Reaction To Biden’s Proposed Tax Hikes
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Summary
Biden's Tax Plan, Bitcoin drops below $50, Dow drops below 50, and the market reacts. What are we all thinking about this? What are the implications for the economy and the stock market? What will happen to the dollar, Bitcoin and the Dow, and what does this mean for the markets?
Transcript
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Okay, so you see this drop-off right here to go from here, Dow Jones, to all the way down here,
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and one day that's not a good thing, and that's what happened to the market yesterday after
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the media got a hold of Biden's proposal on his tax plan, and the market went nuts,
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they went crazy. Dow dropped a percent in a day, even Bitcoin dropped, you know, from 55 Dow
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all the way down to 49 Dow, and, you know, even Bitcoin just a few days ago was at $65,000,
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high $62,000, now it's at a down of $49,000, but the market's been reacting. What happened with
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this Biden tax plan? You know, New York Times writing articles about it, Biden's, this is
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Bloomberg, Biden eyeing tax rate as high as 43.4% in a next economic package, MarketWatch talking
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about how get ready for $178 billion selling ahead of the capital gains tax hike that's going to
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happen this year, Bitcoin drops below $50,000, and then there's another story here by Reuters,
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which, fantastic story, Biden to float historic tax increase on investment gains on the rich,
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and we're going to get a little bit into it, and here's the reality here about taxes, I'm
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going to show you a video by the time we're done with, is the following. There are three
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camps that are going to be going through the tax hikes, okay, number one is those who directly
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know that they're going to be affected by this, right, and we'll talk about those guys,
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those who indirectly are aware that they're going to be affected by this, and then there's a third
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camp, you know who it is? Those who are not aware that they're indirectly going to be affected by
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this, I'll address all those three camps here in a minute, but let's read this article here
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on what they talk about with the tax plan. So, President Joe Biden will roll out a tax plan on
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raise tax on the wealthiest Americans, including the largest ever increase in levies on investment
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gains to fund about a trillion dollars in child care, universal pre-kindergarten education,
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and paid leave for workers. Sources familiar to the proposal said the plan is part of a White
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House push to sweep an overhaul of UL tax system to make the rich and big companies pay more and
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help foot the bill for Biden's ambitious economic agenda. The proposal calls for increasing the top
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marginal income tax rate to 39.6 from 37, and sources said that this week it would also nearly
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double capital gains to 39.6 for people earning more than a million dollars. That would be the
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highest tax rate on investment gains, which are mostly paid by the wealthiest Americans since 1920s.
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The rate has not exceeded 33.8 in the post-World War II modern era. It's also corporate tax rates going
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from 21 to 28% that they're also pitching as well. And to kind of put the numbers here at the bottom
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of what it says, where is the one where it gives you the idea about the states? Let's see here. Okay,
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all the way in the bottom. Okay, this is good here. Erica York, an economist at the Tax Foundation said
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the proposal would put U.S. capital gains taxes at the top of the global charts anywhere around the
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world. Average capital gains taxes in Europe is around 19.3. Can you imagine Europe is known for being a
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socialistic European Union? The average is 19.3. Today's U.S. capital gains is 23.9 because it's 20
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plus the Obamacare that you put on top of that. So we are higher than socialistic countries in Europe
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currently, even with the 23.9. And the highest rating is Denmark, which collects 42%. France and
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Finland charge 34% for residents of some states and cities that assess their own capital gains levy.
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Biden's tax plan would push to the total capital gains rate to more than 50%, York said. The rate
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would rise to 56.7% in California, 68.2% in New York City, and 57.3% in Portland, Oregon. You see
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these numbers here, 68.2% in New York City. That almost doesn't even look real when you read a number
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like that. 68.2%. So now, if you're looking at this, what are you thinking? Well, there's a few
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different things to be thinking about. I'm surprised that people are surprised. What do I mean by this?
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See, on the podcast here, this is September 4th, 2020. I want to zoom in so you see the date.
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September 4th, 2020. It's myself, it's Adam, it's Tom Zenner. We're talking about Biden's tax plan
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that he proposed seven months ago. Meaning, you're either somebody who voted and you said,
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he'll never do this. They'll never raise the taxes. You were naive. Or you voted saying,
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I hope they raise the taxes and he's keeping his commitments. Or you voted against him because you
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feared this was going to happen, and it's happening. But regardless, everybody's in one
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of three camps. And I read an email in this show that I got from Goldman Sachs. I want to play it
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for you, only for the first few minutes. Let me put the speed on 1.5. If you want to slow it down,
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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
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process. So let's take a look at what we're talking about on this podcast episode.
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Biden's tax plan. How about we talk about Biden's tax plan? So check this out.
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Last week, I'm minding my own business. We're at our annual convention. We're preparing for it.
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We've got a lot of stuff going on. I get an email from Goldman Sachs, from authorizer Goldman Sachs.
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Good people there. We like them a lot. They look good for us. Every time we run them, very,
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very helpful. This is not an article written by someone on HuffPost. This is not an article
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written by a contributor on Forbes. This is from Goldman Sachs, talking about Biden's plan to prepare
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CEOs, entrepreneurs, business owners on what is going to happen when this takes place.
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Polls are trending. This is the email. Polls are trending in the Democratic Party's favor.
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And while polls are unreliable, they have few questions around what happens to the financial
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market if the Democrats take the White House and or the Senate. Politics aside, we are having
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conversations with clients around what, if any, steps we should take over the next few
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months. A few topics of note are below. Let's go through three of these topics with them,
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okay, together. Number one, Biden team has published their tax plan, and it outlines increased
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corporate tax rate, personal income rates increase, and capital gains tax rates increasing.
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Specifically, the plan outlines an increase in long-term capital gains, which is what, anything
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above one year. So you buy some, I buy a car for $500,000.
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I sell it two years later for a million dollars, for $2 million, the capital gains taxes on
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that is what? A million and a half. $500,000? Sell it for $2 million? I'm paying capital gains
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By the way, that is why it said in the article, if you look at the article we read a minute
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ago, that is why it says getting ready for the $178 billion of selling ahead of the capital
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gains tax hike. Why? Because if you sell now, you pay 23.9% on a million bucks, let's
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say, which is $239,000. You get to keep the additional $761,000. But if you sell effective
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January 1st, and let's just say they make this 2022, you would have to pay $439,000 instead
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of $239,000. That's 2X-ing what you would have to pay. And on your million dollars, you would only
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net $560,000. That's why here, it's important that people are selling off now, not waiting
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So the long-term capital gains taxes from the current 20% is going to 39.6. So he's not
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Taxes is what we're talking about. Nearly 2X increase, right? That's number one. Second
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is he talks about the current gift of tax exclusion that stands at $11.4 million per person, roughly
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$22 million per couple. And they're thinking about that this is going to go lower. During
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Obama administration per person, that was $5 million. It's supposed to expire by 2025, but
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he's saying Biden's probably going to speed up that process, and it's going to bring it
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down to $5 million sooner. Okay? So this may not apply-
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And they're thinking about making it even lower than that.
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Then you go a little bit deeper here into the tax plan, and here's what you notice.
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Biden would raise corporate tax rate from 21% to 28%. Corporate tax rate. That's seven
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additional percent for corporate tax rate. Restore the top individual tax rate from 37%
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to 39.6%. It went lower. It's going to go back to 39.6%. His tax plan would raise between
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$3.35 trillion to $3.67 trillion over a decade.
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In full, starting in 2021. Okay, let me say that one more time. That means $3.35 trillion of American
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people is going to go to the government. That's really what that means.
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Just so you know. $3.35 trillion over a decade. That's a lot of money.
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Biden's tax plan is highly progressive, increasing taxes for the top 1% earners by 13% to 18%.
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Okay? And then continuously for people who are at the bottom. It's like, well, Pat, I'm
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not really affected by this. This is just for the rich people. Major proposals by Biden's
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campaign would raise $1.6 to $1.9 trillion over a decade from corporations. $1 trillion
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to $1 trillion will come from high earners on their income tax. $800 billion to $1 trillion
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on Social Security taxes on high-wage earners. And then he's adding tax fees, fees on bank
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fees, $100 billion, and a bunch of other things that he's doing. Meaning, taxes are going up.
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When I told you the capital gains was going from $20 to $39.6 trillion, Adam, what was
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You know, it's pretty unbelievable. Like I said before, the only reason that I personally
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You mean taxes? This is the only reason. Taxes.
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The only reason. Money guy. I don't find him likable. I don't find him credible.
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Okay. Let me stop right there. If you want to watch the rest of it, we'll put the link
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here for you to watch the video on this episode. But let's go back to this entire conversation
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about what's going to happen with this. Remember earlier I said to you, there are three different
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types of people, right? Those who know, they're aware that they're directly going to be impacted
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by the tax plan, right? Corporate tax, where it's going for 21, 28. Somebody's got business
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they want to sell or something they want to sell, you know, 20% to 39%, which is really
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going from 23.9 to 43%. They're aware of it. Then there's a community of people who work
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for somebody who is running businesses and is relying on them to make more with the money
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that they have the capital gains. They know they're indirectly going to be affected by
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it. And then there's those who are not aware that they're indirectly going to be affected
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by it. Let's forget about the first camp. You know how they're going to be affected by
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it. They already know they're getting ready to get, you know, the increase in taxes, what
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they'll have to do, businesses, sell off stocks, all of that takes place. Let's talk about the
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other two that are indirectly going to be affected by this. Now, how do you indirectly get affected
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by this? I remember four or five years ago when the taxes dropped. Okay, when they dropped,
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I had a meeting with my staff and I said, gang, did you guys hear about what happened with
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taxes? You know, yeah, we heard it's going to go to 20%. Yes, capital gains. Did you hear
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about what's going on with corporate taxes? Yeah, we heard it's going to go to 21%. Yes.
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I said, do you know what we're doing? What are we doing? And I sat there and I had a conversation
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with my staff. I said, look, for every month you've been with us, we're going to give you $100 up
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to a certain amount of months. And they said, what do you mean? What do you mean by that? I said,
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you're getting a $100 bonus up to a certain amount of months. We're getting a $100 bonus
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for the amount of months you've been with us. And they're sitting there saying, are you serious?
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And we started giving the bonuses out. And this is not like five employees. You're paying
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this to a lot of people and those bonuses were paid out. Everybody said, why are we doing this?
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I said, because when the company gets benefit in taxes, those benefits get passed down to everybody
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else. Because of the tax cuts, we nearly tripled the amount of employees that we had because we
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went and started hiring. And we didn't just hire paying lower wages. I had a meeting with my staff
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and I said, I want to pay higher wages. Why? Because the money's flowing through us. I can go higher
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and pay better wages. So rather than saying, hey, let's just kind of try to do this, get somebody
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with a four-year degree, get somebody with an MBA on this, get somebody that's got more experience
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on this, get somebody with five years experience, get somebody with 10 years experience, rather than
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let's just get what we can in this area. So it means the company, me, us, small business
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owners were more aggressive, being willing to pay more for talent to come and work with
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them, work for them, right? That's the benefit. So when capital gains goes away, some of these
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folks that are running companies, they're going to sit there and say, well, where's this money
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going to come from? Maybe we're going to have to cut some staff. Maybe we're going to have
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to cut some investment into the company. So maybe the government's going to invest money
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into infrastructure. But I mean, we got to hold back a little bit and wait three to four
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years and see what we're going to be doing with our finances, right?
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And then you'll kind of see those effects taking place where, well, it's the company's
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fault. So there's going to be a little bit of a division between employees working with
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employers because they're going to say, they're right, all you care about is the money.
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And the employer's like, listen, I typically have a little bit more money that I can deal
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with with taxes to put into the business. But at this point of the game, we have to make
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the decisions ourselves because we just lost 7% on our corporate tax rate. We just doubled
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our capital gains. And if I'm affected by it, customers are affected by it, employees are
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affected by it, I'm affected by it, everybody's affected by it. So we have to find somehow to
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cut expenses. We have to find somehow to cut the spending that we have wherever it is.
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There's going to be an indirect effect taking place there.
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Now let's talk about the opposite side, which is the real question to be thinking about.
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There's two philosophies, right? There's two philosophies. I talked about this briefly
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on what happened with Mayor Garcetti. The philosophy is punishment. The philosophy is incentive.
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I do believe the punishment, whatever way you create with taxes, you're punishing and you're
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incentivizing people, right? If you lower taxes and you lower the taxes for small business owners,
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you produce more small business owners because the incentive is, let me go take my life savings
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and start a business. Because the incentive you're giving me is you're lowering my capital
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gains. You're lowering my what? My corporate taxes. So I'm willing to put more money into
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the business and take the risk. I'm willing to take that money out and go start a business.
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Incentive. If you punish and you double capital gains, you increase corporate tax, you increase
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everything up and you're punishing, there are side effects to this. The side effects to this
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is the following. Watch what happens. So think about the states that businesses are in today
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that don't pay state taxes. Think about those states, okay? Let's go to those states first,
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which is what? Texas, Tennessee, Nevada, Florida, whatever those seven states are that you're not
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paying any state taxes in, right? So imagine you own a small business there and they're sitting
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there saying, well, you know, the Biden tax plan, what is it going to do? I'm, you know,
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I have to pay capital gains. It's doubling for me. I'm going from 20 to 39.6 plus to Obamacare,
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3.9 states, 43% that I'm paying for capital gains. Corporate tax rates going from 21 to 28.
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Even with the states that don't have state taxes, they're affected by this. But the problem is not
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those states. Let me tell you what the problem is. The problem is with the states that are already
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paying and charging a lot for taxes. So for those of you that love states and you live in Oregon,
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you live in New York, you live in California, if you thought due to COVID people left your state,
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the people who are taking and making money in capital gains and running businesses to make up
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that 20% increase in capital gains, they will go and avoid that 13.9% in California and they'll go
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right next door to Nevada. And yes, they'll lose still 7% or 6%, but they'll leave California.
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They will leave New York and come to Florida and Miami will boom. South Florida will boom
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because they're avoiding that additional taxes that they have to pay in New York. Illinois will take a hit.
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You got Oregon will take a hit. So there will be a even more mass exodus. A lot of people left New
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York and California because of how COVID was handled, meaning shut down, shut down, shut down,
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restaurants, restaurants, restaurants. Nobody left New York and California because of taxes. Let's
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understand that part. People left New York and California simply because the over regulations,
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regulations. But watch what happens. 2020, lots of people leave New York and California due to
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overregulation. In 2021, people are not leaving California and New York for overregulation because
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the market's going to be opening up 2022. They're going to be leaving New York and California because
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of over taxes. So what are Florida and Texas and Tennessee and these people going to be doing?
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Nevada people going to be doing? They're going to be upset, but they're going to have to adjust.
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They're going to have to pivot. They're not going to be happy about it, but they're going to have to
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make long-term adjustments and go figure out a way, a strategy to sit there and whatever their
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strategy is going to be. But this hurts the states that I talked about even more and it's back to
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back to back. Now, can these taxes pass Senate with 50 seats? I don't know. House is proposing.
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Can they pass it? They're short. Will it make it past Joe Manchin? Probably not. If you follow Joe
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Manchin's story, Joe is not somebody that's going to be just sitting there saying, oh, I'm a Democrat.
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No matter what. He even said there's about six or seven people that are probably not going to agree
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with this and that are not going to vote for this on the Democratic side, on the Senate side.
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But it's going to be interesting to see how this thing ends up turning out. I think it's a story
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you ought to be following because it's going to directly or indirectly affect you and your family.
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And if you are living in one of those states where you were worried and concerned and not happy about
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the way COVID was handled and the politicians handled regulations, like imagine how many
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restaurant owners took a hit. All these restaurant owners that took a hit that are dealing with
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margins like this. Restaurant owners deal with four, five, six, seven percent margins. You want to
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increase their corporate tax rate from 21 to 28? They're already dealing with small margins. Like
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they're dealing with such small margins. Go to a restaurant, sit there, like actually sit there and
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say, okay, I paid 12 bucks for this hamburger. Okay, no problem. How long did the waitress serve
1.00
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my table? Okay, when I came and sat on the left, how long was she there? Say she helped you, you
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were there for one hour. How many tables was she helping? Three other tables. That one burger
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is 10 bucks. Say the other guys are also ordering burgers for 10 bucks. Okay, what's the cost for
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the meat? What's the cost for the bread? What's the cost for the paper plate? What's the cost for
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everything they brought you? What's her cost? What's the cost of the building? What's the cost of
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electricity? What's the cost of water? What's the cost of cleaning crew? What's the cost of,
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do you understand? Like, so then you want to, all these restaurants you shut down, you even want to
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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
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taking this direction. Maybe they're overly confident about midterms because they don't think
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anyone on the right is going to win the midterms with house. And maybe they're right. We don't know yet,
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but they're playing their cards and pushing this agenda as if they're determined that everything's going to be
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on their side. But for those of you who voted for this and you said, this will never happen.
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Joe Biden, if there's anything to give him and his camp credit up, what they're proposing today,
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it's not like it was just leaked yesterday. This was released to Goldman, Morgan, Merrill, everybody,
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seven, eight months ago. And we all knew about it before we voted. So we're just getting exactly
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what the majority of Americans voted for. Now you got to either hope your senator votes a different
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direction, but more importantly, you got to have a strategy to know whether you're directly or
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indirectly affected by this, how to make your own next moves. By the way, if you want to see the video
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you saw on the podcast where Adam and I are talking, you want to kind of hear what we say the rest of
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the time, click over here to watch that video. And if you want to watch the video, I did 10 reasons to
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consider moving to another state. And you're actually getting more serious about wanting to make another move to
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another state. Click over here to watch that video. With that being said, have a great day, everybody.