Valuetainment - Reaction To Biden’s Proposed Tax Hikes

00:00:00.000 Okay, so you see this drop-off right here to go from here, Dow Jones, to all the way down here,

00:00:04.940 and one day that's not a good thing, and that's what happened to the market yesterday after

00:00:08.100 the media got a hold of Biden's proposal on his tax plan, and the market went nuts,

00:00:14.340 they went crazy. Dow dropped a percent in a day, even Bitcoin dropped, you know, from 55 Dow

00:00:21.880 all the way down to 49 Dow, and, you know, even Bitcoin just a few days ago was at $65,000,

00:00:28.900 high $62,000, now it's at a down of $49,000, but the market's been reacting. What happened with

00:00:34.680 this Biden tax plan? You know, New York Times writing articles about it, Biden's, this is

00:00:40.180 Bloomberg, Biden eyeing tax rate as high as 43.4% in a next economic package, MarketWatch talking

00:00:46.900 about how get ready for $178 billion selling ahead of the capital gains tax hike that's going to

00:00:54.720 happen this year, Bitcoin drops below $50,000, and then there's another story here by Reuters,

00:00:59.880 which, fantastic story, Biden to float historic tax increase on investment gains on the rich,

00:01:06.360 and we're going to get a little bit into it, and here's the reality here about taxes, I'm

00:01:10.140 going to show you a video by the time we're done with, is the following. There are three

00:01:14.060 camps that are going to be going through the tax hikes, okay, number one is those who directly

00:01:20.040 know that they're going to be affected by this, right, and we'll talk about those guys,

00:01:23.920 those who indirectly are aware that they're going to be affected by this, and then there's a third

00:01:29.820 camp, you know who it is? Those who are not aware that they're indirectly going to be affected by

00:01:35.760 this, I'll address all those three camps here in a minute, but let's read this article here

00:01:39.040 on what they talk about with the tax plan. So, President Joe Biden will roll out a tax plan on

00:01:44.760 raise tax on the wealthiest Americans, including the largest ever increase in levies on investment

00:01:49.220 gains to fund about a trillion dollars in child care, universal pre-kindergarten education,

00:01:53.620 and paid leave for workers. Sources familiar to the proposal said the plan is part of a White

00:01:59.360 House push to sweep an overhaul of UL tax system to make the rich and big companies pay more and

00:02:05.360 help foot the bill for Biden's ambitious economic agenda. The proposal calls for increasing the top

00:02:11.780 marginal income tax rate to 39.6 from 37, and sources said that this week it would also nearly

00:02:20.100 double capital gains to 39.6 for people earning more than a million dollars. That would be the

00:02:26.220 highest tax rate on investment gains, which are mostly paid by the wealthiest Americans since 1920s.

00:02:32.280 The rate has not exceeded 33.8 in the post-World War II modern era. It's also corporate tax rates going

00:02:41.620 from 21 to 28% that they're also pitching as well. And to kind of put the numbers here at the bottom

00:02:47.480 of what it says, where is the one where it gives you the idea about the states? Let's see here. Okay,

00:02:53.120 all the way in the bottom. Okay, this is good here. Erica York, an economist at the Tax Foundation said

00:03:00.280 the proposal would put U.S. capital gains taxes at the top of the global charts anywhere around the

00:03:05.220 world. Average capital gains taxes in Europe is around 19.3. Can you imagine Europe is known for being a

00:03:10.700 socialistic European Union? The average is 19.3. Today's U.S. capital gains is 23.9 because it's 20

00:03:19.480 plus the Obamacare that you put on top of that. So we are higher than socialistic countries in Europe

00:03:25.680 currently, even with the 23.9. And the highest rating is Denmark, which collects 42%. France and

00:03:32.500 Finland charge 34% for residents of some states and cities that assess their own capital gains levy.

00:03:38.800 Biden's tax plan would push to the total capital gains rate to more than 50%, York said. The rate

00:03:45.880 would rise to 56.7% in California, 68.2% in New York City, and 57.3% in Portland, Oregon. You see

00:03:55.700 these numbers here, 68.2% in New York City. That almost doesn't even look real when you read a number

00:04:01.720 like that. 68.2%. So now, if you're looking at this, what are you thinking? Well, there's a few

00:04:08.360 different things to be thinking about. I'm surprised that people are surprised. What do I mean by this?

00:04:15.440 See, on the podcast here, this is September 4th, 2020. I want to zoom in so you see the date.

00:04:21.300 September 4th, 2020. It's myself, it's Adam, it's Tom Zenner. We're talking about Biden's tax plan

00:04:29.720 that he proposed seven months ago. Meaning, you're either somebody who voted and you said,

00:04:37.220 he'll never do this. They'll never raise the taxes. You were naive. Or you voted saying,

00:04:42.760 I hope they raise the taxes and he's keeping his commitments. Or you voted against him because you

00:04:48.240 feared this was going to happen, and it's happening. But regardless, everybody's in one

00:04:52.140 of three camps. And I read an email in this show that I got from Goldman Sachs. I want to play it

00:04:57.720 for you, only for the first few minutes. Let me put the speed on 1.5. If you want to slow it down,

00:05:03.860 you can slow it down on your end. But I'm going to listen to it on 1.5 so we can speed up this

00:05:07.240 process. So let's take a look at what we're talking about on this podcast episode.

00:05:13.160 Biden's tax plan. How about we talk about Biden's tax plan? So check this out.

00:05:15.380 Last week, I'm minding my own business. We're at our annual convention. We're preparing for it.

00:05:19.260 We've got a lot of stuff going on. I get an email from Goldman Sachs, from authorizer Goldman Sachs.

00:05:22.580 Good people there. We like them a lot. They look good for us. Every time we run them, very,

00:05:25.600 very helpful. This is not an article written by someone on HuffPost. This is not an article

00:05:30.140 written by a contributor on Forbes. This is from Goldman Sachs, talking about Biden's plan to prepare

00:05:34.680 CEOs, entrepreneurs, business owners on what is going to happen when this takes place.

00:05:38.700 Polls are trending. This is the email. Polls are trending in the Democratic Party's favor.

00:05:42.220 And while polls are unreliable, they have few questions around what happens to the financial

00:05:45.920 market if the Democrats take the White House and or the Senate. Politics aside, we are having

00:05:50.040 conversations with clients around what, if any, steps we should take over the next few

00:05:52.920 months. A few topics of note are below. Let's go through three of these topics with them,

00:05:55.900 okay, together. Number one, Biden team has published their tax plan, and it outlines increased

00:06:00.640 corporate tax rate, personal income rates increase, and capital gains tax rates increasing.

00:06:04.360 Specifically, the plan outlines an increase in long-term capital gains, which is what, anything

00:06:08.240 above one year. So you buy some, I buy a car for $500,000.

00:06:11.900 I sell it two years later for a million dollars, for $2 million, the capital gains taxes on

00:06:16.300 that is what? A million and a half. $500,000? Sell it for $2 million? I'm paying capital gains

00:06:19.800 on that additional million and a half I made.

00:06:21.020 The cost base is tax-free.

00:06:21.960 $1.5 million. Yes, exactly.

00:06:23.820 By the way, that is why it said in the article, if you look at the article we read a minute

00:06:28.540 ago, that is why it says getting ready for the $178 billion of selling ahead of the capital

00:06:34.380 gains tax hike. Why? Because if you sell now, you pay 23.9% on a million bucks, let's

00:06:41.880 say, which is $239,000. You get to keep the additional $761,000. But if you sell effective

00:06:51.460 January 1st, and let's just say they make this 2022, you would have to pay $439,000 instead

00:06:58.520 of $239,000. That's 2X-ing what you would have to pay. And on your million dollars, you would only

00:07:03.240 net $560,000. That's why here, it's important that people are selling off now, not waiting

00:07:11.660 till 2022. So let's continue.

00:07:13.660 So the long-term capital gains taxes from the current 20% is going to 39.6. So he's not

00:07:21.180 taking it from 20% to 25%.

00:07:22.540 They said this.

00:07:23.240 Not 30%. Not 35%.

00:07:24.300 For 39.6%.

00:07:25.380 Nobody should be surprised.

00:07:26.460 Taxes is what we're talking about. Nearly 2X increase, right? That's number one. Second

00:07:30.080 is he talks about the current gift of tax exclusion that stands at $11.4 million per person, roughly

00:07:34.520 $22 million per couple. And they're thinking about that this is going to go lower. During

00:07:37.880 Obama administration per person, that was $5 million. It's supposed to expire by 2025, but

00:07:41.160 he's saying Biden's probably going to speed up that process, and it's going to bring it

00:07:43.300 down to $5 million sooner. Okay? So this may not apply-

00:07:45.000 And they're thinking about making it even lower than that.

00:07:47.360 Then you go a little bit deeper here into the tax plan, and here's what you notice.

00:07:50.540 Biden would raise corporate tax rate from 21% to 28%. Corporate tax rate. That's seven

00:07:53.780 additional percent for corporate tax rate. Restore the top individual tax rate from 37%

00:07:57.120 to 39.6%. It went lower. It's going to go back to 39.6%. His tax plan would raise between

00:08:01.460 $3.35 trillion to $3.67 trillion over a decade.

00:08:04.220 Same thing you've been talking about.

00:08:05.440 In full, starting in 2021. Okay, let me say that one more time. That means $3.35 trillion of American

00:08:09.460 people is going to go to the government. That's really what that means.

00:08:11.160 Just so you know. $3.35 trillion over a decade. That's a lot of money.

00:08:14.140 Biden's tax plan is highly progressive, increasing taxes for the top 1% earners by 13% to 18%.

00:08:18.460 Okay? And then continuously for people who are at the bottom. It's like, well, Pat, I'm

00:08:21.200 not really affected by this. This is just for the rich people. Major proposals by Biden's

00:08:24.580 campaign would raise $1.6 to $1.9 trillion over a decade from corporations. $1 trillion

00:08:28.260 to $1 trillion will come from high earners on their income tax. $800 billion to $1 trillion

00:08:31.240 on Social Security taxes on high-wage earners. And then he's adding tax fees, fees on bank

00:08:35.460 fees, $100 billion, and a bunch of other things that he's doing. Meaning, taxes are going up.

00:08:38.280 When I told you the capital gains was going from $20 to $39.6 trillion, Adam, what was

00:08:40.880 your reaction to it?

00:08:41.700 You know, it's pretty unbelievable. Like I said before, the only reason that I personally

00:08:46.700 would vote for Trump is for the economy.

00:08:48.720 You mean taxes? This is the only reason. Taxes.

00:08:49.900 The only reason. Money guy. I don't find him likable. I don't find him credible.

00:08:53.880 Okay. Let me stop right there. If you want to watch the rest of it, we'll put the link

00:08:58.140 here for you to watch the video on this episode. But let's go back to this entire conversation

00:09:04.340 about what's going to happen with this. Remember earlier I said to you, there are three different

00:09:08.100 types of people, right? Those who know, they're aware that they're directly going to be impacted

00:09:12.740 by the tax plan, right? Corporate tax, where it's going for 21, 28. Somebody's got business

00:09:17.240 they want to sell or something they want to sell, you know, 20% to 39%, which is really

00:09:21.800 going from 23.9 to 43%. They're aware of it. Then there's a community of people who work

00:09:30.220 for somebody who is running businesses and is relying on them to make more with the money

00:09:37.440 that they have the capital gains. They know they're indirectly going to be affected by

00:09:41.500 it. And then there's those who are not aware that they're indirectly going to be affected

00:09:44.540 by it. Let's forget about the first camp. You know how they're going to be affected by

00:09:47.760 it. They already know they're getting ready to get, you know, the increase in taxes, what

00:09:52.800 they'll have to do, businesses, sell off stocks, all of that takes place. Let's talk about the

00:09:57.280 other two that are indirectly going to be affected by this. Now, how do you indirectly get affected

00:10:02.600 by this? I remember four or five years ago when the taxes dropped. Okay, when they dropped,

00:10:09.660 I had a meeting with my staff and I said, gang, did you guys hear about what happened with

00:10:12.560 taxes? You know, yeah, we heard it's going to go to 20%. Yes, capital gains. Did you hear

00:10:16.280 about what's going on with corporate taxes? Yeah, we heard it's going to go to 21%. Yes.

00:10:19.800 I said, do you know what we're doing? What are we doing? And I sat there and I had a conversation

00:10:24.080 with my staff. I said, look, for every month you've been with us, we're going to give you $100 up

00:10:28.760 to a certain amount of months. And they said, what do you mean? What do you mean by that? I said,

00:10:31.920 you're getting a $100 bonus up to a certain amount of months. We're getting a $100 bonus

00:10:36.100 for the amount of months you've been with us. And they're sitting there saying, are you serious?

00:10:38.760 And we started giving the bonuses out. And this is not like five employees. You're paying

00:10:42.200 this to a lot of people and those bonuses were paid out. Everybody said, why are we doing this?

00:10:46.260 I said, because when the company gets benefit in taxes, those benefits get passed down to everybody

00:10:52.160 else. Because of the tax cuts, we nearly tripled the amount of employees that we had because we

00:10:57.840 went and started hiring. And we didn't just hire paying lower wages. I had a meeting with my staff

00:11:03.700 and I said, I want to pay higher wages. Why? Because the money's flowing through us. I can go higher

00:11:11.060 and pay better wages. So rather than saying, hey, let's just kind of try to do this, get somebody

00:11:16.000 with a four-year degree, get somebody with an MBA on this, get somebody that's got more experience

00:11:19.780 on this, get somebody with five years experience, get somebody with 10 years experience, rather than

00:11:23.960 let's just get what we can in this area. So it means the company, me, us, small business

00:11:29.420 owners were more aggressive, being willing to pay more for talent to come and work with

00:11:34.520 them, work for them, right? That's the benefit. So when capital gains goes away, some of these

00:11:40.920 folks that are running companies, they're going to sit there and say, well, where's this money

00:11:43.820 going to come from? Maybe we're going to have to cut some staff. Maybe we're going to have

00:11:47.520 to cut some investment into the company. So maybe the government's going to invest money

00:11:51.360 into infrastructure. But I mean, we got to hold back a little bit and wait three to four

00:11:54.600 years and see what we're going to be doing with our finances, right?

00:11:58.080 And then you'll kind of see those effects taking place where, well, it's the company's

00:12:02.680 fault. So there's going to be a little bit of a division between employees working with

00:12:06.440 employers because they're going to say, they're right, all you care about is the money.

00:12:10.460 And the employer's like, listen, I typically have a little bit more money that I can deal

00:12:13.580 with with taxes to put into the business. But at this point of the game, we have to make

00:12:17.360 the decisions ourselves because we just lost 7% on our corporate tax rate. We just doubled

00:12:22.500 our capital gains. And if I'm affected by it, customers are affected by it, employees are

00:12:27.020 affected by it, I'm affected by it, everybody's affected by it. So we have to find somehow to

00:12:32.100 cut expenses. We have to find somehow to cut the spending that we have wherever it is.

00:12:37.560 There's going to be an indirect effect taking place there.

00:12:40.240 Now let's talk about the opposite side, which is the real question to be thinking about.

00:12:45.100 There's two philosophies, right? There's two philosophies. I talked about this briefly

00:12:49.020 on what happened with Mayor Garcetti. The philosophy is punishment. The philosophy is incentive.

00:12:54.920 I do believe the punishment, whatever way you create with taxes, you're punishing and you're

00:13:00.100 incentivizing people, right? If you lower taxes and you lower the taxes for small business owners,

00:13:06.100 you produce more small business owners because the incentive is, let me go take my life savings

00:13:12.060 and start a business. Because the incentive you're giving me is you're lowering my capital

00:13:16.980 gains. You're lowering my what? My corporate taxes. So I'm willing to put more money into

00:13:24.660 the business and take the risk. I'm willing to take that money out and go start a business.

00:13:28.980 Incentive. If you punish and you double capital gains, you increase corporate tax, you increase

00:13:35.300 everything up and you're punishing, there are side effects to this. The side effects to this

00:13:40.220 is the following. Watch what happens. So think about the states that businesses are in today

00:13:46.260 that don't pay state taxes. Think about those states, okay? Let's go to those states first,

00:13:50.820 which is what? Texas, Tennessee, Nevada, Florida, whatever those seven states are that you're not

00:13:56.960 paying any state taxes in, right? So imagine you own a small business there and they're sitting

00:14:01.300 there saying, well, you know, the Biden tax plan, what is it going to do? I'm, you know,

00:14:05.500 I have to pay capital gains. It's doubling for me. I'm going from 20 to 39.6 plus to Obamacare,

00:14:09.880 3.9 states, 43% that I'm paying for capital gains. Corporate tax rates going from 21 to 28.

00:14:15.280 Even with the states that don't have state taxes, they're affected by this. But the problem is not

00:14:21.180 those states. Let me tell you what the problem is. The problem is with the states that are already

00:14:25.960 paying and charging a lot for taxes. So for those of you that love states and you live in Oregon,

00:14:34.380 you live in New York, you live in California, if you thought due to COVID people left your state,

00:14:42.280 the people who are taking and making money in capital gains and running businesses to make up

00:14:49.060 that 20% increase in capital gains, they will go and avoid that 13.9% in California and they'll go

00:14:57.680 right next door to Nevada. And yes, they'll lose still 7% or 6%, but they'll leave California.

00:15:04.280 They will leave New York and come to Florida and Miami will boom. South Florida will boom

00:15:09.760 because they're avoiding that additional taxes that they have to pay in New York. Illinois will take a hit. 0.81

00:15:15.080 You got Oregon will take a hit. So there will be a even more mass exodus. A lot of people left New

00:15:22.840 York and California because of how COVID was handled, meaning shut down, shut down, shut down,

00:15:28.160 restaurants, restaurants, restaurants. Nobody left New York and California because of taxes. Let's

00:15:33.360 understand that part. People left New York and California simply because the over regulations,

00:15:39.520 regulations. But watch what happens. 2020, lots of people leave New York and California due to

00:15:46.020 overregulation. In 2021, people are not leaving California and New York for overregulation because

00:15:51.480 the market's going to be opening up 2022. They're going to be leaving New York and California because

00:15:56.260 of over taxes. So what are Florida and Texas and Tennessee and these people going to be doing?

00:16:01.600 Nevada people going to be doing? They're going to be upset, but they're going to have to adjust.

00:16:04.400 They're going to have to pivot. They're not going to be happy about it, but they're going to have to

00:16:07.480 make long-term adjustments and go figure out a way, a strategy to sit there and whatever their

00:16:11.940 strategy is going to be. But this hurts the states that I talked about even more and it's back to

00:16:20.300 back to back. Now, can these taxes pass Senate with 50 seats? I don't know. House is proposing.

00:16:28.100 Can they pass it? They're short. Will it make it past Joe Manchin? Probably not. If you follow Joe

00:16:33.940 Manchin's story, Joe is not somebody that's going to be just sitting there saying, oh, I'm a Democrat.

00:16:37.480 No matter what. He even said there's about six or seven people that are probably not going to agree

00:16:42.040 with this and that are not going to vote for this on the Democratic side, on the Senate side.

00:16:46.680 But it's going to be interesting to see how this thing ends up turning out. I think it's a story

00:16:51.840 you ought to be following because it's going to directly or indirectly affect you and your family.

00:16:57.500 And if you are living in one of those states where you were worried and concerned and not happy about

00:17:03.380 the way COVID was handled and the politicians handled regulations, like imagine how many

00:17:08.300 restaurant owners took a hit. All these restaurant owners that took a hit that are dealing with

00:17:12.220 margins like this. Restaurant owners deal with four, five, six, seven percent margins. You want to

00:17:17.420 increase their corporate tax rate from 21 to 28? They're already dealing with small margins. Like

00:17:22.800 they're dealing with such small margins. Go to a restaurant, sit there, like actually sit there and

00:17:28.000 say, okay, I paid 12 bucks for this hamburger. Okay, no problem. How long did the waitress serve 1.00

00:17:32.740 my table? Okay, when I came and sat on the left, how long was she there? Say she helped you, you

00:17:37.800 were there for one hour. How many tables was she helping? Three other tables. That one burger 0.98

00:17:42.280 is 10 bucks. Say the other guys are also ordering burgers for 10 bucks. Okay, what's the cost for

00:17:46.760 the meat? What's the cost for the bread? What's the cost for the paper plate? What's the cost for

00:17:51.780 everything they brought you? What's her cost? What's the cost of the building? What's the cost of

00:17:57.040 electricity? What's the cost of water? What's the cost of cleaning crew? What's the cost of,

00:18:02.100 do you understand? Like, so then you want to, all these restaurants you shut down, you even want to

00:18:07.100 put it like you're putting salt on a wound. I don't know. It's not a, I don't know if I would be

00:18:12.320 taking this direction. Maybe they're overly confident about midterms because they don't think

00:18:17.700 anyone on the right is going to win the midterms with house. And maybe they're right. We don't know yet,

00:18:22.200 but they're playing their cards and pushing this agenda as if they're determined that everything's going to be

00:18:26.820 on their side. But for those of you who voted for this and you said, this will never happen.

00:18:33.600 Joe Biden, if there's anything to give him and his camp credit up, what they're proposing today,

00:18:39.800 it's not like it was just leaked yesterday. This was released to Goldman, Morgan, Merrill, everybody,

00:18:46.880 seven, eight months ago. And we all knew about it before we voted. So we're just getting exactly

00:18:53.140 what the majority of Americans voted for. Now you got to either hope your senator votes a different

00:18:59.060 direction, but more importantly, you got to have a strategy to know whether you're directly or

00:19:04.860 indirectly affected by this, how to make your own next moves. By the way, if you want to see the video

00:19:09.340 you saw on the podcast where Adam and I are talking, you want to kind of hear what we say the rest of

00:19:12.560 the time, click over here to watch that video. And if you want to watch the video, I did 10 reasons to

00:19:16.880 consider moving to another state. And you're actually getting more serious about wanting to make another move to

00:19:21.500 another state. Click over here to watch that video. With that being said, have a great day, everybody.

00:19:25.980 Take care. Bye-bye.

Valuetainment - April 27, 2021

Reaction To Biden’s Proposed Tax Hikes

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