inane and should be removed. But that is unlikely to be politically feasible.
Not all debt is equivalent: credit card debt and payday loans are examples of pretty punitive debt that really should be avoided. The return on investment from paying off debt is roughly equivalent from the interest on your debt; if it's lower than you can get by investing elsewhere, then it may make sense to invest elsewhere, especially when you factor in second-order effects like tax laws.
[1] For the record, I think the tax-advantaged nature of debt is absolutely inane and should be removed. But that is unlikely to be politically feasible.