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Well, welcome back to ditch the suits.

Steve Campbell, one of your co hosts here.

We are going to be continuing our conversation from the last episode.

This is a two parter, part of our tax policy grab bag.

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Travis, my co host, serves as our CEO.

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So this show is all about us bringing our experience, things we're talking about to clients every day to empower you to get the most of your money in life.

And so we want to continue this conversation today talking about some of the proposed tax legislation and how whether you feel like this impacts you or not will trickle down if some of these things get passed.

So again, no formal introduction.

We're just going to jump right into the next few parts.

This is a longer episode, over 40 minutes, but it's extremely impactful and powerful if you really understand some of the things that we're talking about.

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And again, thanks for being our guests and bearing with us through these five episodes talking about proposed tax law changes.

Well, welcome back to Ditchless suits.

Steve Campbell here with Travis Moss.

No long winded introduction today because this is part two of the conversation that we've been having around proposed tax changes.

Again, we will kind of walk you through some of the things that are being proposed through new legislation coming out.

And one of the things that we had left off in the last episode is wealth creation or social mobility events.

Travis, why don't you pick off where we left off for listeners?

Yeah, and to clean that up a little bit.

I don't know.

Some of these things I think have been in proposed legislation.

Some of these are just being bantied about by the politicians.

I always get nervous during election years for presidential elections, because it seems like every time we have a new president, there's one big package that gets approved and then kind of like Congress can't get along for the next three years.

So, you know, when people are talking about these things I think it is important to listen and be a part of that conversation.

And if you don't understand, this is hopefully an opportunity to get more information.

But there's some things that are in this, and we've been talking about these punitive, like, taxes for these high income earners.

Like, we just got done with a million dollar person, you know, the person making a million dollars a year.

And also we discussed how you could inadvertently fall into that million dollars.

Maybe you just have a lifetime event that happens.

Now, all, there's a handful of other things, from cost basis step ups to capital gains to this thing called a 1031 exchange.

People who are into real estate will recognize this.

And I was having lunch the other day with a friend of mine who's into real estate, and it opened your eyes pretty quick.

They're talking about limiting a 1031 exchange to $500,000 in gainshead.

So for the average person who's listening to this, you're like, what are you talking about, Travis?

This is so weird.

Well, when you sell a piece of commercial real estate with the intention to buy another piece of commercial real estate, and for this purpose, commercial means someplace you don't live.

It's not your house.

So you could be an apartment building, could be a warehouse, it could some kind of business property, right?

Or a property that you're using for business.

You are allowed to, instead of paying taxes on your gain.

So if you bought it for 200,000 and you sell for a million, you don't have to pay the $800,000 in tax or taxes on the $800,000 gain, as long as you take that money and you turn it right into another piece of property.

So it's called an exchange, a 1031 exchange, where you tell the IR's, I've sold that asset.

Yes, I made a hundred thousand.

But I turn around, took all the proceeds from that asset and I put it into this other asset, which is basically the same thing.

It's called a wash sale.

I sold a piece of real estate.

I bought a piece of real estate.

So don't tax me on it, because all I did was move the tax from r1 estate property to another one.

That is a big deal, because if you think about it, if you had to pay, especially some of these higher income taxes that they're talking about and higher capital gains taxes, right?

Could you imagine if you had to pay 30, 40% on a million dollar property or a million dollar gain, all of a sudden you've got a write check for 3400,000 well, what can you not do then?

You can't buy the same property for what you're selling.

And so people are like, well, you know, whatever.

Why is that a big deal?

Buying real estate is a method that a lot of people use to climb the economic ladder.

Oh, yeah, and $500,000 in today's day and age is not a lot of gains.

So if I take the average middle class person who might be trying to build a portfolio of real estate and really accumulate wealth, who's trying to take advantage of 1031 exchanges, I just cut you off at the knees.

I made it very hard for you to compete with any kind of corporate real estate competitor, you know, any kind of company that can go out and raise funds and has really deep pockets, who doesn't, you know, the tax, they may even get subsidies from the local community to pay for those taxes that they otherwise would have to pay.

And they have all different kind of accounting mechanisms, stuff like that.

You now are going to pay more taxes and have less mobility, less ability to move from a smaller property to a bigger property, to a bigger property, to an even larger property.

You're going to be, you're going to be capped at the knees, basically.

And so my issue with that is it sounds like a big number, but there's communities where the average house, like you're not even going to touch for 500,000, like a nice house.

Right?

So any office building or any kind of rental is going to probably be more than that.

And now I just severely limited your ability to leverage your real estate.

There's some problems with that beyond just the fact that you're maybe disadvantaged.

Now I'm taking buyers out of the market.

I'm taking a lot of buyers out of the market because the smaller people who are going to rely on selling one building to buy another one, now they have to take the taxes off of what they're selling first to then buy the other one.

Yep, it's really quite destructive.

And then when you look at the fact that a lot of buildings are depreciated, you've got a lot of people who have taken the cost basis out of the building as tax deductions that are already grandfathered into that.

Now you're saying they're not allowed to transfer that basis to a new property.

It's a wealth destruction event, is what it is, and it's a handcuff.

It will force people to be stuck with things that they otherwise would have.

If I'm really good at revitalizing properties, I may not be able to revitalize properties like I was anymore because I, because of the cost of the taxes, it's gonna prevent me from being able to jump from property to property to property.

Well, and I think talking about the 1031 is really important for a lot of people because maybe you've been trekking along and you don't own the IBM stock or Nvidia stock or something where something has skyrocketed.

But I think with a lot of the other financial podcasts that you and I are linked with, biggerpockets, some of these other shows, they have to do a lot with real estate.

And they're very popular because there are a lot of people who maybe aren't making the money in their current job, and they're trying to find a side hustle.

They've invested properties, they have Airbnbs, you know, they're selling and flipping homes all the time.

This is a really big growing group of people in our country that are buying into real estate property.

And so really understanding the ramifications of changing this math, this wealth destruction, we always talk about wealth creation.

This could be really crippling.

So I'm really glad that you brought it up.

And it's also targeted at that same group.

I mean, the vast.

If you have this situation, it means your income is going to be up there.

Yep.

Right.

So again, it's another tax on top of the other proposed taxes.

It's not necessarily income taxes.

Right.

But it's going to affect what ends up in your income taxes.

You know, it's so it's a play on words that, you know, again, it's a, you said it.

It's a wealth destruction event.

Yeah.

And I think when it doesn't impact you.

Right.

It's kind of like, okay, that sounds like a good thing to do.

It'll add more money.

But understanding it, this is a big one.

So if you've been, you know, falling asleep or whatever, or just you're driving your car, paying attention to this one, because this is something that through financial planning, especially with wealth being transferred, that you talk with individuals about the potential loss of the cost basis, step up at death and what that means.

So help kind of paint a picture for individuals that have never lost a loved one or had assets passed to them.

What is a cost basis step up at death.

So right now, the way that it works is if you own stocks, bonds, collectibles, a house, something like that, and you pass away and you leave those assets to, like, your children, whatever the value was at the date of death is what the cost basis is.

So cost basis is essentially what you've got into it.

So if you bought your house for 200,000 and it could sell for a million, or let's say you're a farmer and you've accumulated your land for three, $400,000 over the years, and you could sell for 5 million.

Right.

When you pass it, you'd pay the income taxes on the difference.

Well, when you pass away, whoever inherits it from you, if it's done a certain way, they get a step up a basis.

So if you bought it for 400,000 and it's worth 5 million, when you pass away, your heirs inherited as if they bought it for 5 million.

That's the step up.

If it's stock, you inherit stock from your parents, you inherit $200,000.

They bought it for 10,000, there's $190,000 gain.

You would otherwise have to pay taxes when you sell it, unless you get to step up, it's worth the day to day, that value.

So if you inherit it the day it's worth 200,000, you only pay taxes on what you make from that point going forward.

So what they're doing is they're saying, hey, and this is one where I think it goes the other way, too.

With the way the media works, they're not saying that they're going to do this on everybody, right.

It could someday be on everybody because they've certainly proposed it broadly like that.

The way that it's currently been proposed that I've seen, and it doesn't mean that I haven't missed something, is that they're talking about applying this to people who have more than $5 million or $10 million if they're married when they pass away, so.

Or $10 million for a married couple, let's say, when they pass away.

So if you had $5,000,001, you wouldn't get your step up a basis.

They haven't said if it's just everything over 5 million, they haven't kind of qualified that at all.

Or if it's just, you know, it's a retroactive tax, because some states have a retroactive punitive tax, so to say.

Well, you know, because of the way income tax is always the amount over, it's not always that case.

Sometimes they go backwards and say, like in New York, if you had a threshold and you go over by more than 5%, it's like a retro tax that grabs it all, taxes everything.

So there are some situations there where that tax can become big.

And it's not really clear if this is a special number just for capital gains or the way that the tax loss onsets.

The estate tax thresholds are supposed to come way back down, and they're supposed to be pretty similar to that five and $10 million number.

I think they're a little bit ahead of those, but pretty similar.

So it's not clear if they were just generalizing or if they were saying, we're also going to support a lower estate tax threshold.

And that's important, too, because that's another tax.

And there's also the states that have inheritance taxes.

Some of them are pegged to that tax.

So just kind of putting that in the back of our mind there.

What happens when taxes are due, when you, when somebody passes away?

Let's say that you have, you own a bunch, you own a vacation house, you own a lake house, family lake has you been going through for 50 years.

You inherited from your parents, your family's been going for 50 years.

You put tons of money in it.

It's worth a million and a half.

And then you got your regular house, it's worth 700,000, and you got your investments and blah, blah, blah.

By the time you add it all up together, you know, you got seven, $8 million or $10 million or 12 million.

You have enough money that you're going to qualify to lose your step up a basis.

So you pass away.

The kids have to pay the capital gains on any of these assets when they're sold.

Right.

So what happens then?

And you have to pay.

When you have to pay income taxes on assets, you are then sometimes forced to sell assets to create the cash to pay the taxes.

If the kids decide, okay, we're going to sell mom and dad's house, and they don't have to step up.

They now may owe hundreds of thousands of dollars in taxes.

And remember, they're talking about, not just.

Not just do we want to charge you capital gains taxes, but remember they were talking about changing the capital gains rates.

Yep.

And adding more nit taxes and stuff on that.

So this is like a double whammy.

We're gonna tap.

We're gonna take away the step up.

If you by chance happen to have too many assets when you pass away, we're gonna take the step up away from your kids.

And then on top of that, we're talking about changing the tax rate of what they're gonna pay when they sell the assets.

So not only are we gonna make, you know, what we would make now, if you sold them.

But we're going to make more because we're gonna change the rules.

It's a fascinating escalation of taxes, is what it is.

It's layers upon layers of, we're going to tax you more and we're going to increase the rate in which we're taxing you.

Well, and to help add some context for it, I mean, you and I have dealt with families that look at money differently, communication styles.

There are some individuals that have amassed a lot of money through investments, inheritances, and they would like to leave money to their children or grandchildren, but maybe they've never told them that that's what they're going to do.

So you have adult children that don't know what's coming their way.

You have some that have planned and they want their children to be a part of the conversation, understand the potential taxation.

So there could be, unfortunately, some people shaking their fists saying, yeah, everyone should pay their fair share tax.

The ultra wealthy.

What happens if you're an individual that when your parents or grandparents pass, you inherit the kind of money you're talking about?

You're going to say, oh, crap, undo it, you know, and so I think what's really important is this cost basis step up.

You and I have, you know, because of where we grew up in upstate New York, endicott IBM Corporation.

How many times did you have grandchildren coming in with paper shares of IBM stock from grandma, Grandpa that worked at the company?

And you've always used that cost basis step up or the date of death to really raise that cost basis.

It helps soften the blow or to set a new cost basis.

If you change that, if you just took any one of these and changed these, it's going to be detrimental.

But you're talking about compounding different types of events that as we've gone through this series.

Maybe everybody doesn't own real estate, maybe everybody doesn't have a lake house, maybe everybody doesn't have corporate stock.

But I got to imagine we're hitting a wide sweeping group of people that may go, oh gosh, they just talked about.

The other thing is if I say I'm going to remove step up for states over five or $10 million, and you might think, well, I'm not going to inherit five or $10 million, there's four kids, I'm only going to get 25% of that.

Well, then you're getting the tax bill that's now going to come with that 25%.

So even if you can't imagine yourself inheriting five or $10 million, because this is where we get stuck with the numbers.

We're like, I'm not going to inherit five or $10 million, but I might inherit two and there's four siblings.

Well, then you could be in a situation where this could apply to you and therefore you could end up losing the cost basis, step up on that $2 million that you're getting, depending on what you're inheriting.

And so that is a dramatic change for you, even though you never got to the five or $10 million number because you had to split it up with siblings.

So it's a tricky when you're talking about taxes.

And this is why we, working with financial planners that actually care about taxes is important.

We made this point earlier.

You could be included into some of these groups on accident at the one time in your life where you get one of these windfalls, and now the government's saying, and give me thank you very much.

They've also come out and said that they're in the same sentence when they're talking about taking away increasing estate taxes, which I personally think they will do because it's easy to tax dead people.

But when they're talking about eliminating step up, they're also talking about tightening the rules related to estate tax so that less people can do planning and get money out of their estate before they're gone to protect themselves from being taxed.

So that to me, is like, so there's ways that you can gift money out of your estate, give up control of it and get out of the, you know, and get that asset out of the estate for tax calculations, they're talking about tightening that.

So it's harder for you to get money out, which means more people will actually end up in the taxable situation.

And, like, if your parents pass away and they have $3 million and they've been giving you 1020 grand a year for the last ten years, they probably would have reached these thresholds if they hadn't been giving all their money away, right?

Or it depends, I guess you could say how many kids and stuff they have.

But there's a good chance that had they not done a gifting program, they actually could have hit some of these thresholds, you know, and that's the thing.

People don't understand how fast you go from two and a half million to $5 million.

Think about, you know, from a standpoint of if you've been able to accumulate your first million, it is very quick to go from a million to 2 million.

And the reason why it'll take you the first 30 years to get to a million.

And that takes you like seven or eight years to get to 2 million.

Right.

You make that jump very, very quickly.

And not because you're making any more money than you ever did, but 10% on a million dollars is more than 10% on $10,000.

Yep.

Right.

Like when you get $1,000, when you get $10,000 or a million dollars, I said, right.

So when you get $100,000, same 10%, just 1000 versus 100,000.

So it just, it compounds faster.

So, so when you look at people who reach those phases, a lot of people don't realize they're going to get that.

We'll sit down with people and say, yeah, your biggest problem is going to be staying under New York state estate tax thresholds.

And they're like, I don't believe that.

You look at the compounding math and you go back to the fact that the government can't stop printing money so that you're not going to get out of this kind of inflationary environment for a long time where there's just more money and more money goes in the market.

Markets going to keep going up.

Your, you're going to see more and more people hit these thresholds.

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Yeah, and you and I, over a decade of talking to folks again from all over the country, you know, it's not rare that you have, you know, retired teachers, engineers, nurses, doctors that, you know, retired I 1015 20 years ago with, with healthy pensions and Social Security.

They've never touched their deferred comp, their 403 B's, their 401 ks.

And like you said, you know, they've just allowed that money to stay invested and grown and it's just been able because they're not withdrawing from it to accumulate a lot of money.

I think one of the biggest points that you just raised in that last scenario, too, which is pretty shocking, is like, how are you going to pay for these tax bills?

You know, if you are one of four siblings, like you said, that receives 25%.

It's not that you just get all this cash dumped into a bank account that covers the tax bill.

It might be transferred to you as actual stocks or as, you know, assets.

You still then have to come up with money to pay these bills.

There are a lot of different moving parts that might be very eye opening or hurtful or painful in a way, because it's like, okay, how do I actually cover some of these tax bills?

And I think this kind of raises into maybe the next grab bag point that you had is how some of the proposed tax policies actually can create double taxation for those.

Again, that may not be familiar.

How does that work?

Yeah, and I.

And I want to emphasize, too, because I tripped over myself when we were going over those section, the step up, a cost basis, the loss of that.

It's unclear if they're saying that they're going to apply, like, an unrealized capital gains tax there, which is something they certainly have been talking about.

I think we covered that a couple episodes ago.

Yep.

Or if it's just going to be passing on the asset to you.

So you'll have to wait till you sell the asset and then pay the tax.

So there's a little bit of gray area there.

So just wanted to kind of.

I don't want to imply that, okay, if you pass away and you don't get a step up cost basis, for sure, you're gonna end up owing tax dollars you may not owe until you actually sell the asset.

So there's, again, some cleanup that they need to do in the way that they're communicating.

And the reason why politicians, I think, don't communicate this very well, and the press doesn't really communicate this very well.

They're financially illiterate.

Wow.

I mean, let's just say it like it is.

I watch the news channels and stuff.

I watch the four, you know, the stock shows on tv and stuff.

I mean, that's not real financial advice.

And it's very surface oriented, and it's got no nuance.

And normally it's pushed by somebody paying them for airtime.

So, you know, the reason why you don't turn on the news and hear about the stuff that we're talking about is because they're not capable of getting into it.

And talking about things that, you know, are very, very complicated and, and intertwined with lots of different aspects of our life.

It's much more easier to paint it and just say, hey, it's simple.

We're just going to raise taxes on people with over 400,000 because they should pay their fair share.

It's like, yeah, but what does that mean?

And what does that actually look like?

You know, it's, it'd be like, I'm going to punish people who are bad.

Okay, but there's a big difference between publicly stoning somebody and sitting somebody in a corner for 15 minutes.

Like, you know, we need to be a little bit less wide open as far as interpretation goes.

So double taxation.

We're back picking on the millionaires.

But I also, there's a lot of small business owners that are going to fall into this categories.

And not the small business owner that just started his business, but the one who made it past the first ten years without a paycheck.

Yeah, right.

Because that's a lot of times when you're talking about entrepreneurs, they're the ones who aren't making any money for years and years and years and years, and then all of a sudden they start to do well.

So we're talking about, and yes, you could have just people in corporate America, too.

But for anybody who makes more than a million dollars in compensation, what they're saying is that the, and this is your payroll compensation.

They don't want companies to be able to deduct that compensation as an expense.

So what they're saying is the companies will pay taxes on it and the employee will pay taxes on it.

So think about how this happens.

They've already said people making a million, we're going to tax you the most out of everybody that there is.

Right.

And if you take that money and invest it, we're going to jack up the taxes that you pay on that money, too.

Now they're saying those who are already paying the highest taxes, you know, the increased taxes above what the high taxes already are, we're not going to allow the companies, which they probably own, stock in, or possibly even own as a business owner, deduct that as an expense.

So company, you're going to pay taxes on it.

Employee, you're then going to pay taxes on it again when the company gives you payroll, Steve.

Yep.

And you get a w, two, there's payroll taxes and there's income taxes all paid already to the federal government.

Right.

And because you pay taxes on that money, company doesn't have to pay taxes on it, right.

Because they'd actually didn't keep it.

They didn't get it.

It passed right through them.

Straight to you.

Right.

Somebody bought a product, company said, steve, here's the money, Steve, you pay the taxes on it.

What they're saying to do is money goes to company.

Somebody buys a product, goes to company.

Company.

You pay corporate income taxes.

I remember they want to jack up the corporate income taxes.

So it's not just you're going to pay taxes on it, but you're going to pay a higher rate than you currently pay.

We're going to, we're going to tax you a ton.

And then when you pay Steve, Steve's going to pay two.

And he's not just going to pay the current taxes.

He's paying.

He's going to pay higher rates, too, because he's got too much money.

So we're going to take those, tax those same dollars twice.

And if you happen to be the business owner, that means you are paying out of your pocket twice, not spread over all the shareholders.

You personally are paying for that million dollars twice.

It's a really, really kind of strange idea that I'm not.

I'm sure that there's some nuance to it, but we're basically saying that you're going to be punished for paying anybody more than a million dollars, whether they deserve it or not.

If you cure cancer, do you deserve a million dollars?

Yeah, absolutely.

You could have a million dollars every year, but we're going to take it back from you as soon as you get it in taxes, is what we're saying.

So when you combine this with all the other taxes that they're talking about, it's just, we're going to tax a company more, we're going to give them less tax deductions.

We're going to tax individuals more.

We're going to add on all these surtaxes, we're going to increase the rates, we're going to reduce your deductions.

We're going to take away 1031 exchanges.

There's all these things that we're going to do.

So it's not, I'm going to tax you 2.6% more, Steve.

It's not that we're just going to tax those dirty millionaires 37% to 39.6.

Yep.

Well, that's what gets the news.

But it's all the other taxes that we're going to throw in there and they're all hitting the same people.

That's just one thing that they're talking about this group of people and this and kind of this double taxation issue.

Well, and it seems like our first three episodes of the series were a lifetime ago.

They were just a few weeks ago where we talked about what corporations are, their value in the economy, how money's passed through, how it gets to you as an individual.

You know, you talk about, for those that go, well, this doesn't mean anything to me.

I don't have a pension.

I don't have all these things.

If your company has to pay so much money in taxes and this double taxation, just think about the lack of benefits that you may be enjoying right now that you don't realize as a company perk to keep a strong culture to keep you involved.

You know, you may not be seeing it as a check, but the things extra paid time, off time with your family, whatever it may be.

You don't work on Friday, Fridays.

There may be things coming down the pipeline that if your company is basically chastised for making too much money or has to pay more, there will be, like you said at the beginning of these episodes, a trickle down effect that will impact you whether you understand it or not.

Here's a really good example.

We're an SEC football country, right?

And I was talking to somebody at dinner the other night, and they were talking about they had seen for the first time on a Tennessee, this is hearsay.

So, you know, I don't have firsthand experience on this, but they, I think it was a Tennessee ticket or some major college football ticket, an nil tax.

So nil is the requirement for the schools to pay the athletes for their likeness, right?

Guess what?

The schools aren't picking up that tab.

They're passing it on to the fans.

They put a tax on the tick for the ticket.

So, you know, you could say that's the right thing to do.

Good.

Those greedy schools, right?

Those schools are not taking a pay cut.

They're going to charge it from their fans to give it to the athletes.

They're still going to make the same amount.

They make the only difference.

It just got more expensive for you to go and attend.

So it's interesting when we fight for these theoretic injustices without understanding who's going to pay for it.

The college is not paying for it.

The fans are paying for it.

And so, and if you're good with that, then you're good with that.

I'm not going to judge that.

Right?

Like, yeah, okay.

You know, if you love football and you want to see those athletes rewarded, but the same goes with the taxes.

And the same goes with these policies that work.

If you make the corporation pay more expenses, they're going to cut expenses.

Who do you think the expenses are?

People are by far the largest expenses at corporations.

Another thing that they're talking about doing, double taxation.

Increase tax on stock buybacks from one to 4%.

So back to our home, our home insurance or our home property taxes, your property taxes go from $10,000 a year to $40,000 a year.

That's what they're saying.

Basically they're going to increase the tax from one to four and you go, oh, it's a big deal.

It's only a 3% tax, right?

It's a 300% increase.

What is a stock buyback?

The government claims, or politicians claim that stock buybacks only make the rich richer.

Because what happens is company makes money and company says we don't have anything else to do with the money.

So why don't we buy back some of our stock from some of our shareholders and thereby giving them the money.

So they do that though at a profit.

So they already pay corporate income tax, or at least it passes through their corporate income taxes.

Whether or not they pay that has to do with a lot of other factors.

But it's already taxed money.

They then pay a 1% tax for the right to buy stock back from you.

The average Joe, the person with a 401k, they're buying it from your mutual fund basically, right?

So they go out to the market and they buy stock.

It forces the price of the stock up, which shows up in your 401k, but they pay a 1% tax on that, on money they've already paid a tax on.

They've already paid income taxes on.

What they're saying is that 1% is not enough.

We're going to text you 4% now.

So we're going to increase that tax 300%.

Right.

We're going to tax you a whole bunch more.

It's already taxed.

And the worst part about that is you as an investor, when you get that money, when you finally decide to sell your company stock, you get taxed too.

So the money is now getting taxed when the company makes it.

It gets taxed when the company buys the stock back from you and then it gets taxed when you sell the stock.

Whatever you have left in the future, that extra value that you got for that, you're also going to pay taxes on that as well.

And let's take away your step up a cost basis, by the way, so that you can't send it to your heirs and not have them pay taxes on it.

And a couple years ago, they changed the inherited IRA rules, which packed your arm ds your inherited RMD.

So that's if you have an IRA and you leave it to your kids, they have ten years to cash the thing out.

Yep.

They have to take a little bit every year, but then they have ten years.

Cash it out.

If you leave your kid $2 million in your 401K plan or IRA, they're going to deal with all these tax problems.

They will deal with almost all these tax problems at some point, at least during the time period where they have to unwind that thing.

Or a lot of these tax problems I'll deal with.

I don't want to say absolute things, but they will deal with these things.

It will be a big deal.

You will get impacted by the fact that companies now have increased the cost to buy things from their, the actual transaction cost by 300% to buy stock from the stock market.

Basically.

It's a really bizarre thing.

But yeah.

So the IRA, they changed the rules so that you have to take cash out all those iras, like within ten years unless you're disabled or surviving spouse.

Well, what did that do?

That forced more money into the higher tax brackets.

Now they're talking about raising the higher tax brackets.

See what's happening here?

It's little by little, inch by inch, percent by percent, but it's a lot when you add them all up.

There was something that you said a little while ago that I think, again, we try to be, you know, balanced now we approach this stuff, but is theoretic injustices.

You had mentioned about the media, it's sensational.

You turn on the news.

Right?

It's not that you're getting financial planning 101, you're getting sensational ideas to stir up an emotion inside of you.

And I think with some tax law changes, it's, hey, those guys over there are costing you your dreams, they're costing you your future, they're costing you your bottom line.

So let's tax them.

And on the surface it sounds like, yeah, that's a great idea.

It's 1%, it's 2%, it's 3%, it's four.

But when you start to look at it and peel it back, there are a lot of people that are going to be impacted by this that could be not only you and your generation, it could be your children, your children's children.

So understanding truth and from the fact of, like, how these policies actually could impact you, your family, getting the most from your money in life is the difference between having knowledge and understanding to go, wow, okay, let's take a step back and reevaluate how we're doing some of this.

And I think that's what's maybe part of the problem is people don't have enough information to really understand what's being pushed through.

We're being kept like kind of willfully blind, basically.

So we're pumping our fists at everybody that we don't agree with or we don't like and saying it's those guys over there.

But when you really had talked about throughout this series, it's that the government has a spending problem.

And so just the fact that you're going to raise rates on corporations, individuals, high net worth earners, it's not like they're going to take that money and wipe out our us debt for your kids so that we're solving and in a better position, they will spend it on other things.

And so I think as you start to then lead into kind of the closing of this series, we had talked about why they would go ahead and do this.

So talk to us.

We've gone through double taxation, stock buybacks.

We had kind of teed this up a little bit, saying the actual number of Americans that have over a million dollars, but talk to us, why would they do this?

Well, and we have one more, and I just want to hit the last one and then we'll rapid fire through that kind of the framing of what, you know, how to, how to address this.

Basically, there's another tax that's been proposed to require companies to pay somewhere between 15 and 20% of any income that they report to investors.

The largest shareholders are the wealthiest people.

They've said that they're going to take away.

They're going to change the tax rates on that dramatically.

Right.

So they're already going to raise the income on this pass through investment income.

Corporations already pay income taxes.

So if a corporation maintains, you know, 15% of their income, they've paid taxes on that already.

So what they're trying to do is force them to also pay that money out again, which would then cause another tax event.

The problem with that is now your corporation doesn't have money as much like take Amazon.

Amazon doesn't pay a dividend because they keep reinvesting the money and keep buying up other businesses and keep getting bigger.

So on your 401K statement, you keep seeing the balance go up.

Imagine if that was removed.

Imagine if their ability to grow was removed because they're being forced to give it back to the shareholders in the form of a dividend that is then taxed a second time.

And Warren Buffett will say that's one of the worst possible ways to redistribute wealth is to force a dividend.

So, anyway, that kind of rounds up all of our issues.

And I think we probably could have made it like a five episode set on this.

But to your .5 to 1012 percent, depending on what you google, Americans have more than a million dollars.

About 5% make income of over 400,000.

Less than that, actually.

So it's all about talking to 95% of the people, like you said, getting 95% of the people to fake their shit, their fist about issues that they don't have enough information about to really know what they're shaking their fist at.

Most things are more complicated than that.

But yeah, it's the surface level stuff and that's what they try to do.

They drum up the surface level stuff just to get you amped up.

And it's just so much more complicated.

And it's one thing to say we're going to do one change.

We're just going to change that one tax bracket from 27 to 29.6.

But there's like 30 different things here.

And we didn't even go that deep into the proposals.

That's too much, too fast and for the wrong reasons.

And really targeted at one select group of people, which would be really devastating to the economy depending on where you live.

Go ahead.

And not even that, Travis.

You got an upcoming election.

No matter how you look at the world or who you vote for, this could be the only thing on the ticket, and it would be a lot to try to digest.

This taxation idea is one thing of a litany of other things that Americans are also very concerned about.

So when you talk about theoretical injustice, there may be other things that are getting their attention that they want somebody to acknowledge.

You're kind of tucking this into a middle of it, and it's very hard if it's only talking about 5% of our population to really say, that doesn't affect me.

So, sure, go ahead and do it.

Peel back the onion, Steve.

When they say this, you know, we're going to give you all these tax credits and it's not going to cost you anything.

When they pass those laws, what they do is they give somebody a tax credit by implementing some of these taxes.

And that's how they say it doesn't cost you anything.

Because those of you who qualify for the tax credit you don't have to pay for it directly.

Those who don't qualify for the tax credit because they make too much money, they will pay for it because of higher income taxes.

The problem is though, ultimately, and some of these policies could prevent the cycle from happening, which is just a financial doomsday.

But when you look at some of the things that are happening with that cycle, you're disrupting the ability just to.

I totally lost my train of thought, to tell you the truth.

Well, and let me just pick up from there too, right.

I think when you hear things during debates or whatever, that says, hey, we've tested this sole policy and it's going to be strong based on XYZ.

There isn't enough sample data, there isn't enough time because of all the moving parts and all the ramifications.

So how can you, before something has ever actually been introduced and in process say we've tested it, this is going to work.

When we just went through five episodes explaining to you all the different moving parts from corporations to individual to business owners and how there is no way to say on this side of it being implemented, this is going to work out because of the ripple effect of generations and inheritances.

It is more complicated than just saying a group of professors tested this and this is a good plan.

There might be some good principles or some bad ones, but like you said, some of what we've been alarming you to is it will create financial doomsday many ways because of all the moving parts that will affect a lot of our population.

And thanks for reciting me there.

I think what I was getting at is a lot of these taxes are going to trickle through.

They're going to pass through.

You could have wage stagnation, you could have layoffs, you could have migration to more automation.

There's so many unintended consequences with these types of things.

You could have wealth that leaves the country.

There's all kinds of stuff that could happen with these types of taxes because what you're talking about, New York, Oregon, California, New Jersey, Hawaii and DC would have tax rates.

When you account for the state income taxes, marginal rates would be over 50%.

And not only that, but those states, I believe, have pretty high property taxes.

And they have, I'm pretty sure all of them have sales tax, you know, so it's, it's a lot of money.

It's a lot of taxes on certain groups of people.

The total tax package on corporations would put the corporate tax rates to the highest in the world or to among the highest in the world, we'd be up there with Colombia and Mexico.

And when you think of cutting edge economies that are growing and there's not a lot of corruption and those types of things, I'm sure that you don't think of Colombia and Mexico, I'm sure that those are not the countries we should be idolizing to be like.

And so the big thing is, I just, I don't want people to let the marketing, the taglines, the zingers and all that other stuff that's being thrown out there by policymakers regarding, you know, the tax has tricked them into thinking that it's just not going to impact them.

And I think I've hammered that so many times.

But repetition, I think, is sometimes what it takes.

Even if you are not directly targeted by these new tax deductions or for these tax credits, they are going to impact you.

You cannot hide your hide in the sand, still be part of the community, the larger community.

Right.

They are going to impact you.

They are going to find their way to your front door, and there's real world ramifications for that.

So aside from the very destructive economic issues, this is one of the things that I always try to put people back in here when they're thinking about this and they're trying to reconcile.

In my heart, I want people to do well.

And yes, those people have a lot.

So how do we help the people who don't have a lot?

Are they doing their fair share?

Whatever.

Imagine not you.

Let's pretend you can't imagine yourself ever being in a situation, but imagine, like, your dream is for your kids to be super successful, right?

Imagine one of your kids was that successful.

Imagine your parents that are going to leave you everything that they own, was that successful.

Do you think it's fair in that situation?

If you don't think it's fair in that situation or if you don't think it's healthy, then you need to hit the pause button and say, tell me more.

I need to know more about this because this is, this is, taxes are one of those fun things that we can kind of sneak them in there and nobody knows because it's part of an appropriations bill, and before you know it, you know, things are out of control.

So you really do want to pay attention to these things and you need to stay aware.

And I think part of the way that you stay aware is, you know, back to the whole point of ditch to suits.

People tell us all the time, they got financial advisors, they got their finance people, they got their buddies, at the bank, at a credit union or whatever.

This is real important stuff.

Depending on the outcome of policy, you may have to change a lot of what you expect to happen in the future with your finances.

You may have to change your tax plan, you may have to change your investment plan.

You may have to change your spending, your retirement plan, all that kind of stuff.

You may have to change the state that you live.

Yeah, these tack, that's how these tax policies will impact you.

So you do need to pay attention.

And if you don't want to pay attention because you hate this stuff, you need to make sure that whoever is you're kind of guiding light on the finance side of things is paying attention to these things, and not in the way that they're trying to just scare the heck out of you, but in the way that it's like, hey, this is how this would work.

If this happens, this is what our plan would be.

Yeah.

Two thoughts before we finish up, and then again after this episode, you'll get the last two episodes from the previous series that was a part of this that we had to, to kind of stop.

Two thoughts.

I'm thinking about all the people I've talked to over the last decade that as you went through some of these different subgroups, I thought them, those people, oh, gosh, that would stink for them.

I remember when those people called in and were this in situation.

So I think when you're not in that situation, it's very hard to think who are in these positions.

It's people that look like you that are just doing things across this country that are going to fall into some of these categories.

So it's not just the 5%, it's going to be people that will fall into it.

The other part I was thinking about, too, is you had mentioned the tax, the Trump tax cuts.

Trump hasn't been in office for four years, and there's legislation that he introduced that's still impacting our economy today.

So just because a candidate has four years in office and potentially introduces something doesn't mean that a policy doesn't last long beyond them.

So no matter what side of the aisle you fall on, understanding the implications of what somebody's going to introduce in their time of office doesn't necessarily mean that the day that they stop in office or continue on, that some of these policies are going to stop.

Some of these things are going to impact our children and our children's children.

So whether you care about it or not, knowing information is how it's going to empower you to get the most from your money in life.

We're trying to give you a guidebook that if some of these things come down the pipeline, you can be aware of it and start to make moves today so that you don't get to the end of this thing and go, crap, I have half of what I thought I would have because I didn't understand how this works.

So couple of things as we leave it with you.

If this series has helped you, leave a comment below like and subscribe to ditch the suits.

As always, we would love for you to leave a review of this podcast where you listen but on Apple Podcasts and you can head over to ditchthesuits.com and leave a comment for Travis and I, topics you'd like to hear about.

As we said, we're extremely passionate about helping people like you.

Every single day you tell us what's important to you and we're going to share all the information that we know to help you get the most from your money in life.

Current news, tax policies, legislation are things none of us have control over.

We just have to sometimes deal with as they get interjected.

So we're trying to bring information that can really help you.

Thanks for staying a part of this five part series.

Again, thanks for stopping by dipsa suits.

And until next time, thanks for being our guest.