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0:00:50 This episode is brought to you by FX’s Dying for Sex on Disney+.
0:00:52 Based on the podcast of the same name,
0:00:55 Dying for Sex tells the story of Molly,
0:00:57 who is diagnosed with stage 4 breast cancer.
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0:01:12 FX’s Dying for Sex, now streaming only on Disney+.
0:01:20 I’m Scott Galloway, and this is No Mercy, No Malice.
0:01:24 We talk about tax policy through the lens of rich versus poor.
0:01:29 We should also discuss earners versus owners.
0:01:33 Earners versus owners, as read by George Hahn.
0:01:46 It’s tax season in the U.S.
0:01:50 60 million-plus Americans’ taxes are so simple,
0:01:53 the IRS could process them automatically
0:01:55 and just send a bill or refund check.
0:02:00 Instead, the average American spends $270 and 13 hours
0:02:02 filing their taxes each year.
0:02:07 Spoiler alert, the IRS is the least popular federal agency.
0:02:11 Last month, Doge came for the tax man.
0:02:16 Half the IRS workforce, 90,000 people in total,
0:02:18 is reportedly on the Green Mile.
0:02:22 Meanwhile, Republicans in Congress are inching closer
0:02:25 to extending Trump’s 2017 tax cuts.
0:02:30 This is good news for the wealthy, i.e., owners.
0:02:36 Lowering tax rates and decimating IRS enforcement capabilities
0:02:37 is stupid.
0:02:42 We get $12 back for every $1 given to the agency.
0:02:44 But it’s only a misdirect.
0:02:47 We talk about taxes and enforcement
0:02:50 when the real juice is the tax code.
0:02:55 Our tax code exacts a high price on earners.
0:02:56 And the price is even higher
0:02:59 when enforcement is rendered a paper tiger,
0:03:02 as the shortfall is either added to the debt
0:03:05 or used as a pretext for cutting Medicare,
0:03:08 Medicaid, Social Security, and other programs.
0:03:11 As Warren Buffett once said,
0:03:14 there is class warfare in America.
0:03:15 Quote,
0:03:24 This post was originally published last May,
0:03:26 but the war remains the same.
0:03:28 Owners are crushing it.
0:03:30 Earners are getting crushed.
0:03:32 And the battlefield,
0:03:34 a.k.a. the U.S. tax code,
0:03:38 continues to be a weapon of mass distraction.
0:03:46 Over the past several decades,
0:03:49 America has waged a covert war against the young.
0:03:53 One front in this war is our income tax system,
0:03:56 which favors owners over earners.
0:03:59 Young people are almost all earners,
0:04:01 while owners are typically older.
0:04:05 And the tax code is a wealth transfer vehicle for owners
0:04:09 to garner a greater share of our common wealth.
0:04:10 The good news?
0:04:11 It can be changed.
0:04:12 Back.
0:04:15 If you get a paycheck,
0:04:17 whether it’s salary or freelance,
0:04:19 and that’s how you pay your bills,
0:04:20 you’re an earner.
0:04:22 Owners, on the other hand,
0:04:24 might collect wage income,
0:04:27 but their real money comes through profits from investments,
0:04:29 stock sales and dividends,
0:04:31 rent from property,
0:04:35 and other income streams derived from the ownership of assets.
0:04:38 To be an earner is noble.
0:04:39 You work for a living,
0:04:41 and labor is a sacred thing.
0:04:44 Labor is the source of food,
0:04:45 shelter, entertainment,
0:04:47 and every material pleasure of society.
0:04:50 We even celebrate it with a holiday,
0:04:52 the first Monday in September.
0:04:53 Pro tip,
0:04:56 if you want to celebrate Labor Day somewhere awesome,
0:04:59 try as hard as you can to become an owner.
0:05:02 Owners also get a celebratory day.
0:05:05 It’s April 15th.
0:05:06 Another pro tip,
0:05:10 if you’re ever featured in a commercial calling you a hero,
0:05:12 it means you’re getting fucked.
0:05:16 The most fortunate in our society have no holiday,
0:05:17 as they don’t need one.
0:05:23 They recognize that holidays wallpaper over the inequity faced by anybody who gets a day in their honor.
0:05:28 Income taxes for earners are deceptively straightforward.
0:05:31 Take your annual income,
0:05:33 subtract the standard deduction,
0:05:36 $24,000 for a married couple,
0:05:38 make a few other calculations,
0:05:42 and then pay a percentage of what’s left to Uncle Sam.
0:05:45 And the income tax rates for most people are low.
0:05:50 A two-adult household making less than $100,000 per year
0:05:54 pays 10% or less in federal income tax.
0:05:57 Many pay much less or none at all.
0:05:59 Sounds reasonable, right?
0:06:01 But there’s a catch.
0:06:04 Several catches.
0:06:06 First,
0:06:12 for those paying only 10% or less of their wages in income taxes,
0:06:15 other forms of tax are a heavier burden.
0:06:17 At the federal level,
0:06:21 Social Security and Medicare add almost 8%.
0:06:24 Then all states collect taxes,
0:06:27 and most state tax systems are regressive.
0:06:29 All told,
0:06:35 lower-income people pay a greater portion of their income in taxes than many rich people.
0:06:37 Sales tax,
0:06:38 property tax,
0:06:40 and other government revenue sources,
0:06:42 licensing fees,
0:06:43 permits and filing fees,
0:06:44 and car registrations,
0:06:48 take a larger bite out of lower-income households.
0:06:51 In low-tax Florida,
0:06:52 the most regressive state,
0:06:54 low-income families,
0:06:55 earners,
0:06:59 pay 13.2% of their income in state and local taxes.
0:07:02 The middle class pays 9.1%,
0:07:03 and the top 1%,
0:07:04 and the top 1%,
0:07:07 and the top 1% owners pays just 2.7%.
0:07:09 In fact,
0:07:18 lower- and middle-income Florida households pay about the same in total taxes as they would in high-tax California.
0:07:24 The next time you hear someone complain about low-income people who don’t pay any taxes,
0:07:28 remind them that income tax doesn’t exist in a vacuum.
0:07:35 Low-income people often pay over 25% of their income in taxes.
0:07:41 There’s a myth that the rich don’t pay their fair share of taxes.
0:07:44 The reality is most rich people,
0:07:45 the super-earners,
0:07:48 pay more than their fair share.
0:07:52 A married household making more than $500,000 per year
0:07:56 is in the top 5% of households by income
0:08:00 and pays an effective federal income tax rate around 25%.
0:08:03 Half a million dollars may seem like a lot,
0:08:09 but careers that pay that well require expensive college and graduate degrees,
0:08:11 entail long hours,
0:08:13 offer little job security,
0:08:15 and they’re typically in high-cost-of-living locations
0:08:18 with high state income tax.
0:08:20 In New York or California,
0:08:23 add another 10% onto that 25%.
0:08:25 With other taxes,
0:08:27 including sales tax,
0:08:31 the total tax burden borne by mid-career professionals
0:08:33 can reach 40% of their income.
0:08:35 The baller,
0:08:37 who makes seven figures plus,
0:08:39 is often working for the government.
0:08:42 Their total effective tax burden
0:08:44 can approach 50%.
0:08:46 Until, that is,
0:08:48 they can make the jump to light speed,
0:08:51 i.e. become an owner.
0:08:55 Think of building wealth
0:08:57 as launching a rocket ship into orbit.
0:09:01 Rockets burn 95% of their fuel
0:09:03 to escape Earth’s soupy atmosphere
0:09:05 and incessant gravity.
0:09:07 Once you get to orbit,
0:09:09 you’re a master of the universe,
0:09:10 covering thousands of miles
0:09:12 with just a touch of propulsion.
0:09:14 Wealth is similar.
0:09:16 The atmosphere is your expenses.
0:09:18 The distance traveled,
0:09:19 your income.
0:09:23 Most of us never generate enough current income
0:09:25 to make the jump to space
0:09:26 and become an owner.
0:09:28 Save enough to invest
0:09:30 so our primary sources of income
0:09:31 are passive.
0:09:33 Saving your first $100,000
0:09:35 is incredibly hard.
0:09:37 The next $100,000
0:09:38 is tough,
0:09:40 but you now have momentum
0:09:43 and start to see the curvature of the Earth.
0:09:45 Once your current income
0:09:46 is substantially greater
0:09:47 than your expenses
0:09:49 and you’ve deployed
0:09:50 an army of capital
0:09:51 that fights for you
0:09:52 and your family in your sleep,
0:09:54 you’ve made the jump.
0:09:57 What we’ve done with the tax code
0:09:59 has rendered the atmosphere
0:10:01 thicker and gravity stronger.
0:10:03 Go to law or medical school
0:10:04 or live at the office
0:10:05 and you’ll see
0:10:07 your current income increase,
0:10:09 but you’ll also lose
0:10:11 a bigger share to taxes
0:10:14 and the harder it gets to save
0:10:15 and escape the gravity
0:10:17 of being an earner.
0:10:21 Imagine if taxes worked like this.
0:10:23 Everything you spend
0:10:24 that’s remotely related to work
0:10:26 is deducted from your taxable income.
0:10:28 Clothes you wear
0:10:29 and food you eat
0:10:30 during the work week,
0:10:30 your car,
0:10:32 your internet and cell phone bills,
0:10:34 furniture and square footage
0:10:35 where you work at home,
0:10:36 like the kitchen table,
0:10:36 et cetera,
0:10:38 all taken off your income
0:10:39 before taxes.
0:10:42 Pretty much anything you do
0:10:43 on days you’re working,
0:10:44 deductible.
0:10:46 All past investments
0:10:47 in education,
0:10:48 deductible.
0:10:50 If you spent more
0:10:51 than you earned
0:10:52 as you did in college
0:10:53 and graduate schools,
0:10:55 you can roll over those losses
0:10:56 as deductions
0:10:57 in future years.
0:10:59 In the meantime,
0:11:00 deduct any credit card interest
0:11:01 you’re paying.
0:11:03 Any money you don’t spend,
0:11:04 that’s not taxed
0:11:05 until you retire
0:11:06 and start spending it.
0:11:08 If you give it to your kids,
0:11:10 it’s never taxed at all.
0:11:13 If this sounds familiar
0:11:14 but awkward,
0:11:15 it is.
0:11:17 It’s our tax code
0:11:19 through the lens
0:11:20 of the owner.
0:11:23 The Federal Income Tax Code
0:11:24 looks progressive.
0:11:26 The highest marginal tax rate
0:11:27 is 37%,
0:11:29 more than three times
0:11:31 what the average American pays.
0:11:33 But the published tax rates
0:11:35 are a weapon
0:11:36 of mass distraction.
0:11:39 They are the rack rate
0:11:40 published on the door
0:11:41 of your hotel room.
0:11:42 Owners never pay
0:11:43 the rack rate.
0:11:45 They barely pay at all.
0:11:48 Unlike earners’ taxes,
0:11:49 owners’ taxes
0:11:51 are complex.
0:11:52 As a result,
0:11:54 determining the total tax burden
0:11:55 of the very wealthy
0:11:55 is difficult.
0:11:57 But here’s what we know.
0:11:59 In 2020,
0:12:02 the 26,000 households
0:12:02 with an income
0:12:03 over $10 million
0:12:06 paid 25.5%
0:12:08 of their reported income
0:12:10 in federal taxes,
0:12:12 plus 5% to 10%
0:12:14 in state and local taxes.
0:12:17 But as I’m about to explain,
0:12:19 much of the cash they received
0:12:21 isn’t taxable income,
0:12:22 and most of the increase
0:12:24 in owners’ wealth
0:12:25 is never taxed at all.
0:12:27 The White House
0:12:28 has estimated
0:12:30 that the 400 wealthiest
0:12:30 households
0:12:31 pay an effective
0:12:32 income tax rate
0:12:35 of just 8.2%.
0:12:37 And ProPublica found
0:12:38 that the wealthiest
0:12:39 25 households
0:12:42 pay just 3.4%.
0:12:44 We can’t say for sure
0:12:45 what percent owners
0:12:46 pay on average,
0:12:48 but it’s less than most
0:12:50 of their employees pay.
0:12:52 This complexity
0:12:53 results in a transfer
0:12:54 of wealth
0:12:55 from earners
0:12:56 to owners.
0:12:58 The tax code
0:12:59 has exploded
0:13:01 from 400
0:13:03 to 4,000 pages
0:13:05 in the past few decades.
0:13:07 If you have GPS,
0:13:08 advisors,
0:13:10 loopholes for the wealthy,
0:13:11 you want races
0:13:13 run at night.
0:13:15 If the government
0:13:16 is meant
0:13:17 to decrease suffering
0:13:18 and add happiness,
0:13:20 then our current system
0:13:21 makes no sense.
0:13:23 paying taxes
0:13:24 of $5 million
0:13:25 on $10 million
0:13:26 in income
0:13:27 is the difference
0:13:28 between flying
0:13:29 first class
0:13:30 and flying private.
0:13:32 Paying $15,000
0:13:34 on $60,000
0:13:35 in income
0:13:36 might mean
0:13:36 foregoing
0:13:38 a second child.
0:13:40 Capitalism means
0:13:42 accepting a society
0:13:42 of winners
0:13:43 and losers.
0:13:44 And that’s okay.
0:13:46 Wealth is a great reward
0:13:47 for hard work,
0:13:48 and talent
0:13:49 is what drives us
0:13:50 to create value.
0:13:52 And capitalism
0:13:53 has brought prosperity
0:13:54 to billions
0:13:55 over the past
0:13:56 150 years.
0:13:58 The problem
0:13:59 is the system,
0:14:01 if left unchecked,
0:14:02 becomes increasingly
0:14:03 inequitable
0:14:04 and unsustainable.
0:14:06 We’ve morphed
0:14:07 from capitalism
0:14:09 to cronyism
0:14:10 rigged
0:14:10 in favor
0:14:11 of owners.
0:14:12 How?
0:14:14 Three ways.
0:14:16 Calculation,
0:14:18 timing,
0:14:19 and collection.
0:14:22 Calculation.
0:14:23 Amateurs focus
0:14:24 on tax rates.
0:14:25 Professionals
0:14:26 zero in
0:14:27 on the calculation
0:14:28 of the income
0:14:28 to which
0:14:29 those rates
0:14:30 apply.
0:14:32 In the 1950s,
0:14:32 the highest
0:14:33 federal income
0:14:34 tax bracket
0:14:35 was 91%,
0:14:37 except nobody
0:14:37 paid it.
0:14:39 The tax code
0:14:40 was a mosaic
0:14:41 of loopholes,
0:14:42 ensuring high-income
0:14:43 taxpayers were able
0:14:44 to shield
0:14:45 most of their income.
0:14:47 Now the top rate
0:14:48 is 37%,
0:14:49 but while the colors
0:14:50 and fabric
0:14:51 have changed,
0:14:53 the owner’s tapestry
0:14:54 of tax avoidance
0:14:55 still exists.
0:14:58 Owners receive cash
0:14:59 from a range
0:15:00 of sources.
0:15:01 Rent from tenants,
0:15:03 dividends from stock,
0:15:04 interest from loans,
0:15:06 distributions from trusts,
0:15:07 profits from investment
0:15:08 partnerships,
0:15:09 loans and lines
0:15:10 of credit from banks,
0:15:11 proceeds from asset
0:15:12 sales,
0:15:13 and more.
0:15:15 Much of this income
0:15:16 is shielded by pages
0:15:18 of tax code defining
0:15:19 what is and is not
0:15:20 taxable.
0:15:23 Owners who invest
0:15:24 in the oil business
0:15:25 leverage tax code
0:15:26 provisions
0:15:28 Section 263,
0:15:30 intangible drilling costs,
0:15:31 Section 613,
0:15:33 percentage depletion,
0:15:35 Section 611,
0:15:37 cost depletion,
0:15:39 Section 167,
0:15:41 geological expenses,
0:15:43 Section 199,
0:15:45 domestic production
0:15:46 deduction,
0:15:49 Section 193,
0:15:51 tertiary injectant
0:15:52 expenses,
0:15:55 and Section 469,
0:15:57 active losses.
0:15:59 That’s just one industry.
0:16:03 entrepreneurs are barely
0:16:04 visible to the treasury
0:16:06 standing behind the tax code.
0:16:09 Section 1202
0:16:10 excludes the first
0:16:11 $10 million
0:16:13 received in the sale
0:16:13 of a business,
0:16:15 a provision that saved
0:16:16 me millions of dollars
0:16:17 when I sold my firm
0:16:18 L2
0:16:19 several years ago.
0:16:21 When working at the firm,
0:16:22 earning,
0:16:23 I was paying
0:16:25 40-plus percent taxes.
0:16:27 But when I sold the business,
0:16:29 my tax rate on the proceeds,
0:16:30 owning,
0:16:32 was 17%.
0:16:35 Even before selling,
0:16:36 every small business owner
0:16:38 gets an enormous shield,
0:16:40 the power to push
0:16:42 all manner of personal expenses
0:16:43 through the company
0:16:44 income statement,
0:16:45 thus making them
0:16:46 tax deductions
0:16:47 for the business
0:16:48 rather than taxable
0:16:50 income for the owner.
0:16:53 Income that’s acquired
0:16:54 by selling an asset
0:16:56 for more than you paid for it
0:16:58 is a capital gain
0:16:59 and isn’t subject
0:17:01 to ordinary income tax rates.
0:17:03 Capital gains rates,
0:17:04 federal,
0:17:06 max out at 23.8%
0:17:08 instead of 37%.
0:17:09 That’s still not
0:17:10 the biggest loophole.
0:17:12 Capital gains are only taxed
0:17:14 when realized,
0:17:15 typically when sold,
0:17:16 so owners’ assets
0:17:18 grow tax-deferred,
0:17:20 some you can depreciate
0:17:22 as they go up in value,
0:17:23 and their sales
0:17:24 are timed
0:17:25 to minimize taxes.
0:17:27 Earners lose
0:17:30 20% to 50%
0:17:30 of their gains
0:17:31 from sweat
0:17:32 every year,
0:17:34 a massive
0:17:35 gravitational pull.
0:17:36 Owners
0:17:38 enjoy cleaner propulsion.
0:17:40 as their wealth grows,
0:17:42 the taxes are deferred
0:17:43 until they sell,
0:17:45 if they ever do.
0:17:47 But wait,
0:17:48 there’s more.
0:17:50 The biggest tax break
0:17:51 owners can register
0:17:52 is dying,
0:17:54 which resets
0:17:55 the basis
0:17:57 of their assets,
0:17:58 so their heirs
0:17:59 never pay taxes
0:18:00 on the increase
0:18:01 in value.
0:18:02 Still,
0:18:04 there’s more.
0:18:06 The most indefensible
0:18:07 loophole award
0:18:08 goes to
0:18:09 the Carried
0:18:10 Interest
0:18:11 Loophole,
0:18:12 which permits
0:18:13 investment fund managers
0:18:15 to pay capital gains
0:18:16 rates on their
0:18:16 compensation.
0:18:19 Tax policy groups
0:18:20 have been lobbying
0:18:21 to close this loophole
0:18:22 for years,
0:18:23 and Congress
0:18:24 nearly did it
0:18:25 in 2022,
0:18:26 but Senator
0:18:27 Kyrsten Sinema
0:18:29 took $2 million
0:18:30 from the private
0:18:31 equity industry,
0:18:32 a.k.a.
0:18:32 owners,
0:18:33 and saved
0:18:35 their $14 billion
0:18:36 loophole.
0:18:38 It’s well known
0:18:38 that our leaders
0:18:39 are whores.
0:18:41 What’s more surprising
0:18:42 and disappointing
0:18:43 is what cheap
0:18:44 whores they are.
0:18:46 $2 million
0:18:48 for $14 billion?
0:18:50 But I digress.
0:18:52 Owners
0:18:54 are so tax-advantaged
0:18:55 that if they do
0:18:56 have earned income,
0:18:57 they often shield
0:18:58 that from taxation
0:18:59 as well.
0:19:00 Donald Trump
0:19:01 paid virtually
0:19:03 no income taxes
0:19:05 on the $427 million
0:19:05 he made
0:19:06 from The Apprentice
0:19:08 where he had
0:19:09 an actual job
0:19:10 by offsetting
0:19:11 that cash income
0:19:12 with paper losses
0:19:13 on his real estate
0:19:14 properties.
0:19:15 Real estate
0:19:16 is another
0:19:16 of the most
0:19:17 tax-advantaged
0:19:18 industries.
0:19:20 In 2007,
0:19:21 Jeff Bezos
0:19:23 made $46 million
0:19:24 in actual income,
0:19:26 yet he paid
0:19:27 zero dollars
0:19:28 in federal income tax
0:19:29 because he was able
0:19:31 to shield that income
0:19:32 with paper losses
0:19:33 as an owner.
0:19:34 In reality,
0:19:36 his wealth increased
0:19:37 $3.8 billion
0:19:38 that year.
0:19:40 In 2011,
0:19:42 not only did Bezos
0:19:44 pay no income tax
0:19:44 again,
0:19:46 he claimed
0:19:47 and received
0:19:49 a $4,000
0:19:51 child tax credit,
0:19:53 a program intended
0:19:54 to lower child poverty.
0:19:56 If you paid
0:19:57 federal income tax
0:19:58 in 2011,
0:19:59 you helped feed
0:20:00 Jeff Bezos’ kids.
0:20:02 Don’t worry.
0:20:03 He’s fine.
0:20:05 Timing.
0:20:06 A key advantage
0:20:07 of control
0:20:08 over timing
0:20:09 is state income tax
0:20:10 arbitrage,
0:20:12 practiced often
0:20:13 by company founders.
0:20:15 Several years ago,
0:20:16 the media discovered
0:20:17 the phenomenon
0:20:18 of California
0:20:18 entrepreneurs
0:20:20 moving to Texas
0:20:20 and Florida,
0:20:21 and there was
0:20:22 a lot of jazz hands
0:20:23 about those states’
0:20:25 friendly business climates
0:20:26 and youthful energy.
0:20:27 The truth
0:20:28 was simpler.
0:20:31 Texas and Florida
0:20:32 have no state income tax
0:20:34 and many of those founders
0:20:35 were about to recognize
0:20:37 enormous gains
0:20:38 via sales of stock
0:20:39 that had become
0:20:40 worth billions.
0:20:42 Elon Musk,
0:20:44 who moved to Texas
0:20:45 in 2020,
0:20:46 sold millions
0:20:46 of shares
0:20:47 of Tesla,
0:20:49 saving an estimated
0:20:50 $2.5 billion
0:20:52 in California
0:20:53 income tax.
0:20:56 When Washington State
0:20:57 enacted a tax
0:20:58 on income
0:20:59 from asset sales,
0:21:00 Jeff Bezos
0:21:01 decided to spend
0:21:02 more time
0:21:03 with his father
0:21:03 in Florida,
0:21:05 which has no income tax,
0:21:06 and sold
0:21:07 50 million shares
0:21:08 of Amazon
0:21:10 after he relocated.
0:21:12 If taking advantage
0:21:13 of Washington’s
0:21:14 schools,
0:21:14 roads,
0:21:16 and tech ecosystem
0:21:17 to build wealth
0:21:18 and then declining
0:21:19 to pay taxes
0:21:20 back to the state
0:21:21 sounds wrong,
0:21:22 and a massive
0:21:23 additional burden
0:21:24 on middle-class taxpayers
0:21:25 who can’t peace out
0:21:26 to Coral Gables,
0:21:29 trust your instincts.
0:21:32 The best time
0:21:33 to pay taxes
0:21:34 is never,
0:21:36 using the infamous
0:21:36 buy,
0:21:37 borrow,
0:21:39 die tax strategy.
0:21:41 Wealthy owners
0:21:42 take out loans
0:21:43 secured by assets
0:21:45 such as company stock
0:21:46 or real estate
0:21:48 and live off the loans
0:21:48 which are not
0:21:50 considered taxable income
0:21:51 instead of selling
0:21:52 the assets
0:21:53 which would incur
0:21:54 a taxable gain.
0:21:56 When the owner dies,
0:21:57 the stock goes
0:21:58 to their heirs
0:21:59 who,
0:21:59 with their
0:22:01 stepped-up basis,
0:22:03 can sell enough
0:22:04 stock tax-free
0:22:06 to pay off the loans
0:22:07 and start the cycle
0:22:08 anew.
0:22:09 This creates
0:22:11 dynastic wealth,
0:22:12 the lack of which
0:22:13 used to be a key point
0:22:14 of differentiation
0:22:15 between Europe
0:22:16 and the U.S.
0:22:18 Used to be.
0:22:21 Collection.
0:22:23 All of these strategies
0:22:24 are legal
0:22:25 and enabled
0:22:26 by the complexity
0:22:27 of the tax code.
0:22:28 But that complexity
0:22:30 also affords owners
0:22:31 another means
0:22:32 of avoidance.
0:22:33 Cheating.
0:22:36 Skirting taxes
0:22:37 stems from the complexity
0:22:39 of the tax code itself.
0:22:41 Wealthy filers
0:22:42 can take deductions
0:22:43 that don’t apply
0:22:44 or classify income
0:22:46 in inappropriate ways.
0:22:48 And without an exhaustive
0:22:49 analysis of the facts,
0:22:51 there’s no way
0:22:52 for the IRS
0:22:52 to determine
0:22:53 what they’ve done.
0:22:55 Some of the losses
0:22:56 Trump used
0:22:57 to offset his income
0:22:58 from The Apprentice
0:23:00 may have been illegal.
0:23:02 The IRS believes
0:23:02 he claimed
0:23:03 hundreds of millions
0:23:04 of losses
0:23:05 on a Chicago
0:23:06 real estate project
0:23:07 twice,
0:23:09 burying the double dip
0:23:10 under a mountain
0:23:11 of tax paperwork
0:23:12 so tall
0:23:13 it’s taken the IRS
0:23:14 a decade
0:23:15 to dig through it.
0:23:17 Owners can also
0:23:18 choose to cheat
0:23:19 bluntly,
0:23:20 failing to report
0:23:21 substantial income
0:23:22 and making up
0:23:23 fake expenses
0:23:24 and losses.
0:23:25 This was New York
0:23:26 hotelier Leona
0:23:28 Helmsley’s strategy.
0:23:30 Before going to prison
0:23:31 for tax evasion,
0:23:32 she told her housekeeper,
0:23:33 quote,
0:23:39 Offshore entities
0:23:41 are a time-honored
0:23:42 strategy for tax evasion.
0:23:44 Trump’s campaign manager,
0:23:45 Paul Manafort,
0:23:47 concealed $16.5 million
0:23:48 in income
0:23:49 from the IRS
0:23:50 in foreign bank accounts.
0:23:53 The Treasury’s analysis
0:23:56 suggests $600 billion
0:23:58 in owed taxes
0:24:00 are not paid
0:24:01 every year,
0:24:02 equivalent to the
0:24:03 total income taxes
0:24:05 paid by the lowest
0:24:06 earning 90%
0:24:07 of taxpayers.
0:24:10 The avoidance
0:24:11 is solely the domain
0:24:13 of ownership income.
0:24:16 99% of the taxes
0:24:17 owed on wages
0:24:18 get paid.
0:24:20 Owners can do this
0:24:21 because Congress
0:24:23 has starved the IRS
0:24:23 of funding
0:24:25 and the agency audits
0:24:27 fewer and fewer returns
0:24:28 each year.
0:24:32 remedying these inequities
0:24:33 is nowhere near
0:24:34 as difficult
0:24:35 as it would be
0:24:35 to address many
0:24:37 of the other challenges
0:24:38 facing America.
0:24:39 The most obvious
0:24:41 and glaring remedy
0:24:42 is to fund the IRS,
0:24:44 enabling it to collect
0:24:46 hundreds of billions
0:24:46 in taxes
0:24:48 owed but not paid.
0:24:51 The Inflation Reduction Act
0:24:52 was supposed to allocate
0:24:54 $80 billion to the IRS
0:24:56 over the next 10 years,
0:24:56 but Republicans
0:24:58 have attacked the measure,
0:24:59 cutting $20 billion
0:25:01 from the plan
0:25:02 and keeping the IRS
0:25:04 budget flat in 2024.
0:25:07 Every $1 invested
0:25:08 in tax enforcement
0:25:10 targeting the wealthy
0:25:13 returns $12 in revenue.
0:25:15 To be clear,
0:25:17 this isn’t harassment,
0:25:19 but enforcement.
0:25:21 Most externalities
0:25:23 are a function of incentives,
0:25:24 and the government
0:25:26 has incentivized owners
0:25:27 to be incredibly aggressive
0:25:29 on their tax returns
0:25:30 as there is little chance
0:25:31 they’ll get caught.
0:25:33 If you were on a highway
0:25:34 with no police,
0:25:36 would you speed?
0:25:40 Eliminating the special treatment
0:25:41 given to capital gains
0:25:42 is a simple fix
0:25:43 that would increase
0:25:44 tax revenue
0:25:45 without increasing
0:25:46 the tax burden
0:25:47 of most Americans,
0:25:49 reduce the incentive
0:25:50 to cheat
0:25:51 through misclassification,
0:25:53 and make the tax system
0:25:54 more fair.
0:25:56 So would eliminating
0:25:58 the step-up basis
0:25:59 upon inheritance,
0:26:00 which wipes away
0:26:02 billions in taxes
0:26:03 owed by the wealthiest people
0:26:05 with little justification
0:26:06 or social benefit.
0:26:08 We should remove
0:26:09 the income gap
0:26:11 on Social Security tax,
0:26:13 currently a paltry $160,000,
0:26:16 which would help shore up
0:26:17 the Social Security trust fund
0:26:19 and make the tax code,
0:26:20 not rates,
0:26:22 more progressive.
0:26:24 We should restore
0:26:26 the highest marginal tax rate
0:26:27 for owners
0:26:28 to 40%.
0:26:31 Biden and Congressional Democrats
0:26:32 have proposed
0:26:33 all of these changes
0:26:34 in recent years,
0:26:36 but to no avail.
0:26:38 Since ownership
0:26:39 carries with it
0:26:41 some inherent tax advantages,
0:26:43 a transaction tax
0:26:45 would raise revenue
0:26:45 from ownership
0:26:47 in a fair manner.
0:26:49 Numerous proposals,
0:26:50 including one
0:26:51 from Mike Bloomberg,
0:26:53 for a 0.1% tax
0:26:55 on securities trades
0:26:57 and other financial transactions
0:26:58 could raise nearly
0:27:01 $80 billion per year,
0:27:03 with the potential side benefit
0:27:05 of damping high-frequency trading,
0:27:07 which adds volatility
0:27:08 without benefit
0:27:09 to the markets.
0:27:11 We should also levy
0:27:12 a compute tax
0:27:14 on cloud and AI services,
0:27:16 as the wealth created
0:27:17 by these innovations
0:27:19 is accruing mainly
0:27:20 to the wealthiest owners.
0:27:23 Compute is the new energy,
0:27:25 and this is a chance
0:27:26 to avoid the mistakes
0:27:27 of fossil fuels,
0:27:28 where we give tax breaks
0:27:29 to owners
0:27:30 and stick earners
0:27:32 with gas taxes,
0:27:33 among the most
0:27:35 regressive surcharges
0:27:36 in our system.
0:27:38 Finally,
0:27:39 and most
0:27:41 transformationally,
0:27:43 Congress should take
0:27:44 a chainsaw
0:27:45 to the tax code,
0:27:47 cutting the thousands
0:27:47 of handouts
0:27:49 to the ownership class
0:27:49 that have been
0:27:51 stuffed into it
0:27:52 by lobbyists.
0:27:54 Theoretically,
0:27:55 finding the political will
0:27:56 shouldn’t be difficult,
0:27:57 as the majority
0:27:58 of Americans
0:27:59 are getting screwed
0:28:00 by lawmakers
0:28:01 representing a small number
0:28:03 of their fellow citizens.
0:28:04 Ironically,
0:28:06 the Trump tax cuts
0:28:07 paved the way
0:28:08 for this change.
0:28:09 By doubling
0:28:11 the standard deduction,
0:28:12 Trump ensured
0:28:13 that just 10%
0:28:14 of taxpayers
0:28:15 take any
0:28:17 itemized deductions,
0:28:19 meaning 90%
0:28:20 of voters
0:28:21 should support
0:28:21 eliminating
0:28:22 the rest
0:28:22 of them.
0:28:24 Still,
0:28:25 it may be a challenge,
0:28:26 as the most
0:28:28 valuable asset
0:28:29 owners own
0:28:30 is Congress.
0:28:33 We should reinvest
0:28:34 some of the hundreds
0:28:35 of billions
0:28:35 of dollars
0:28:36 per year
0:28:37 gained by
0:28:38 these changes
0:28:39 to make the system
0:28:41 fairer for earners,
0:28:41 i.e.,
0:28:42 the young.
0:28:44 Expand
0:28:45 the child tax credit
0:28:46 and the earned
0:28:47 income tax credit
0:28:49 and raise the floor
0:28:49 required to pay
0:28:51 any tax at all.
0:28:52 Currently,
0:28:52 it’s set
0:28:53 by the standard
0:28:54 deduction
0:28:56 at $14,600
0:28:57 or $29,200
0:28:59 for single
0:28:59 or married
0:29:00 households.
0:29:02 That would shield
0:29:03 more lower-income
0:29:04 households
0:29:04 from federal
0:29:05 income tax
0:29:06 and reduce
0:29:07 the impact
0:29:08 of regressive
0:29:09 state and local
0:29:09 taxes.
0:29:11 Lower the rates
0:29:12 paid by higher
0:29:14 but not highest
0:29:15 income taxpayers.
0:29:16 The professionals
0:29:17 and entrepreneurs
0:29:19 who 60-hour-a-week
0:29:20 climb up the
0:29:21 professional ladder
0:29:21 shouldn’t be
0:29:22 rewarded
0:29:23 with a 45%
0:29:24 tax burden.
0:29:26 This will make
0:29:27 earning the way
0:29:27 to ownership,
0:29:28 a.k.a.
0:29:29 the American dream,
0:29:30 more feasible.
0:29:33 I am troubled
0:29:34 by the trend
0:29:35 away from
0:29:36 patriotism,
0:29:37 fomented
0:29:37 by a tech
0:29:38 billionaire class
0:29:39 that conflates
0:29:40 luck with talent,
0:29:42 shitposts America,
0:29:43 and prosecutes
0:29:45 an economic war
0:29:46 on the young.
0:29:48 But America’s promise
0:29:49 does not resonate
0:29:51 unless it’s backed
0:29:52 by performance.
0:29:54 We diminish
0:29:54 what’s great
0:29:55 about America
0:29:56 when we fail
0:29:56 to talk about
0:29:57 what’s broken
0:29:58 in America,
0:30:00 especially when the
0:30:01 fixes are within
0:30:01 our grasp.
0:30:04 In defense
0:30:05 of shielding
0:30:05 owners,
0:30:07 lobbyists
0:30:07 and our
0:30:08 representatives
0:30:09 in D.C.
0:30:10 argue the wealthy
0:30:11 are our most
0:30:12 productive citizens,
0:30:13 can better
0:30:14 deploy capital,
0:30:15 and need
0:30:16 incentives to
0:30:17 keep innovating.
0:30:19 There is some
0:30:19 truth to this
0:30:20 notion,
0:30:21 but we aren’t
0:30:22 lowering taxes
0:30:22 on the bulk
0:30:23 of today’s
0:30:23 innovators,
0:30:25 the super earners,
0:30:26 or on future
0:30:26 innovators,
0:30:27 young people.
0:30:28 Instead,
0:30:30 we are ensuring
0:30:31 a failure
0:30:32 to launch
0:30:33 by transferring
0:30:34 more wealth
0:30:34 to owners
0:30:35 and seniors.
0:30:38 The three legs
0:30:39 of the tax
0:30:40 stool are
0:30:40 corporations,
0:30:42 super earners,
0:30:44 and super owners.
0:30:46 Corporate taxes
0:30:46 are at their
0:30:47 lowest levels
0:30:49 since 1939,
0:30:51 and the wealthiest
0:30:52 Americans are paying
0:30:54 single-digit tax rates,
0:30:56 meaning the entire
0:30:57 funding burden
0:30:58 of our country
0:30:59 rests on the
0:31:00 super earners
0:31:01 and the young,
0:31:02 who will have
0:31:03 to survive
0:31:04 the tsunami
0:31:04 of debt
0:31:06 we are aggregating
0:31:06 to finance
0:31:07 this inequality.
0:31:10 This is capitalism
0:31:10 collapsing
0:31:11 under its own
0:31:12 weight.
0:31:14 America,
0:31:16 like any country,
0:31:17 is a product,
0:31:19 a mix of benefits
0:31:20 that come
0:31:20 at a price.
0:31:22 America’s been
0:31:23 the best value
0:31:24 globally
0:31:25 for the better
0:31:26 part of three
0:31:26 centuries.
0:31:28 Other than drugs,
0:31:29 there is no
0:31:30 other product
0:31:31 so many people
0:31:32 are willing
0:31:32 to risk
0:31:33 their lives
0:31:34 to obtain.
0:31:35 However,
0:31:37 the value
0:31:37 of America
0:31:38 has diminished
0:31:40 for super earners
0:31:40 and the young.
0:31:42 We’re charging
0:31:43 the former
0:31:43 too much
0:31:45 and keep asking
0:31:45 the latter
0:31:46 if we can borrow
0:31:47 their credit card.
0:31:49 The bad news?
0:31:51 This was deliberate,
0:31:52 our decision.
0:31:54 The good news?
0:31:56 We can decide
0:31:57 to fix it.
0:32:01 Life is so rich.