Episode 138
2024 Proposed Tax Policy Grab Bag (Part 1)
This episode delves into the potential impact of proposed tax policy changes that could significantly affect Americans, particularly those making over $400,000, and the broader implications for everyday citizens.
We discuss how these tax changes, including increases on capital gains and the introduction of new taxes, may not only target high earners but could also trickle down to the average person in various ways.
We emphasize the importance of understanding that tax policies can influence the economy as a whole, affecting prices and investment opportunities. We also highlight the misconception that only the wealthy will bear the burden of these tax increases, illustrating how small business owners and individuals experiencing wealth creation events could also face substantial tax liabilities.
We encourage you to stay informed about these changes and consider how they might impact your financial future and the economy at large.
______________________________________________________________
Thanks to our sponsor, S.E.E.D. Planning Group! S.E.E.D. is a fee-only financial planning firm with a fiduciary obligation to put your best interest first. Schedule your free discovery meeting at www.seedpg.com
You can watch all episodes, as well as other great content produced by NQR Media through their YouTube channel at https://youtube.com/@NQRMedia
📧 For more information or to get in touch with us, visit https://www.ditchthesuits.com
👍🏼 You can also follow us on Facebook, Instagram and Twitter at @nqrmedia
______________________________________________________________
About Your Co-Hosts:
Travis Maus has been in financial services for over fifteen years. He is a Senior Wealth Manager and Chief Executive Officer at S.E.E.D. Planning Group. Travis also hosts the Unleashing Leadership Podcast, where he dissects some of his favorite books on leadership and how you can apply it to your business or life.
Steve Campbell has over a decade of industry experience and is the Chief Brand Officer at S.E.E.D. Planning Group. Steve also hosts the One Big Thing Podcast, an interview-style show meant to inspire and encourage 30 and 40-year-olds going through difficult seasons of navigating marriage, raising kids, and growing personally.
Transcript
Welcome to Ditch the Suits podcast, where we share insights nobody in the financial services industry wants you to know about.
Steve Campbell:We're here to help you get the most from your money in life.
Steve Campbell:So buckle up and welcome to ditch the suits.
Steve Campbell:Well, welcome back to ditch the suits.
Steve Campbell:Steve Campbell here with Travis Moss.
Steve Campbell:Folks, as we told you, this is a five part series, so this is going to be your last two episodes that have been a part of this series, talking about proposed tax policies that may be potentially coming down the pipeline.
Steve Campbell:Appreciate all of you that have been commenting on our YouTube videos through the series.
Steve Campbell:Throughout we see those, we're responding to those.
Steve Campbell:Those mean a lot to us.
Steve Campbell:So post questions, leave your thoughts.
Steve Campbell:But for those that are new to digital suits, my name is Steve Campbell.
Steve Campbell:I serve as the chief brand officer at Seed planning group.
Steve Campbell:Travis, the other guy on the screen, or if you're listening on the other voice you're going to hear, is our CEO at Seed.
Steve Campbell:Seed is a fee only financial planning firm.
Steve Campbell:We have a fiduciary obligation to put our clients best interests first, and ditch the suits is all about us bringing our collective consciousness, years of experience working with financial planning clients to bring to you what we've discovered and helping people really, hopefully get the most in their money in life.
Steve Campbell:Travis, current events we always like to mix up ditch the suits topics.
Steve Campbell:We've been talking about proposed potential tax law changes.
Steve Campbell:This is our last two episodes.
Steve Campbell:Kind of some grab bags we're going to be throwing out there.
Steve Campbell:But why don't you talk to us about the importance of kind of setting up this last two part conversation?
Travis Moss:Yeah, so we think about financial health, and that's what we talk about all the time, getting more out of your money and out of your life.
Travis Moss:And part of that is taxes.
Travis Moss:So when we think about taxes, it's not just our taxes that we pay as individuals.
Travis Moss:We gotta think about our property taxes, our sales taxes, income taxes, but we ought to be thinking about our errors, what kind of taxes they're gonna be paying.
Travis Moss:Um, I think we need to be considerate of the taxes that other people have to pay, because as we're going to talk about today, and as we've talked about during some of the last couple of episodes, just because you don't pay the tax as a tax bill doesn't mean you don't pay for the tax through the cost of goods or the cost of services or loss earnings on your investments or things like that.
Travis Moss:So it's really important not to have this kind of tunnel vision view about how taxes work and whether or not they impact us.
Travis Moss:And hey, as long as it doesn't affect me, I don't care, because it does.
Travis Moss:And it does trickle down to you.
Travis Moss:And I think it does influence what you should or should not do, especially over the next two years.
Travis Moss:While the current tax laws are sunsetting, there's some opportunities that may go away for people that they may never have again or they may not have for a long time, or there could be some enhancements to them.
Travis Moss:And I think it's just important to understand how these things work.
Travis Moss:The other thing is, I think it's important to be empowered to not be so worked up by the things that other entertainers are trying to tell you.
Travis Moss:By other entertainers, I mean the general media, anybody who's trying to drum up viewership based on getting you revved up in one direction or the other, you should be able to get facts and have somebody explain the facts in a way that's plain English, but not have somebody necessarily tell you how you should think about them.
Travis Moss:Right.
Travis Moss:And so we'll talk about our perspective on this stuff.
Travis Moss:Hopefully that gives people something to compare other things that they're hearing.
Travis Moss:But, you know, in the last three episodes, we talked about what could happen if the government raises taxes on corporations.
Travis Moss:We've talked about what could happen if the government starts taxing unrealized capital gains.
Travis Moss:Those are some of the really big things that are being proposed right now.
Travis Moss:Right.
Travis Moss:And we're going to switch that a little bit and focus on, like what you said, a grab bag of increasing taxes, because as if those was, that wasn't enough of very interesting things that are going to cost people more money.
Travis Moss:There's a whole bunch of additional taxes that are being proposed right now.
Travis Moss:And the reason why we kind of leapfrogged in line this series of episodes versus what we were doing is because, you know, we're about to vote for our policymakers.
Travis Moss:And it's important that you are informed when you're making those decisions, whichever way that you go, just be informed when you're making it and understand what you're, what you're supporting and what you're asking for.
Travis Moss:I just think it's important to be informed.
Travis Moss:That's all.
Travis Moss:So one of the statements that's come out a lot is that we're not going to change.
Travis Moss:And it's come out of the current administration.
Travis Moss:It's come out of some of the people running.
Travis Moss:It's not just the presidential people.
Travis Moss:It's, you know, the, the senators and House of Representatives, like a lot of people, are saying this stuff.
Travis Moss:So again, I don't want to zone in on any political party or any individual.
Travis Moss:What I'm.
Travis Moss:All I'm doing is responding to things that have been thrown out there publicly and things that people have brought up and maybe misunderstood or not understood how they could affect them.
Travis Moss:But one of the statements that's been thrown out a lot is no change for americans making less than $400,000.
Travis Moss:And so I want to talk about what that actually means today.
Travis Moss:The other things I want to talk about is the significant number of proposed punitive, like taxes against high income earners.
Travis Moss:So specifically targeting a small group of people, and we'll talk about who a high income earner actually is and who's kind of in this box of people that is really being targeted.
Travis Moss:But the reason why I say punitive is because it's a lot of different taxes.
Travis Moss:They're not talking about, Steve, I'm going to raise your taxes by 2%.
Travis Moss:Right.
Travis Moss:Okay, fine.
Travis Moss:Raise my taxes by 2%.
Travis Moss:They're talking about, Steve, I'm going to raise your taxes by, let's say, one and a half or 2% five different ways all at the same time.
Travis Moss:So it's not just 2%, it's maybe 2% times five.
Travis Moss:You know, that type of thing.
Travis Moss:There's.
Travis Moss:There's a compounding math here that when you put it in, totality becomes really crazy.
Travis Moss:And one of the examples that we're going to use a lot is imagine I, you own a house and your property taxes are $5,000 a year.
Travis Moss:And imagine I walked in and said, next year they're going to be 10,000.
Steve Campbell:Yep.
Travis Moss:Because that's what we're talking about.
Travis Moss:That's 100% increase on your property taxes.
Travis Moss:Oh, it's only $5,000.
Travis Moss:Yeah, but it's a 100% increase.
Travis Moss:You could say, oh, it's only a 10% assessment on the house, but it's a hundred percent increase.
Steve Campbell:Yep.
Travis Moss:So we're talking about your tax budget increasing by not one or 2%, but tens and even hundreds of percents depending on this.
Travis Moss:Sounds kind of weird, but significant, significant jumps.
Travis Moss:And then we're going to round that out with.
Travis Moss:And I think that you and I were talking before this show, we're probably end up with two episodes here, so we'll probably cut it at some point because I'm going to probably be too long winded and we're going to have to shut me up and maybe split this over two episodes.
Travis Moss:But we've got the potential loss of cap of cost basis step up at death.
Travis Moss:And what that means.
Travis Moss:That's a very significant issue for people who aren't making $400,000.
Travis Moss:That is one that could impact you.
Travis Moss:Situations where tax policies here that they're talking about could create double taxation.
Travis Moss:So essentially you could be being taxed on the same money twice.
Steve Campbell:Yep.
Travis Moss:Which is, which is an interesting phenomenon.
Travis Moss:And then that could even happen even if you're under the $400,000 kind of threshold.
Travis Moss:Some of these things that we're talking about.
Travis Moss:And then depending on where you live, your actual real income tax levels could reach over 50%.
Travis Moss:So just let that set in for a second.
Travis Moss:When you're thinking about more people need to pay their fair share.
Travis Moss:Think about what that is though, is 50% of every dollar you make fair.
Travis Moss:And again, that's just some of the taxes we're talking about.
Travis Moss:There's a whole bunch of other taxes that are getting introduced outside of those particular taxes that they're talking about.
Travis Moss:And so that's what we're going to dig into.
Steve Campbell:Let's take a quick break to hear a word from your sponsor.
Steve Campbell:This episode is brought to you by seed planning group.
Steve Campbell:If you're looking for a life giving experience working with a financial planner, then seed is here for you.
Steve Campbell:Seed is a fee only financial planning firm with a fiduciary obligation to put your best interests first.
Steve Campbell:If your goal is financial freedom and independence without sales products or really glorified salespeople, then check out seed planting group today.
Steve Campbell:You can visit www.seedpg.com.
Steve Campbell:that's www.seedpg.com.
Steve Campbell:and the best part, you can schedule a free consultation to find out if their fee only planners and their process are right for you.
Steve Campbell:Yeah, and if you're brand new to ditch the suits.
Steve Campbell:Travis and I try to be very sensitive to the fact that this is not a politically charged series as much as just bringing you information to understand, really, you're here to get the most of your money in life.
Steve Campbell:How could potentially policy changes from either side really impact you?
Steve Campbell:Your bottom line?
Steve Campbell:And we had somebody from our first few episodes who had commented, this isn't going to affect me.
Steve Campbell:I don't even have a pension.
Steve Campbell:What are you even talking about?
Steve Campbell:We have listeners from all ages and all backgrounds listening to the show.
Steve Campbell:So some of the information might apply to you in your current season.
Steve Campbell:But you got to remember, we're trying to help people of all different spectrums coming into this, really understand how this taxation could potentially affect them.
Steve Campbell:And we had laughed off in our series that this was kind of an emergency.
Steve Campbell:We inputted this series because of how important it is to stop the current series that we're in.
Steve Campbell:So Travis and I are always listening to what you guys need to know.
Steve Campbell:We're always paying attention to current events.
Steve Campbell:And for the hosts of this show, if there is something that is being potentially introduced that really could impact you, well, we want to get out in front of it to let you know what you need to know.
Steve Campbell:So you talked about grab bag going to be two episodes.
Steve Campbell:It's too long to give you so much information in a single car, drive back and forth.
Steve Campbell:So we're going to break this up.
Steve Campbell:But one of the first things you had talked about is kind of this notion being affloaded around that there will be no change for americans making less than $400,000.
Steve Campbell:Let's kind of break this down and help people understand.
Steve Campbell:Is that true or what are maybe some of the moving parts that could be involved in the.
Travis Moss:That, you know, one thing that I do want to do, and it's just my combative nature.
Travis Moss:It's my red personality.
Steve Campbell:Here we go, folks.
Travis Moss:Before we dive into the $400,000 number, if you're not interested in something like this, if you don't care about how this works, and then you don't care to the point where you're going to go make comments and stuff online, my only advice would be, don't be so damn selfish, because this is really, these are, these are things that will affect you.
Travis Moss:Whether you're paying the tax or not, they will affect you.
Travis Moss:At the last episode, we made a point about having a pension or not.
Travis Moss:Even if you don't have all of this trickles down, you can't disrupt the cycle of money the way money moves around the economy and not have a profound impact.
Travis Moss:We learned that during COVID and I think that we've done a very, very good job on this show trying to establish, you know, that there is a system that we live in where money is moving from party to party.
Travis Moss:And, you know, there's kind of rules to play.
Travis Moss:If you change the rules midway and blow up a couple of players to benefit a couple of other players, you're going to have unintended consequences.
Travis Moss:You're going to have people that stand up and flip the board over.
Travis Moss:You're going to have people that, you know, there's just going to be consequences that you don't understand.
Travis Moss:So if you're somebody who's saying, well, you know, I don't really care about taxes.
Travis Moss:You should still listen because even if you don't care about taxes, taxes are going to impact you.
Travis Moss:There is nobody in the United States immune to what happens with our tax laws.
Travis Moss:They all come home to roost.
Travis Moss:If you want to complain about inflation, if you want to say, I go to the grocery store and goods are too expensive, you need to be concerned about taxes because increasing taxes and fees will increase the cost of goods flat out.
Travis Moss:Has to.
Travis Moss:If you're concerned about cause of housing, you have to be concerned about government regulation and taxes because all of that stuff goes into the cost of housing.
Travis Moss:Right?
Travis Moss:Like, there's so much stuff that you, you can't just be, like, willfully ignorant on.
Travis Moss:And what we try to do is boil it down so that, okay, at least I can get some tidbits of this and I can at least understand that those are important things.
Travis Moss:And, you know, how do I know if this is something that's real or if it's something somebody's just trying to get me, you know, worked up about?
Travis Moss:So I'm off my high horse a little bit.
Travis Moss:I don't know if you want to interject before you go over to the 400k folks.
Steve Campbell:I've known Travis for about a decade.
Steve Campbell:That was the softest introduction I've had him give.
Steve Campbell:That was combative.
Steve Campbell:But it, but it's important, right?
Steve Campbell:Because when you're making content from our industry, helping people, you get people from all walks of life.
Steve Campbell:It's important for you to understand what really happening and understand truth.
Steve Campbell:What you do with that is completely up to you.
Steve Campbell:As a listener, we're going to present some facts to you.
Steve Campbell:How you interpret that is completely up to you.
Steve Campbell:But we'd rather ditch the suits.
Steve Campbell:Become a place where you can be empowered with knowledge that can help you really understand moving parts, who's in power games at play.
Steve Campbell:And when you hear things like this, no change for Americans making more, making less than $400,000.
Steve Campbell:On the surface, it sounds like, okay, great, this doesn't involve me.
Steve Campbell:But like you said, there's trickle down that happens with that.
Steve Campbell:So start to unwind that for us.
Steve Campbell:When we hear that, what does that really mean?
Travis Moss:Yeah, and there's, there's a mouthful here.
Travis Moss:I'm gonna try to keep it succinct and we'll kind of unpack more as we go.
Travis Moss:But first of all, it's not, when they say nobody making less than 400,000, are they talking about a household or individuals?
Travis Moss:Because most of the time they're talking about households.
Travis Moss:And so, but they're not saying households.
Travis Moss:They're saying nobody making under 400,000.
Travis Moss:Well, most of the time that the way that the taxes are calculated is you go and you file your taxes and they're talking to families.
Travis Moss:Here you go and you file your taxes and they aggregate your income up.
Travis Moss:And in fact, when we go to the websites and we go out there and we try to figure out, okay, what are you saying?
Travis Moss:I've seen the difference between $400,000 for single people, $400,000 for couples, and up to as much as $450,000 for couples.
Travis Moss:So what we can take from that is we don't know.
Travis Moss:But the highest proposed income, where nothing will change for you, as they're saying, is at $450,000 for a household.
Travis Moss:Now, one of the things that they're talking about, and this is what, one of the frustrating things and one of the things that people should have, you know, you should be paying attention to, they're going to play a word game with terminology.
Travis Moss:They're talking about income taxes.
Travis Moss:Income taxes on your paycheck is all they're talking about right now.
Travis Moss:They're not talking about money you make from investments.
Travis Moss:They're not talking about capital gains.
Travis Moss:When you, you know, sell your rental property or I, you know, when you, when you sell the lake house or when you, you know, make money from your coin collection or whatever else, we're not talking about that.
Travis Moss:What they're specifically talking about is your job.
Travis Moss:You go to work, you make money.
Travis Moss:And some people might say, well, I'll never make more than $400,000.
Travis Moss:I never do with everything else.
Travis Moss:What happens, though, when, you know, you had that IBM stock when you were a kid and, you know, 60 years later you can sell it for a million dollars, that's going to come back into this equation with additional taxes that they're talking about on top of that.
Travis Moss:And it actually could, depending on how they recharacterize, some things end up in that 400,000 bucket, too.
Travis Moss:So it's not just when we think about, I'm not in that bucket.
Travis Moss:All the other changes and stuff that they're making could actually drop you in that bucket.
Travis Moss:Or they're talking about other things as well that would impact you.
Travis Moss:And so it's window dressing.
Travis Moss:It's like, don't worry.
Travis Moss:And the reason why are they doing that?
Travis Moss:The whole reason why they're doing that, I've got a stat here I'm going to get out of order for just a hot second.
Travis Moss:Go ahead.
Travis Moss:But something like if you were to take people that are over the $400,000 income threshold, you're only talking about depending on what stat you find, somewhere between like five and 12% of the american public or something, maybe that's millionaires.
Travis Moss:So somewhere in here we're going to talk about this stat.
Travis Moss:It is very easy to get 95% of the population to say, yeah, you know, I'm not going to be impacted.
Travis Moss:So I don't really care what happens.
Travis Moss:And what we're really saying here is, number one, they're not being very clear with it as far as who's going to be in that category, this box.
Travis Moss:And then number two, that's only for one type of taxes, but they're proposing all these other kinds of taxes, too, which would, you would be subject to these higher taxes as they're saying, five.
Steve Campbell:To 12% found it for you.
Steve Campbell:Google how many Americans have more than one million dollars?
Steve Campbell:Five to twelve percent, depending on your search results.
Travis Moss:Yeah.
Travis Moss:So there you go.
Travis Moss:They're kind of, they're getting a bunch of people to agree to do something for everybody else who don't have experience in everybody else's shoes.
Travis Moss:It's a very, very interesting phenomenon that's happening.
Travis Moss:I mean, if you've never had, if you've never paid a $50,000 income tax bill, you don't know what it's like to have a $50,000 income tax bill.
Travis Moss:So it's easy to judge somebody else.
Travis Moss:But I have never been in that situation.
Travis Moss:But anyway, I digress.
Travis Moss:So the first thing they're talking right off the top, they're saying, hey, let's, let's increase this top income tax rate.
Travis Moss:So these are for the people who make big money, right?
Travis Moss:We're going to increase them from 37% to 39.6%.
Travis Moss:We're automatically just going to tax them more.
Travis Moss:That's what we want to do.
Travis Moss:And that's actually, that has nothing to do with 400,000.
Travis Moss:I don't even know where they came up with that number.
Travis Moss:It's a, if you're an individual, 609,000.
Travis Moss:If you're a household, 731,000.
Travis Moss:So if your incomes are over those thresholds, you're in the 37% bracket today and they're saying it's going to go to 39.6.
Travis Moss:Well, that has nothing to do with the current policymakers.
Travis Moss:That is happening because the current tax laws are sunsetting at the end of next year.
Travis Moss:So that's going to happen anyway.
Travis Moss:So when they come in and say we're going to tax the people making more than 400,000 more.
Travis Moss:They're kind of doing that by inaction more than by action.
Travis Moss:They're basically saying, like, you know, look at us, we're taxing people with money more.
Travis Moss:We're champions of this.
Travis Moss:But at the end of the day, that's kind of going to happen anyway unless Congress takes action.
Travis Moss:And, you know, who knows what Congress is going to do?
Travis Moss:But the way to think about this is it only sounds like a 2.6% increase.
Travis Moss:Right?
Travis Moss:And so you go, yeah, you know, 2.6%.
Travis Moss:Who cares?
Travis Moss:It's only 2.6%.
Travis Moss:Well, if you do the math, is actually a 9.3% increase.
Travis Moss:It's a 9.3% increase over where it's at.
Travis Moss:We can say it's only a 2.6% increase from 37 to 39.6, but it's actually a 9.3% as a percentage increase from the base to the new rate.
Travis Moss:So that would be.
Travis Moss:So to give you an example of why this is important, to think like this.
Travis Moss:That would be like me coming in and telling you I'm going to raise your property taxes by 9.3% this year.
Travis Moss:Most people would not be comfortable with that.
Steve Campbell:Correct.
Travis Moss:Most people would be freaked out with that.
Travis Moss:What if I came in and I said, look, I'm going to increase your natural gas bill by 9.3% this year, your propane bill by 9.3% this year, your school tuition by 9.3% this year.
Travis Moss:Right?
Travis Moss:Your union dues by 9.3% this year.
Travis Moss:You'd be like, hell, no, not me.
Travis Moss:But that's right off the top.
Travis Moss:That's in one, one class.
Travis Moss:And, yeah, it's going to kind of happen anyway unless they act.
Travis Moss:The only reason I point that out there is because it's happened in any way.
Travis Moss:Right?
Travis Moss:So it's like, you know, nobody's, nobody's actually making an effort to do that.
Travis Moss:It's just a matter of whether or not Congress extends the current tax cuts and makes them more permanent.
Travis Moss:But, and you'll hear that.
Steve Campbell:You'll hear that on the news, right?
Steve Campbell:It's the Trump tax cuts.
Steve Campbell:So, so unless that gets extended.
Steve Campbell:So you'll hear that no matter what station you list, who the Trump tax cuts are going to sunset, unless Congress does something.
Steve Campbell:So that's what you're referring to.
Steve Campbell:And the challenge, when you say, unless that happens.
Travis Moss:Yeah.
Travis Moss:And the challenge with the, with maybe a lack of transparency on it is, you know, let's face it, there's a group of people that don't like Trump's name on anything.
Travis Moss:So even if they like the fact that people making under $400,000 of those tax cuts have a better tax situation than they had prior, they don't want to say that.
Travis Moss:So what they're saying is we're going to change the rules and we're going to let people over 400 pay more taxes and people under 400, nothing will change.
Travis Moss:What they're really saying is we're going to cherry pick some of the stuff we like, let some of the other stuff go sunset.
Travis Moss:So they're talking about new legislation, but they're not also being honest about all these other things.
Travis Moss:We're going to talk about that they're proposing separately that have nothing to do with that $400,000 number, but they have to do with other things.
Travis Moss:But still to that $400,000 number, there's a thing called NIIT, or net income, net investment income tax.
Travis Moss:And this is for people who have a certain amount of money or a certain amount of income off of, like, investments and stuff and have to pay an extra tax of 3.8% on it.
Travis Moss:So this happens to people sometimes when they're retired.
Travis Moss:Maybe they get a lot of company stock or maybe you sell a property or something like that, a lot of capital gains, you might fall into this category.
Travis Moss:So what they're saying is, at $400,000, they want to apply that tax of 3.8%, but they want to increase it to 5%.
Travis Moss:They actually want to make it bigger.
Travis Moss:So the people, what they're saying is over 400,000, we want to raise your income from 37 to 39.6 or that top tax bracket.
Travis Moss:But we also want to add this extra tax.
Travis Moss:We want to go from 3.8% to 5%.
Travis Moss:And again, you look at that and go, well, what's the big deal with that?
Travis Moss: was a tax that was created in: Travis Moss:So this was already a new tax, you know, a little bit over a decade ago.
Travis Moss:On this group of people.
Travis Moss:It's on capital gains, dividends, rental income, royalty income, passive investment income, and non qualified new income you're already paying taxes on.
Travis Moss:It's an extra tax on top of the tax.
Travis Moss:They're talking about increasing it.
Travis Moss:Back to our word game.
Travis Moss:It's not a 1.2% increase.
Travis Moss:It is a 31.5% increase of the current rate I'm taking.
Travis Moss:If your property taxes, I'm going to increase your property taxes.
Travis Moss:Same example here.
Travis Moss:31.5% is what they're saying.
Travis Moss:That is a huge amount of increased taxes.
Steve Campbell:Yep.
Travis Moss:And you might say, well, you know, they have the money to pay for it.
Travis Moss:What would you, how would it feel to you if that happened?
Travis Moss:And if it happened, what wouldn't you spend your money on?
Travis Moss:Right now?
Travis Moss:All of a sudden, you have to pay this bigger tax bill.
Travis Moss:What aren't you doing?
Travis Moss:You're not going out to eat as much.
Travis Moss:Right?
Travis Moss:There's things that you can't do because you no longer have the money.
Travis Moss:So regardless of whether or not you think, well, people just have too much money to spend, the money stops circulating through the economy.
Travis Moss:Right.
Travis Moss:Your favorite diner doesn't get that customer as much anymore.
Travis Moss:Right?
Travis Moss:I mean, the people who do their landscaping don't get as many projects.
Travis Moss:That money stops someplace, or the money doesn't get invested in the stock market.
Travis Moss:And you could say, well, I don't care about that.
Travis Moss:But if everybody stops investing in the stock market, guess who doesn't make any money in the stock market?
Travis Moss:You.
Travis Moss:Right?
Travis Moss:The average Joe doesn't make any money if the guys with the money have to yank all their money out because they're paying more in taxes.
Travis Moss:So when you look at this and they go, oh, it's, you know, it's only 2.6% for the higher income tax.
Travis Moss:It's only 1.2% for the NIIT tax.
Travis Moss:You actually have to add them together because it's the same group of people.
Travis Moss:Right.
Travis Moss:And again, we've got a laundry list of other taxes.
Travis Moss:But so you're talking about huge increases of taxes.
Travis Moss:One of the other things that they're talking about, kind of in the same group, they want to reverse what's called the salt deductions.
Travis Moss:So the way that the current tax law works, if you remember back in the day, you could deduct all your mortgage interest and all your state income taxes, and they kept that, and they created a bunch of restrictions on it.
Travis Moss:Who that hurt the most were wealthy people in high tax states.
Travis Moss:So you're talking New York, California, Illinois, places like that, states with high income tax rates who are making a lot of money, paying a lot of state income taxes and able to deduct their state income taxes.
Travis Moss:So somebody in Tennessee like us, no state income taxes.
Travis Moss:We don't really care.
Travis Moss:The state's not taking the money.
Travis Moss:But up in New York, the state's taking all your money.
Travis Moss:You want that federal deduction.
Travis Moss:You don't want to send it to the fed.
Travis Moss:You want to send it to the state instead.
Travis Moss:So what they're saying is we're going to let that come back.
Travis Moss:We're going to, we're going to make that a real thing again.
Travis Moss:Think about what they're actually saying, though.
Travis Moss:We're going to increase taxes on all the high earners across the country.
Travis Moss:And then in a couple of these high tax bases, we're going to give them some huge tax deductions.
Travis Moss:We're going to benefit those wealthy people in those high tax states again, which happened to be.
Travis Moss:So it's a little bit of a political play there.
Travis Moss:But the funny thing is, is they're vilifying wealthy people at the same time they're giving massive credits to certain wealthy people.
Travis Moss:They're not credits, but deductions are allowing people to take deductions they otherwise can't take right now.
Travis Moss:So it's a, it's a really kind of weird, kind of manipulated kind of process where they're like, we'll take more from those rich people over there and we're going to give more back to those rich people over there, or at least it'll make it a little bit more neutral for them.
Travis Moss:So those ones over there on to pay more taxes, those ones over there, they're going to pretty much just be status quo.
Steve Campbell:Hey guys, Steve Campbell with digital suits.
Steve Campbell:Want to take one quick moment to make a big ask if you haven't already, Travis and I would love for you to subscribe to this podcast.
Steve Campbell:But if you haven't, also we would love for you to leave a five star rating and review.
Steve Campbell:Your rating and review will let other podcasters know the show is worth their time.
Steve Campbell:So let's get right back to the episode.
Steve Campbell:And thanks for listening to ditch the Suits podcast.
Steve Campbell:And sometimes it feels like the way that this is described is that we're going to tax the ultra high net worth and then almost send you as other Americans checks from the difference of what they're going to be spending in taxes.
Steve Campbell:Right?
Steve Campbell:So let's tax these people over here so you get more.
Steve Campbell:But that's not what's happening.
Steve Campbell:You had left off one of our episodes saying the real problem is the government not getting a handle on their spending.
Steve Campbell:So even if you did increase these taxes across the board, and let's say the government was able to have all this excess money, it's not that they're using it to spend down government debt that we still owe on.
Steve Campbell:So where is that money going?
Steve Campbell:So I think what you did a really nice job of, and again, there's a lot of numbers in this is when you hear 2% or 1.8%.
Steve Campbell:It doesn't sound that bad because it's not you that's the one paying it, but it does trickle down to you.
Steve Campbell:And you had talked about incorporations and some of those things, stock buybacks, dividends, things that are given out to you as an employee.
Steve Campbell:Understanding the importance of how this can actually work might be a little eye opening for people.
Steve Campbell:If there's anything else in that topic that you want to talk about, go ahead.
Steve Campbell:But then we also had thrown out as part of the grab bag, propose punitive, like taxes for high income earners.
Steve Campbell:So you can jump right into that if you got some talking points.
Steve Campbell:Yeah.
Travis Moss:And I think we can cover this.
Travis Moss:And then we'll.
Travis Moss:We'll break for our next episode just to kind of watching the clock there.
Travis Moss:But this is an interesting one.
Travis Moss:So they're kind of targeting people over 400,000.
Travis Moss:Our house was over 400,000.
Travis Moss:They're not clear enough to understand exactly what they're talking about, but they're targeting a certain socioeconomic demographic for Americans making over $1 million per year.
Travis Moss:So we would say that those are people who are doing pretty well.
Steve Campbell:Yep.
Travis Moss:Now, you could make a million dollars in one year because you just had a good year, because you just sold a property or something.
Travis Moss:Right.
Travis Moss:So it doesn't necessarily mean that you make a million dollars every year.
Travis Moss:And I think that that's one of the nuances here, that it's lost.
Travis Moss:The top 1% of income earners in the US are not the same 1% every year.
Travis Moss:You know, people, they have a lot of income because they sell a business or something like that, and then not a lot of income.
Travis Moss:So a lot of times, the typical person who's done very well will have certain years where there was major, major income taxes, but there were certain wealth creation events that happened.
Travis Moss:So imagine that I come in when those wealth creation events happen, and I really jack up the taxes on you.
Travis Moss:Right.
Travis Moss:Not only are the tax rates higher with the more money, but now I'm going to create a whole bunch of extra taxes because you know what?
Travis Moss:Those darn people who make more than a million dollars, they have too much.
Travis Moss:Right.
Travis Moss:So it's a really significant concept to get our mind around, because more people could find themselves in these situations maybe once or twice in their life that now will give up a substantially larger portion of their net wealth then.
Travis Moss:And they're only thinking, well, it's like, this is really just for the people who are always at a million dollars, you know, that make it all their lives.
Travis Moss:And it's not this is that you could get caught in this and inadvertently, but for people making over a million dollars, what they're talking about doing is taxing investment earnings.
Travis Moss:So it's like dividends, capital gains, that kind of stuff at the regular income rates rather than capital gains rates.
Travis Moss: Capital gains rates are: Travis Moss:And then subject to that NIIT tax that we talked about.
Travis Moss:Now they're saying, hey, you know what, we should just tax that as regular income.
Travis Moss:That 39 point whatever rate that we were talking about, 39.6 or whatever, they're saying that I've seen one place where they pegged it at 28%.
Travis Moss:So I don't know if they're saying, hey, let's essentially change capital gains rate for people over a million to 28%, or if they're saying, let's go all the way up to that 39.6.
Travis Moss:They don't seem to be clear on that.
Travis Moss:But that's in addition to the NIIT tax increase.
Travis Moss:And so what you're really talking about, if you take the top capital gains rate of 20% and not to get into how that's calculated, because that's a different conversation, but let's pretend that you were going to be in the 20% range anyway.
Travis Moss:They're talking about increasing you about 8% if you go to 28%, or 19.6% if you, and this doesn't count the NIIT tax.
Travis Moss:So that's a tax increase.
Travis Moss:Back to our example about your property taxes going up of between 40 and 98%.
Travis Moss:You're talking about basically doubling your personal, like, if you are in a state where you pay state income tax, imagine your state income tax doubling on you.
Travis Moss: te income tax, imagine paying: Travis Moss:Are you going to start, like, you're going to start thinking, okay, what am I getting for this?
Travis Moss:Right?
Travis Moss:Like I was doing, all right, we had some extra money, went on vacations.
Travis Moss:Where did it go?
Travis Moss:It just, it's gone and you don't have a choice.
Steve Campbell:Well, Travis, one of the things that I was thinking about is I think it's very easy to vilify what we think the ultra net worth are.
Steve Campbell:But think about in your own hometown where you live.
Steve Campbell:If you had a small business owner that spent 35 years building a business and was able to sell their business to somebody that wanted to take it over, they've worked their entire life, maybe haven't been funding a retirement account because they've poured their blood, sweat and tears into a business.
Steve Campbell:And now somebody buys their business for $2 million in your hometown, you would be proud of that person for building the american dream.
Steve Campbell:But now we're saying, hey, you had a wealth creation event.
Steve Campbell:We're going to tax you almost half of the earnings that you've made because you've passed a threshold.
Steve Campbell:We'd go, whoa, whoa, whoa.
Steve Campbell:That's not fair.
Travis Moss:That's before you even get to the state.
Steve Campbell:Yeah.
Steve Campbell:So I think it's very easy to draw a blank slate and say, of course, tax all these wealthy people when wealth creation events are happening every day in America from inheritance transfer, selling of businesses.
Steve Campbell:So it's not just these CEO's making multiple millions of dollars a year, which is what we think.
Steve Campbell:It's the everyday people that have been grinding for years that are now at the climax of their income earning years.
Steve Campbell:They could be potentially hit with some astronomical numbers that would be like, what is this all for?
Steve Campbell:So it's not to humanize, it's not to say one way or another other, but just be aware that this isn't just people in three piece suits off somewhere on yachts.
Steve Campbell:This is the guy next to you or the woman next to you that's worked really hard.
Steve Campbell:Building a business could be entering a wealth creation event that could cripple their family.
Travis Moss:Trey and Juan, as we wrap up this particular episode, this half of this discussion, I mean, just think about it.
Travis Moss:You worked your entire career and you got some stock options, and you saved those stock options up, and the company you worked for did very well.
Travis Moss:Now you got three $4 million in stock options, and that's your retirement.
Travis Moss:It's your kid's wedding.
Travis Moss:It's, you know, vacation funds.
Travis Moss:It's maybe you've got a special needs kid and it's going to fund their trust.
Travis Moss:It's grandkids going to college.
Travis Moss:It's like, it's all your hopes and dreams.
Travis Moss:Because you worked really hard and you were in those stock options and they were going to be taxed with stock options a lot.
Travis Moss:There's going to be taxes, income.
Travis Moss:Let's assume that you were expecting tax acts, and now the tax is going to be, you know, 40% higher, you know, or 20% higher or 30% higher, you know, or even 10% higher.
Travis Moss:Is that fair to you?
Travis Moss:Or let's say that you had a situation where you had bought some stocks in your company, and it's sitting there and it's going to be taxes, capital gain someday.
Travis Moss:And you're counting, okay, it's gonna be 15, 20%.
Travis Moss:And now all of a sudden, it goes up to 39.6% plus your NIIT, which could be an extra 5% on top of that.
Travis Moss:That's devastating.
Travis Moss:You're talking hundreds.
Travis Moss:You're going to write checks for hundreds and hundreds of thousands of dollars.
Travis Moss:For what reason?
Steve Campbell:Just because I think to add context, because of what we do for a living, I think we have this assumption of what a millionaire looks like.
Steve Campbell:But we get people from all over the country that call in that work for a tech company, or, like you said, have been in a small business in the last three years or their highest earning years, so they get bonuses that are a part of it.
Steve Campbell:You start to talk to them about their income.
Steve Campbell:Not surprising that you have people making hundreds of thousands of dollars, younger people chasing the fire movement that have just saved their entire life.
Steve Campbell:They got company stock that has skyrocketed over time.
Steve Campbell:So it's not just always the big, the elons and the people that we think on tv.
Steve Campbell:It's the everyday people that live in your communities that may not be, you know, holding a sandwich board saying how much money they make, but there are more people because of these wealth creation events.
Steve Campbell:And I love the fact that that you talked about that are entering a new season of life that if proposed changes go through, could be pretty crippling.
Steve Campbell:So it's just, again, add some context for.
