Episode 137
The Financial Doomsday of an Unrealized Capital Gains Tax
This episode into the controversial proposal of taxing unrealized capital gains, a measure that could have far-reaching consequences for individuals and the economy at large.
Hosts Steve Campbell and Travis Maus break down the implications of such a tax, emphasizing that it not only targets the ultra-wealthy but could also negatively impact everyday Americans.
They discuss how taxing assets that have not been sold creates a precarious situation where individuals might be forced to liquidate holdings to pay taxes on hypothetical gains, potentially destabilizing markets and affecting job security. The conversation highlights the ripple effects of such policies, illustrating how they could lead to diminished investment returns and economic uncertainty for all.
By examining real-world scenarios and economic principles, the hosts aim to equip listeners with a clearer understanding of the risks associated with these proposed tax changes.
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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:Welcome in to Ditch the Suits part two of our last conversation.
Steve Campbell:Steve Campbell, you're one of your co hosts here.
Steve Campbell:I serve as the chief brand officer at cDNA Planning Group.
Steve Campbell:Travis Moss, the guy who's got all the insights, he serves as a co host and our CEO at Seed.
Steve Campbell:For those of you don't know, Seed is a fee only financial planning firm.
Steve Campbell:We work with individuals just like you every day, and this show is us bringing our collective consciousness, years of experience in this industry, helping people really get the most from their money in life.
Steve Campbell:We want to bring these ideas to you and why I said part two.
Steve Campbell:If you're just brand new to ditch the suits, go back and take 29 minutes and listen to the last episode, because this series is all about, you know, potential proposed income tax legislation, what this could be, and how it impacts you.
Steve Campbell:So we had to lay the groundwork in the previous episode, talking about the nightmarish scenario of taxing unrealized capital gains.
Steve Campbell:And now we actually want to talk about, what if this was implemented in the financial doomsday, that it could actually.
Steve Campbell:I don't care where you say it or how you look at the world financial doomsday.
Steve Campbell:So, Travis, when we say that that sounds scary, it sounds like you could be trying to get under people's skin, like, help people actually understand if this was implemented, what this means for people.
Travis Moss:Yeah, I think a lot of people are like, well, why would they do that?
Travis Moss:Why would people actually do that?
Travis Moss:You know, it sounds so stupid, you know, to create something that's gonna be so destructive, and we're gonna talk about how it's destructive.
Travis Moss:But, you know, I think politics are kind of a bunch of smart people doing really dumb things to get attention.
Travis Moss:There you go.
Travis Moss:That's the best way that I can kind of, like, get my mind around why they do what they do.
Travis Moss:And to say that while they would obviously not pass a law that they haven't thought out, they do that all the time.
Travis Moss:They did it with 401K regulations over the last year or two.
Travis Moss:They wrote out all these new 401K rules, but there's no functional way to administer them.
Travis Moss:So companies are years behind in implementing it because there's no mechanism to do what they want to have done.
Travis Moss:So there is some kind of cart before the horse here that's happening that people would say, be more dismissive of this.
Travis Moss:It's like, ask for a loaf of bread if you just want crumbs.
Travis Moss:But the reality is that these things do happen sometimes, and you end up in a situation where you go, this is completely untenable.
Travis Moss:And how did we get here?
Travis Moss:And what we're trying to do is just, these are things that are coming up in conversation that we're hearing or that we're seeing in the news and stuff.
Travis Moss:And I think it's important to understand them when they come out and they say, look, we're not going to increase taxes on anybody over 400,000 or, you know, this won't impact 99% of Americans.
Travis Moss:I think what we've done two episodes ago and last episode is start to paint the framework that, no, it will impact you.
Travis Moss:It's just, you won't.
Travis Moss:It won't.
Travis Moss:You won't see the way that it impacts you, the way that it impacts somebody else.
Travis Moss:If I'm paying the tax, that's not going to hurt you because I'm paying the tax.
Travis Moss:But what will hurt you is now I don't have the money to do other things.
Travis Moss:And like we talked about, corporations, if corporations pay more tax, you're getting less dividends, you're getting less market appreciation, employees are getting less compensation.
Travis Moss:So it's like one of those things that, okay, it doesn't, the act doesn't necessarily impact you, but the result of the act impacts you equally, if not more.
Travis Moss:In a lot of cases, or in most cases, I think you could probably make an argument.
Travis Moss:So in our last episode, we discussed what unrealized capital gains are and really just kind of the nightmare scenario of trying to manage the appraisal process to come up with what things are actually worth.
Travis Moss:And maybe I didn't lay it out perfect.
Travis Moss:So really what they're saying is, if you have more than $100 million, we want to tax you on unrealized capital gains.
Travis Moss:So money that you don't have in your hand yet, but you could have, if you did, liquidate all your holdings.
Travis Moss:And there's a lot of problems with that.
Travis Moss:We're going to talk today about those problems, the actual problems that that creates and why that is your problem.
Travis Moss:I don't care if you have $50,000, you know, up to $99 million, it's going to be your problem.
Travis Moss:If that is something that actually starts to happen, dramatic negative effect, basically, on personal financial well being.
Travis Moss:I think for just about everybody, I think it's just a very destructive and it wouldn't take very long to have that show up.
Travis Moss:So that's where I want to start with this.
Travis Moss:I don't know if you wanted to.
Steve Campbell:Throw anything, folks, if this is your first ditch the suits episode, maybe you came here because a friend suggested it, or you saw it was trending as one of the top finance podcasts, and you're like, guys, I want to learn about financial planning.
Steve Campbell:Why are we talking about taxes?
Steve Campbell:I think that's part of the issue is we're not understanding that you can't have a financial plan without understanding tax implications and estate planning.
Steve Campbell:It's all part of it.
Steve Campbell:So in digital suits, we try to bring to you not a politically focused, you know, you should feel one way or another, but just present to you facts and maybe ideas that can come if certain things are implemented.
Steve Campbell:And so for you, you really do need to understand the mechanics of how this works.
Steve Campbell:As Travis said, whether you feel like this is on your day to day, personally going to impact you, there will be ramifications and a ripple effect if some of these tax implications are implemented.
Steve Campbell:Because you are here, you work for businesses.
Steve Campbell:It affects your investments.
Steve Campbell:So stick with us.
Steve Campbell:I think it's going to inspire you.
Steve Campbell:And if it does, again, I always tell you, please leave a comment below.
Steve Campbell:Send us a note.
Steve Campbell:Let us know what you learned in this episode.
Steve Campbell:But when we say financial doomsday, Travis, that sounds really heavy.
Steve Campbell:Like, talk to us then, like what has been.
Steve Campbell:So if someone hasn't tuned into the news whatsoever, I don't know where you've been, what you've been doing.
Steve Campbell:You've been off the grid, what has been proposed, that's kind of a good starting point for us.
Travis Moss:I talked to a lot of people who just try to tone this thing, this stuff out, and they say, we rely on you guys to tell us if we need to be concerned.
Travis Moss:So this is us telling you that these are things you need to be concerned about.
Travis Moss:People with more than $100 million in wealth would have to pay at least a 25% of a combination of their income and their unrealized capital gains.
Travis Moss:So this is specific for, you know, wealthy people, and it's a minimum amount of tax that they're trying to create off of those people.
Travis Moss:Four things that they haven't actually, like we said, that the money has not been realized yet.
Travis Moss:And the problem with this, aside from all the appraisal issues and things like that, is how do you tax something which has not been received on an anticipation that it could be received in the future someday?
Travis Moss:How do you pay for a tax on something that does not generate income to pay the tax?
Travis Moss: let's pretend that you owned: Travis Moss: know, someplace where you get: Travis Moss: Let's say you own: Travis Moss:You could own a property, a piece of property that could be worth more than $100 million.
Travis Moss:But it doesn't produce anything yet.
Travis Moss:It's not producing.
Travis Moss:They came in, they put the wells.
Travis Moss:You're getting a little bit of money, but you're getting, you're not getting a ton of money yet, right.
Travis Moss:So maybe you're getting ten, $15,000 a month, but the overall value of the reserves of your wells and all that kind of stuff and the land, if you were to sell it, the underlying value would actually be $100 million.
Travis Moss:What they're saying is we can come in now and tax the $100 million value of that land and there may be carve outs.
Travis Moss:Maybe they come up because they're completely vague about this.
Travis Moss:Maybe they come up with carve outs like farmland isn't included.
Travis Moss:Let's assume that there's no carve outs because they haven't talked about them yet.
Travis Moss:Use this as an example.
Travis Moss:You want to consider yourself rich because you get five or ten or $15,000 a month in royalty payments.
Travis Moss:However, you now qualify in this category, but you don't have enough money to pay.
Travis Moss:Let's say you have that for that farmland your family has paid, you know, maybe $2 million going back through time.
Travis Moss:You have a $98 million gain.
Travis Moss:Let's just create a number and say you're going to owe $25 million in income taxes.
Travis Moss:Where, where's the $25 million going to come from?
Travis Moss:You're only getting $15,000 a year out of it or a month out of it, $180,000 a year.
Travis Moss:The money doesn't exist yet and we're going to come tax you on that.
Travis Moss:So that's a problem if appreciation of an asset carries a tax due to the very nature of appreciating and not triggering the event to cause liquidity.
Travis Moss:So what I mean by this is I bought this property.
Travis Moss:The property is appreciated in value.
Travis Moss:However, whether I sell the property or not, there's going to be this monster tax due.
Travis Moss:When I hit this certain threshold.
Travis Moss:What will likely happen is values will stop going up because people will want to stay away from the threshold.
Travis Moss:So they will just start saying, I'm not paying you for that anymore.
Travis Moss:So it's actually going to put values down.
Travis Moss:So let's pretend you own that piece of land or that piece of property.
Travis Moss:Now what you can sell for is actually going down.
Travis Moss:If you go over this magic threshold, you end up paying taxes.
Travis Moss:However, you can't even get to the threshold because, because there's downward pressure because nobody wants to be near that threshold.
Travis Moss:It has to come into the cost of the asset.
Travis Moss:Right.
Travis Moss:And what you're going to be able to sell it for, what would happen to a startup?
Travis Moss:So this is another example if anybody's ever, if you have kids that maybe they've done a good job and they found a startup company that they've joined and the startup company is doing really great and it's got some patents on some technology or it's got some patents on like a pharmaceutical or something like that, and they're gonna, this is gonna be the next big thing.
Travis Moss:Those patents are worth money.
Travis Moss:So Google come in and say, hey, look, we don't give a damn about your business, but that thing you're doing over there, we'll pay you $200 million for that today.
Travis Moss:Well, there's your perceived value, right?
Travis Moss:According to this, you now have to pay taxes on that $200 million.
Travis Moss:So if Google wants to put you out of business, they could just make you an offer knowing that you're not going to accept it.
Travis Moss:Or maybe you accept it, but they can make an offer, just, they could make an offer for 101 million.
Travis Moss:You, you, if you don't accept it, that's now on the record.
Travis Moss:You now will pay taxes on that money.
Travis Moss:However, it's just a startup.
Travis Moss:All you have is the idea and five employees in your garage.
Travis Moss:The idea is worth a hundred million dollars.
Travis Moss:But you don't have any products that you've sold, you haven't done anything yet to it to get any money from that idea.
Travis Moss:However, now it's deemed worth $100 million, you're broke, you're out of business, you're gone now.
Travis Moss:Okay, so now I owe, let's say I said, okay, google, I'm not going to sell it to you.
Travis Moss:And we have this valuation, you know, or this offer, which is going to mean that that's, that could be assumed what it's worth by the IR's.
Travis Moss:So you're going to, here's a $25 million tax bill.
Travis Moss:And you look at that and you go, well, I can't afford that $25 million tax bill.
Travis Moss:So I guess I'm going to sell it.
Travis Moss:Well, now you have to sell it to cover your tax bill so you don't go to jail.
Travis Moss:So now Google can come in and say, we'll give you 25,000 or 25 million for it.
Travis Moss:We'll just get you out of your tax bill.
Travis Moss:I mean, this doesn't even make any logical sense when you think through it.
Travis Moss:The world is not all people interested in everybody else doing well.
Travis Moss:Let's make sure everybody gets a fair shake at this.
Travis Moss:The world is a competitive marketplace, and you're talking about dynamics here.
Travis Moss:Number one, how do you.
Travis Moss:How do you pay for intellectual property, then?
Travis Moss:Or let's say you had bitcoin.
Travis Moss:Let's say that you made $100 million in bitcoin for the bitcoin people out there.
Travis Moss:You can't sell $100 million of bitcoin in one day without wrecking the bitcoin market, right?
Travis Moss:So how do you.
Travis Moss:How do you sell it to free up the money without crushing the value of your underlying position right in those chunks?
Travis Moss:This is why, when Elon Musk wants to sell Tesla, he can't just go out and sell $10 billion of Tesla at a time.
Travis Moss:He has to have it approved, and there has to be a process to sell a certain amount at a time, because when you sell giant chunks of an asset, you crush the value of it if you're forced to sell.
Travis Moss:This is a couple years ago, we had a market meltdown.
Travis Moss:I forget when it was but a big part of the market meltdown.
Travis Moss:Washington, there were funds that were going bust that had different leverages on things, or it might have been cryptos, or.
Travis Moss:Anyway, there's funds out there that will invest a certain way, either with leverage or in risky assets.
Travis Moss:And when they go bust, it's not that the underlying asset went to zero that's the problem.
Travis Moss:It's that they borrowed money to buy the underlying asset.
Travis Moss:That went to zero, and they borrowed the money against stuff in the stock market.
Travis Moss:So now they have to go sell stuff in the stock market to pay the loans off for the stuff that went bust, and that creates this cascading effect where everything starts to tumble, because they can't say, well, bank, we're going to wait till next year to pay you, when maybe the market goes up 20% so we can actually get what we think our assets are worth.
Travis Moss:No, they have to go out and sell.
Travis Moss:The Silicon Valley bank, they had bonds.
Travis Moss:If they could have waited ten years for the bonds to mature, they could have.
Travis Moss:Theoretically, they could have paid their bills off.
Travis Moss:But they couldn't.
Travis Moss:The bills were due today.
Travis Moss:The future value was x.
Travis Moss:The current value is wide.
Travis Moss:Nobody will pay you for that.
Travis Moss:So they couldn't raise the money even though they had the assets that over ten years probably would have been able to cover it.
Travis Moss:They couldn't raise it today because of the sale price.
Travis Moss:So you have to do distressed sale.
Travis Moss:That drives the market down even further.
Travis Moss:They take even bigger losses.
Travis Moss:They're even further behind.
Steve Campbell:So 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 planning 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:Well, and Travis, if I can, I think for those that are listening, maybe they don't own land or they're not a part of a startup, so they're trying to understand what you're saying.
Steve Campbell:Just imagine if you live in a suburban house and your house on Zillow, from what you paid for to what it is now.
Steve Campbell:You and your spouse are getting excited.
Steve Campbell:It's gone up a couple hundred thousand dollars.
Steve Campbell:You get to the end of the year and they want to come collect a tax on the amount that it could sell for.
Steve Campbell:Even though you haven't sold it, you'd be mortified.
Steve Campbell: Now, in: Steve Campbell:So what we're trying to say is, what if you as an individual had to pay a tax on something that you haven't actually sold when you don't have the money to pay for it?
Steve Campbell:You would say that's not Fair.
Steve Campbell:So I think it's hard when you're talking about $100 million for people that are investing in their 401k, they're living not normal lives, but they're people.
Steve Campbell:It's hard for them to understand.
Steve Campbell:But I think when you're really breaking down the impact of what this means, it does start to raise a lot of red flags.
Steve Campbell:So keep talking us then.
Travis Moss:What if you're not one of those wealthy people.
Travis Moss:But what if you own Tesla stock?
Travis Moss:So you own some TesLA stock, and Elon Musk is forced to sell some odd billion dollars worth of TEsla stock so he can pay his unrealized capital gain.
Travis Moss:Bill, you know what?
Travis Moss:Your TESLA stock's going to be worth just about nothing, because it's going to crash and there's not going to be anybody to buy it up.
Travis Moss:If he has to sell billions of dollars with a stock, who's going to buy those billions of dollars?
Travis Moss:Because all the other billionaires, they're all paying the same taxes, right?
Travis Moss:They're all paying these massive taxes.
Travis Moss:So everybody's selling at the same time.
Travis Moss:That's when markets crashed.
Travis Moss:The difference, there is a lot of times when the markets crash, Warren Buffett shows up with a pile full of cash and buys everything, right?
Travis Moss:And he kind of tries to save the market.
Travis Moss:What happens if that pile of cash is gone?
Travis Moss:Because he had to use the pile of cash to pay taxes.
Travis Moss:Where's the money to come back into the market to soak up those stocks and keep the prices up?
Travis Moss:Now you could SAy, well, it'll be GReat.
Travis Moss:This price will go down so far that I can buy it.
Travis Moss:It will never recover, though.
Travis Moss:That's the problem.
Travis Moss:The reason why it recovers is because if you take the stock that Elon owns, for instance, in Tesla or Bill Gates has in Microsoft or whatever, you take these concentrated positions, those are effectively off the market.
Travis Moss:They're not available.
Travis Moss:If I own 50% of a company, that means you can't buy 50%.
Travis Moss:That means everybody else is just fighting for the other 50%, and there's enough money out there to fight that and maybe force the price up.
Travis Moss:But if all of a sudden I increase that exponentially, who's fighting for it?
Travis Moss:You know what I mean?
Travis Moss:There's more to buy.
Travis Moss:Why would it ever get back up there?
Travis Moss:Because it becomes too available.
Travis Moss:Supply and demand economics.
Travis Moss:The stock market's going to act the same way.
Travis Moss:So it's a really, really big issue.
Travis Moss:If you work for, let's say you work for an Amazon warehouse or a cv's warehouse or a Best Buy warehouse or where the heck you work, and the owner of the company gets slammed for a multi billion dollar tax, for a multi million or multi billion dollar guy, big tax.
Travis Moss:A big enough tax that they have to start dumping stock or selling the company.
Travis Moss:One, they might have to sell the company.
Travis Moss:What happens when companies get sold?
Travis Moss:Normally, you lose your job, or a bunch of people lose their job.
Travis Moss:Okay, maybe that doesn't happen.
Travis Moss:Let's say that they have to.
Travis Moss:Amazon has to close a warehouse because you gotta get costs down to make the profit look better to drive the stock price back up, right?
Travis Moss:Yep.
Travis Moss:You worked at the warehouse.
Travis Moss:Your job's gone.
Travis Moss:Sorry.
Travis Moss:Because they're gonna have to react to these dynamics.
Travis Moss:You can't just raise a tax and pretend those people pay the tax.
Travis Moss:It's not Scrooge McDuck with a, with a, you know, full of coins that they're swimming in.
Travis Moss:This money is already, it's not real.
Travis Moss:It's already invested into something and tied up with something, and it's an expected value of what something would be worth in a perfect scenario.
Travis Moss:But if everybody's selling at the same time and there's no buyers, there's no value either.
Travis Moss:It's just going to plummet to create that cash to pay the taxes.
Travis Moss:So it sounds cool when people are saying it, and it makes good enemies and stuff, but if by chance they ever get this through, I don't even know how you would recover from it after the first year of implementing it.
Travis Moss:I don't even think it's recoverable.
Travis Moss:First, I don't know how they would do it from the appraisal standpoint.
Travis Moss:But second of all, could you even recover?
Travis Moss:And the reason why that's important is whoever is talking about these economic policies, if this is what senators, presidential candidates, whatever are running on, you got to hold them accountable for something smarter than this, I think, is the problem.
Travis Moss:And an asset has to be sold.
Travis Moss:Prices are going to tumble.
Travis Moss:That's just how it works.
Travis Moss:There are going to be ramifications of prices tumbles.
Travis Moss:Companies go out of business when prices tumble.
Travis Moss:Why?
Travis Moss:Because they can't raise money.
Travis Moss:They can't get lending that type of stuff.
Travis Moss:Their credit lines can get cut.
Travis Moss:You just can't.
Travis Moss:These two, these things are all too intertwined.
Travis Moss:If you're saying, like, it's just the 1% that'll pay this.
Travis Moss:No, it will actually.
Travis Moss:Let's say at the end of the day, you get every person over a hundred million dollars back.
Travis Moss:Under $100 million, they'll still have $100 million.
Travis Moss:Everybody else will be struggling in proportion.
Travis Moss:The only difference is, is they got $100 million.
Travis Moss:Buffer, do you have 100 million?
Travis Moss:You know what I mean?
Travis Moss:Like, like, let's say that it costs somebody over a five or ten year period, 70% of their net wealth.
Travis Moss:Could you live on 70% of what you have?
Travis Moss:I don't think so.
Travis Moss:But you're going to see that type of ramification across the entire market.
Travis Moss:If that happens, what you're talking about doing, when you're talking about taxing unrealized capital gains is to redistribute wealth, is you're talking about taking money from the most productive people in society.
Travis Moss:You could say, oh, you know, they're not that productive.
Travis Moss:Listen, if you created Starbucks, you're the guy, you're the guy who created Starbucks, you're the guy who got it through a startup, you're the guy who got it to exist, your guy who got it through x amount of market crashes.
Travis Moss:You are more productive than any single person who ever worked there.
Travis Moss:You are the productive person.
Travis Moss:You are the person who made it happen.
Travis Moss:If you create a Tesla, if you created Microsoft, if you created Amazon, if you created, you know, pick a business, you are more productive than anybody else because you actually made that happen for everybody else because of your production.
Travis Moss:Everybody else now is productive, right?
Travis Moss:You get credit for all that production that you created.
Travis Moss:You don't just, oh, well, now he's just a CEO sitting at the top and look at the bum, you know, he just flies around on his jet.
Travis Moss:No, what did he do before he got there that made it so that he could actually even be there?
Travis Moss:And what did that do as kind of a ripple down through it?
Travis Moss:So you're talking about taking money from people who do stuff and create stuff.
Travis Moss:Think about your favorite store, your favorite product.
Travis Moss:You're talking about taking the money from them, and then you're talking about forcing them to sell things so that they can cover that bill, which is going to cause a crash across everything.
Travis Moss:But there won't be them.
Travis Moss:That person won't have the money left to come in and rebuild.
Travis Moss:It is so destructive.
Travis Moss:Most billionaires have and Mil, you know, when you talk about people, I think really, when you get up over 20 million, when you talk about people with a lot of money, right?
Travis Moss:You're really talking about people who have the majority of their money in illiquid assets, you know, endowments.
Travis Moss:So are we going to tax endowments on unrealized capital gains?
Travis Moss:You're going to see half the endowments implode, you know, or do they get a free pass because they're charities?
Travis Moss:How you're gonna reconcile that?
Travis Moss:But let's say that they, let's say that you manage a portfolio like an endowment.
Travis Moss:That means you have real estate, you have small businesses, you have all kinds of things in there, right?
Travis Moss:Your money's not cash oriented.
Travis Moss:There's not a quick way to sell a lot of that stuff and because of that, that brings stability.
Travis Moss:Right?
Travis Moss:If you could just, you know, if there was no limitations to buying and selling things, you would see a much more volatile market.
Travis Moss:Right?
Travis Moss:You know, if Elon Musk could, hey, next time he wants to buy something, just sell, you know, $20 billion of TEsla stock.
Travis Moss:In a day like that, you're going to see chaos unfold in the markets.
Travis Moss:Absolute chaos.
Travis Moss:So the fact that he can't do that actually stabilizes the market.
Travis Moss:So you could say, well, we'll take it from him and redistribute it.
Travis Moss:But that very act itself is a destabilizing event.
Travis Moss:Yes, you'll make him poorer, but you'll also end up poor because you've destabilized your market.
Travis Moss:You've crushed the supply and demand side of the market.
Travis Moss:It doesn't work the way that it kind of sounds when it rolls off your tongue.
Travis Moss:So we get to benefit from people who own these assets because it stabilizes everything for us.
Travis Moss:Imagine if you inherited an asset from somebody and then had to immediately pay taxes on it because the capital gains had never been realized and because you inheriting that asset threw you over a certain threshold.
Travis Moss:Like, it just, you never even get it.
Travis Moss:You have to sell the asset immediately to pay the tax.
Steve Campbell:Well, it was what you said in the first episode.
Steve Campbell:Right.
Steve Campbell:The real issue is that the us government spending is out of control and we're in a real deficit.
Steve Campbell:And so the idea of imposing higher taxes, I mean, sure, if you were going to take the money that was recouped and pay down the us debt and you had a meaningful plan, I think people might be interested.
Steve Campbell:But you don't even know if the money that you're going to take from the $100 million asset or these businesses with illiquid investments.
Steve Campbell:It sounds like there's more negative ramifications if you go to raise taxes on them than positive, because a lot of us as Americans don't even know what would happen with that money that you'd actually be recouping.
Steve Campbell:And that is a serious issue for a lot of people of the mismanagement of those funds.
Steve Campbell:So I think the big takeaway is you've kind of talked about in this part is the taxes would be very short lived.
Steve Campbell:Right.
Steve Campbell:It would create a glass ceiling, severely limiting the amount of people and assets who reach and stay within that tax level.
Steve Campbell:What happens when you do it?
Steve Campbell:It's going to create more of an issue.
Steve Campbell:So it's to raise these points that you just talked about.
Steve Campbell:Assets would have to be sold businesses have illiquid investments.
Steve Campbell:It's not just that they have a line item flush with cash, and when you give them an unrealized gains tax bill, they go, great.
Steve Campbell:We've already had the money set aside.
Steve Campbell:It has to come from somewhere.
Steve Campbell:And when it comes from somewhere, it will impact you.
Steve Campbell:As the listener, if you're an investor in stocks or mutual funds or you have pension accounts, this will impact you.
Steve Campbell:So even though it sounds great to say, yeah, they should pay their fair share, we got to get a pound of flesh from them.
Steve Campbell:I get it.
Steve Campbell:But unless you really understand that that pound of flesh is also coming from you, too, as well, at the end of this thing, you're going to be in for a rude awakening.
Steve Campbell:So I think, Travis, as we try to in ditch the suits, we always try to give people solutions.
Steve Campbell:What then, with all of this at stake, what is the solution that we want to lead people to?
Travis Moss:Well, I think with all of this stuff, it does matter if you're engaged and you're paying attention, and it does matter if you can have an intelligent conversation about this stuff without getting all upset and all hyper political and that kind of stuff, simply talking about this is what this actually means and not just, yeah, let's go get that money.
Travis Moss:Let's go get those people.
Travis Moss:They've been taking advantage of everybody, you know, understanding how delicate the system is.
Travis Moss:But you need to read the fine print and buyer beware.
Travis Moss:You know, don't go for the headlines.
Travis Moss:Don't go for the punch lines that sound really cool or something like that.
Travis Moss:Read.
Travis Moss:Read into it.
Travis Moss:Find additional sources.
Travis Moss:Look for things that are contradictory to wherever your favorite source is to make sure that you're not misinterpreting what you're reading.
Travis Moss:Because when they come out and they say, hey, this is only for 1%.
Travis Moss:If you're making under 400,000, nothing's going to impact you.
Travis Moss:It's not how the world works.
Travis Moss:You can't, you know, whether you call it karma or whatever you want to call it the butterfly effect, you can't do something onto somebody else and not have it come back and be reciprocated.
Travis Moss:You cannot suck money out of the economy in massive amounts and not have it show up someplace like people will notice.
Travis Moss:It's like if you got your front tooth knocked out, yeah, you got more teeth.
Travis Moss:But guess what people are going to notice when they see you smiling?
Travis Moss:That you're missing a tooth.
Travis Moss:Right?
Travis Moss:That's what you're talking about.
Travis Moss:And you can't eat the same foods in the same way that you maybe could have otherwise if you had two front teeth.
Travis Moss:Right.
Travis Moss:It's going to affect you.
Travis Moss:You were going to get affected even if you were not the one technically paying the tax.
Travis Moss:Basically, an unrealized capital gains tax is the government saying, we want to take your stuff from you just because we can.
Travis Moss:Because the definition of an unrealized tax is something that is not real.
Travis Moss:It is not actual.
Travis Moss:Literally, look up the definition of unrealized, not made real or actual, not resulting in accomplishment as a task or aim.
Travis Moss:Unrealized ambitions not known or suspected.
Travis Moss:If I tax you on something that is so, take unrealized capital gains.
Travis Moss:People don't understand what that means.
Travis Moss:Just say this.
Travis Moss:I want to tax you on something that is not made real or not actual.
Travis Moss:It's not resulting in accomplishment.
Travis Moss:It's not based on success from your ambitions.
Travis Moss:It's not known if it will ever come to fruition or even if we really should plan on it coming to fruition.
Travis Moss:If I were to say I want to tax you based on that, you would go nuts on me.
Travis Moss:Yep.
Travis Moss:Steve, you know what?
Travis Moss:You could be making a million dollars a year if you just applied yourself.
Travis Moss:I'm going to tax you more because you're selling yourself short.
Travis Moss:And because of that, and I know you're worth more than you think.
Travis Moss:I'm going to tax you more.
Travis Moss:That's what you're saying.
Travis Moss:That that's legitimately what that is.
Travis Moss:We're going to tax you on something that you have not received yet.
Travis Moss:That is arbitrary.
Travis Moss:That the powers that be have the control to decide on that.
Travis Moss:You really have very little recourse to say, look, that's kind of out of alignment.
Travis Moss:Where are you coming up with that?
Travis Moss:They're basically saying, let's tax people on a theoretic value of something that may or may not ever happen.
Travis Moss:And.
Travis Moss:But let's do it now.
Travis Moss:Let's get you to pay the bill now.
Travis Moss:Not in the future.
Travis Moss:Now.
Travis Moss:Today.
Travis Moss:I want the money today.
Travis Moss:And then that's bad, and not bad enough.
Travis Moss:Sorry.
Travis Moss:But if that's not bad enough, then you got this ripple effect which we talked about, the destruction and the complete destabilization of the markets because somebody's got to come up with the money.
Travis Moss:And that money is not just staying sending around a $100 bills in a warehouse.
Travis Moss:Somebody's actually going to have to come up with that money, which means they're going to have to sell stuff, which means prices are going to plummet.
Travis Moss:Not at the grocery store.
Travis Moss:Those prices are going to go up because companies are going to have to make more money.
Travis Moss:What's going to happen is prices are going to plummet in the stock market, in your asset values, they are going to plummet.
Travis Moss:So not only could it create actually more inflation, it could also just absolutely destroy what you have individually as somebody not in that $100 million group, and you've got no room.
Travis Moss:Like, if you're in a hundred million dollar GRoup, you got some room.
Travis Moss:If you're not, you have no room.
Travis Moss:Where are you going to go?
Steve Campbell:Well, I think.
Steve Campbell:I think when you look at an elon, he seems so distant for most people that it's hard to understand.
Steve Campbell:But think about our Reddit community.
Steve Campbell:Think about all the people we talk with that bought bitcoin.
Steve Campbell:You might be making 80 Grand Doing a job, but you bought BitCoin.
Steve Campbell:And the Unrealized Capital Gain, it's gone up.
Steve Campbell:Imagine if the government came to you today and said, hey, you've made some money in our, our eyes, we need you to pay $80,000 in taxes.
Steve Campbell:You turn around and say, that's not fair.
Steve Campbell:Where am I going to come up with that money?
Steve Campbell:Maybe you have to sell your car.
Steve Campbell:Maybe you have to rent out your house.
Steve Campbell:Maybe you'd go, I don't want to do all of that.
Steve Campbell:So I think when it's an elon or a big figure, it's easy for us to kind of shake our fist at them.
Steve Campbell:But when you really think about just what they're trying to propose on the Unrealized capital gains, and that's the whole point of this, we're not talking about, you went out and actually sold a good, and you made money, so you got to pay your fair share.
Steve Campbell:This is, the potential value has gone up.
Steve Campbell:Therefore, we're knocking on your door today saying, travis, we need you to pay us.
Steve Campbell:And you'd go, for what?
Steve Campbell:Well, what it could be worth.
Steve Campbell:You would go, that's asinine.
Steve Campbell:I don't understand, like, why you would do that.
Steve Campbell:That's what we're trying to do.
Travis Moss:If I wanted to destroy bitcoin, I would implement this tax.
Travis Moss:I would then pump so much money into bitcoin that you end up with a whole bunch hundred millionaires.
Travis Moss:And then I would withdraw all that money at one time.
Travis Moss:Everybody would have to pay their taxes, but they would not be able to sell their bitcoin at all for anything of value.
Travis Moss:And that's the reality of coming to.
Steve Campbell:A Netflix series soon.
Steve Campbell:So I think, you know, Travis, this is an interesting topic, talking about income taxes, anything else here, you know, solution.
Travis Moss:Wise, before, whenever you hear policies like this or ideas like this that are being thrown around, you know, I always say this.
Travis Moss:With all of this stuff, consider you or one of your children or one of your loved ones are in the situation, do you think it's fair to them?
Travis Moss:It's your money, it's your kid's money, it's your parents money.
Travis Moss:Is it fair to them that this is happening?
Travis Moss:So you don't have to believe me that there'd be these ripple effects across the economy saying, yeah, no way.
Travis Moss:Those people have enough money.
Travis Moss:They'll just pay it.
Travis Moss:It won't be a problem.
Travis Moss:Fine.
Travis Moss:But if it was you, one of your kids or your parents, would you feel the same way?
Travis Moss:And if the answer is no, you got us.
Travis Moss:Sit down and think about this for a minute.
Travis Moss:Right?
Travis Moss:If the answer is no, you wouldn't mind?
Travis Moss:And you still don't believe me about the economy.
Travis Moss:I don't know if I can help you, right?
Travis Moss:It's just there's a disassociation for how the financial system actually works at that point.
Travis Moss:And although you might be in the camp, ultimately, if you're in the camp that those super wealthy people, they got to pay more taxes, you could be in that camp.
Travis Moss:There's other ways to achieve it without being so destructive.
Travis Moss:Right?
Travis Moss:I mean, like, this is just, this is a way that, like I said, sometimes you do something that, you know, doesn't just hurt your enemy, it hurts everybody, you know?
Travis Moss:And if you're sitting here pointing the finger, you're saying, they're the enemy, they don't pay enough, they need to pay more.
Travis Moss:Make sure that you don't cut off your own arm at the same time.
Steve Campbell:And if you heard nothing for the last three episodes, let me know.
Steve Campbell:If you raise taxes on corporations or you implement some of these taxes we've talked about on the ultra, you know, wealthy, it will impact your 401k, it will impact your mutual funds, it'll impact your stocks, your pension, your livelihood.
Steve Campbell:So even if you missed everything else, if these things are actually introduced, it will impact you.
Steve Campbell:No matter where you live in this country, no matter what demographic you're from, it will impact you.
Steve Campbell:And that's the bottom line.
Steve Campbell:If you understand that and you're still willing to shake your fist and get your pitchfork, we've laid out what could happen.
Steve Campbell:So we just want to, again, with all of these ideas, not make it political, but just stay to the arguments and maybe some things to think about because the whole idea is to help you get more from your money in life.
Steve Campbell:So if this has helped you, if you got more questions, if you want resources, get in contact with Travis.
Steve Campbell:And I got a couple more episodes around this idea and some kind of grab bag ideas, so you're going to want to stay tuned.
Steve Campbell:But as always, we are real people just like you, doing this every day with individuals that have the same questions and concerns that you have.
Steve Campbell:If you need help, get in touch.
Steve Campbell:But as always, we appreciate you being our guest on ditch the suits.
