Latest / Before You Speak / Before You Speak | Episode 30 | Wealth and Estate Tax Debate

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Before You Speak | Episode 30 | Wealth and Estate Tax Debate · Before You Speak

• Derek Peterson: What's up y'all? Welcome back to the Before You Speak podcast. I am your host, Derek Peterson, just ⁓ processing the fire hose of my newsfeed with this guy over there. Elwyn: What's up everybody? I am Elwyn and ⁓ hey, the fire hose of my news feed is filled with people arguing over whether whether or not James Talarico is a vegan. Derek Peterson: Yeah, I ⁓ wasn't his response to that was like, I'm from Texas and I eat barbecue pretty regularly. Elwyn: He said I I'm an eighth generation Texan. if all have on me is that I had a potato egg and cheese taco fucking whatever. ⁓ Derek Peterson: Is this so this is all coming from that one sound clip that Trump was like, is he a v dude, this is just b it is case in point that this is becoming more and more of a cult. If we're arguing over whether James Tallerico is a vegan because Trump said he was, like, my God. Like, alright. ⁓ for Taller Rico? No. I mean Elwyn: Did you hear the nickname they have for him? Yeah. Talafreco. Derek Peterson: There could be worse like I wish I wish my nickname was something in regards to that and ⁓ Elwyn: I mean okay, look the They came out of the gate swinging with Talafrico, he's a vegan and he thinks God is non binary. It's like you know what? We got a shot. We've got a shot here. Derek Peterson: ⁓ also if anybody has proof that God is binary, let me know. All right. ⁓ 'cause we I would love your I would love to ⁓ see your evidence, your physical evidence of such. So ⁓ Elwyn: Can you imagine if God was like some ancient Roman senator who was having it's like blasphemy, orgies with little boys and little girls? ⁓ my god, and I'm gonna be stricken down. Can you imagine if somehow somebody proved that? Derek Peterson: God Dude Dude ⁓ then I I think we're all just per my preference would be hell. All right, let's just Yes. Thanks a lot, Ellen. Elwyn: We are two minutes and nine seconds in and I have taken this off the rails. Fucking great. Yikes. Derek Peterson: Well ⁓ I guess we can only go up from here as far as news goes. So speaking of terrible human beings and potential pedophiles, let's talk about Paxton winning the Texas primary. So not only that, not only that and a potential landslide too. Corn apparently Cornyn didn't have a shot, which the best thing that could happen for anybody in this situation is that Cornyn still runs a as an independent, which would be fantastic. ⁓ I know he Elwyn: He won't. He won't. Derek Peterson: I know he won't because he's a but ⁓ it would be a huge FU to the ⁓ to the party if he did. 'Cause he would definitely take some votes from Paxton 'cause there are going to be some Textans. Not all. Anyone that's anyone that believes Taller Rico is a vegan is in the same camp that Paxton is a good human. So ⁓ but yeah, ⁓ other than that, you know, I think most people I mean since I've lived in Texas, even my Republican counterparts ⁓ have not been big on Paxton. Elwyn: No, I mean he's a completely odious piece of shit who was overwhelmingly impeached b on a bipartisan basis. The vote was like a hundred and twenty to eight or one hundred and twenty to twenty eight. It was a landslide to impeach him. His fucking ex wife, his estranged wife voted to impeach him. The he is you c you cannot possibly be more corrupt than Ken Paxton is. It it's been proven many times over, he's been sued and indicted for corruption. He i it I don't even think he denies it anymore. I think his mugshot is like one of the worst looking mugshots ever because he's just smirking like, Yeah, yeah, whatever. I do all this. So he's he's just a terrible, terrible person. ⁓ but right now, you know, you're either with Trump or you're against Trump. And Cornyn had too much history of being against Trump. I don't think Trump endorsed Paxton for any like principled reason except that he saw an opportunity in a notcha win. He saw Paxton's gonna win, I'm gonna endorse, and you know, it's gonna go the polls are gonna go from fifty-three forty seven to sixty-three thirty-seven. But either way, it's a win and he can take credit for the win. But you know, the the question here, I saw a a post on Threads yesterday with somebody, it was a video of a voter saying Derek Peterson: Yeah. Elwyn: you know, that how much he hated Paxton and he voted for Corning and he wouldn't be able to vote for Paxton and all this stuff. And that was kind of a sub thread the where the where the primary post was like, yeah, this is nice to hear and all that, but like ninety one percent or something of Corny voters are gonna vote for Paxton. And I initially read that and I was like, God damn it. And I like, no no no that's it's the of course the Corning voters are gonna vote for Paxton. We know the Cornyn voters are gonna vote for Paxton. The Cornyn voters, the Republican primary voters, are not the guys who are gonna switch and vote for Tal Rico. And any analysis that starts with that is flawed because of that single fact alone. The question is the Latinos in South Texas. The question is new voters voting people who are voting for the first or second time, young voters who are not entrenched in their ⁓ partisanship. Where do they go? And there are enough of those to swing this election, without a doubt. ⁓ Derek Peterson: Yeah. I think the ⁓ I think you're correct. I think a lot of the people that are disheartened by our current state of affairs, ⁓ were not voting in the primary. Meaning like I don't think that they were out voting for Cornyn or Paxton. I think most of those people are probably like, yeah, I'm sitting this one out. And that that'll that's what'll be interesting is just to see like the amount of people that decide to sit out, does that actually impact The does that move the needle at all for the people that actually show up to vote? And do enough people show up to vote ⁓ to flip the the script when it all when it comes to, you know, November and we're figuring this stuff out, which and then then there's the real question is has Elon Musk messed with all of our voting machines? If there's a the there's also a world where ⁓ just everything turns red and In a landslide and we're like, Hmm, where our voting machines actually messed with this time? Because ⁓ Doge what? Elwyn: Yeah. Yeah. I mean I thought the I think that you know, we have to remember in any sort of time we're talking about this, the people who vote in primaries are partisan by nature. You're you're pretty plugged in if you're voting in a primary. And the March primary in Texas had extremely high voter turnout, considering it's a primary. The runoff was had the highest runoff turnout in like decades, but was below the March primary. So the it's not I think when we're looking at the primary votes, it's not are all these voters gonna turn out and vote are any of them gonna vote outside of their party line. I think you have to assume that they all will turn out and that they all will vote according to their party line. But it's not those voters that will swing the election. It's the ones who don't vote in the primary because they don't know what's going on or they don't understand it, or they're like, ⁓ I'll go today and then something happens and they don't go and they don't go, and the next thing you they forgot about because they don't really give a shit and nobody's talking about it as much. That's those are the voters that matter. And I think that those are the voters who are more ⁓ amenable to hearing about just how corrupt Paxton is and tying him to exactly the type of sort of the billionaires are corrupt, the powerful are corrupt, and they're all lining up against you in un in underhanded ways and in open ways. And this guy is just one of the same, I think there's a there's a real name there. Derek Peterson: Yeah. God, we've we're in a mess, bro. ⁓ well like and Okay. Elwyn: Before we before sorry, before we move on from the primary in Texas, I wanted to talk about this ⁓ San Antonio Democratic House runoff, where the woman who won the primary in March but did not get 50 or 50% plus one, so they had to go in a runoff, was like a a progressive lefty candidate running against ⁓ this guy Johnny Garcia. Her name is Maureen Galindo, this guy's Johnny Garcia. He's like a he used to be a sh deputy, a sheriff's deputy, endorsed by the DNC establishment. Well, it came out like two or three weeks ago that this woman, Galindo, is a complete fucking freak nutjob, who had said things like, I believe there should be internment camps for American Zionists. ⁓ and that got everybody all fired up. She said a bunch of other crazy, terrible stuff, too. ⁓ you know, AOC, every the whole Democratic establishment was like, Nope, nope, ⁓ my God, they disavowed immediately. They did the right thing. But it also came out that she was largely funded by a dark money Republican far right group to try and ⁓ beat the guy who, you know, has a shot in a San Antonio district that's I think majority Hispanic. Now they have a Hispanic former sheriff's deputy running. Yep, that was it was one of the redistricted gerrymander county or districts, but Derek Peterson: Yeah. Interesting. Elwyn: You know, it w it was like a Trump plus twelve. The the new district would have gone Trump plus twelve. That's not an easy swing, but we've seen swings of plus fifteen plus twenty the other way. So certainly that one's in play. And also, by the way, the Cook political report on the Senate when Paxton won immediately shifted Texas from likely R to lean R. Derek Peterson: Interesting. Yeah. Well, yeah, fingers crossed. But ⁓ the amount of bigotry and racism in Texas ⁓ never ceases to amaze me. So I will not be shocked if we still are ⁓ a full red state at the end of all of this. But ⁓ fingers crossed that ⁓ we're not ⁓ at least at least till the Republican Party gets back to s having a ⁓ an iota of ⁓ morality, then we'll then we'll discuss ⁓ you know how I feel about the party again. ⁓ but I also wanted to talk a little bit ⁓ about the DOJ because the this slush fun stuff is not going away. It's starting to sound like it might actually be not very like n not what Trump maybe thought it was. And you're like I'm I dude I saw Megan Kelly talking about how terrible this was. Like some like you know we're We're continually seeing more and more criticism from the talking heads on the right about some of this stuff. and a lot of it's virtually depressing 'cause like, you know, the thought of my tax dollars going to pay for some of these J Sixers like lifestyles that makes me want to fight somebody. 'Cause like that's it that will drive me absolutely bonkers. So like what are what's your take on what's going on with the DOJ right now? 'Cause Todd Blanche does not ⁓ I mean, this dude is probably getting arrested after all this is done. 'Cause that's how that's how awful all this shit is. Elwyn: I mean it it's worth always noting that Todd Blanche was Donald Trump's personal defense attorney. Like not not he's acting as his personal defense attorney. ⁓ this sort of seems like the DOJ is being used as Trump's law firm. Todd Blanche was actually his attorney. And now he's in charge of the DOJ. ⁓ you know, it does seem like Republicans, this is too much for them. They left. They left town for a couple weeks rather than take a vote on this because they didn't have the votes. ⁓ so once they learned they didn't have the votes, Mike Johnson was like, Okay, session over, let's get the hell out of here. ⁓ the the D so you know the DOJ kind of trying to push this on Derek Peterson: So now they go I was gonna say, so now they're gonna go find a Democrat that's ready to retire and give ⁓ a bunch of the money from the slush fund to get ⁓ to vote their their way. Get fet they need another f they need another Fetterman. Elwyn: Yeah. That's right. They yeah, or they'll find, you know, any one of these Republicans who looks at the primaries and is like, ⁓ my god, I could lose to the craziest person on the planet, like a Thomas Massey. See if see if you know the next Thomas Massey can be bought. ⁓ but you know, the in DOJ news this week, the thing that was most interesting to me is I've touched on this before, but their rank and competence. ⁓ so back when IC going crazy earlier in the year in Chicago. There was a demonstration outside of a detention facility in Chicago called the Broadview Detention Facility. And it made pretty big news because there's a woman who was running in the primary for Congress in Illinois, who was one of the ones who was arrested. Turned out six people were arrested, and they've dubbed themselves in progressive circles as the Broadview Six. Well, the case against them was dismissed by the judge when she read the grand jury transcripts and what was found in the grand jury transcripts was just like super bonkers awful. Where where you know you're in a grand jury, you have to present evidence and the bar is pretty low to get an indictment. But like one of the things that every attorney who's ever done a grand jury knows is you can't say, trust me on this guys. You know, like, ⁓ you got a bunch of questions, just trust me. These folks need to go to trial. They're guilty. You can't do that. Right. And that is what they did in this. And the the first time it went up for an indictment, they didn't get the indictment. So they immediately kicked out the people who voted against the indictment and brought it up for another vote with the people who voted for it. And the attorney the US attorney who was there, like went into the break room and gave them all his cards and said, Hey, if you have any questions, call me. All this shit that's just completely out of bounds. Like you just cannot do it. ⁓ and the junior US attorney who was on it. in it when they were being read the Riot Act by the judge last week was like, well, this was my boss who did this and my boss who did that. ⁓ so n and this is where like my brain exploded. The fucking boss was working at the time, la until last Friday when they fired her for Dick Durbin, Democratic Senators, Senate Judiciary Committee. The Democratic Senate Judiciary Committee was employing the senior DOJ attorney who had violated every single rule of grand jury conduct in order to get indictments against liberal protesters. So it's just like total incompetence with a side of corruption. Derek Peterson: I hate it all, bro. This is so it was that ⁓ Kat Abu Ghazale or whatever her her name is that that was the situation. Yeah, they accused them of like attacking an officer for while they were protesting, which is which there was like a scrape on his car or something. He was driving and they were like I I there was some that whole thing and then there was isn't there also a term for what they were doing ⁓ where they try to vouching, yeah. Elwyn: Yeah. Yep. vouching. Derek Peterson: I was listening to strict scrutiny the other day and they were talking about that a little bit and the the term vouching came up. I was like, That's an actual legal term? I was like, you know, because I vouch for my friends all the time. Turns out ⁓ it's the it's legal ease. Elwyn: Yeah. But best thing about ⁓ Kat Abugaza Abu Gazala, I think that's how you pronounce her name. Do you know who her hus who her husband is? Or fiance, I don't think they're married. He is the guy who owns the onion. Derek Peterson: No. ⁓ nice. ⁓ Elwyn: Yeah, like four or five years ago he bought the onion. So he is also the guy because the onion bought Infowars, Alex Jones's website, out of bankruptcy. Yeah, so that's that's her fiance. So he's all over this shit in a great way. Like they do a great job. ⁓ but yeah. Derek Peterson: It is the best thing ever, yes, it is the best. Dude, have you ever seen Steven Colbert's ⁓ impersonation of ⁓ Alex Jones? The bit he did on ⁓ dude, I'll have to s it is fantastic. One day ⁓ you have to watch that. He he was I think the original it was ⁓ his name I can't remember the character's name, but it was like Tuck something. It's hilarious. ⁓ worth watching and pulling up old clips of on YouTube, which ⁓ now I will be doing later today so I can send them all to you. So well ⁓ okay. So today we're gonna talk about something that most people hate talking about. taxes. ⁓ and the ⁓ the wealth inequality when it comes to taxes, because this is something that has been coming up more and more ⁓ throughout ⁓ especially as of late. You know, like there are there's a general discord, I think, amongst people and they're looking at billionaires and ⁓ taxing the wealthy and so Elwyn: There you go. Derek Peterson: ⁓ over the last couple weeks I've been looking into it and ⁓ reading up a little bit more about you know like how does the tax system actually benefit the wealthy? ⁓ and so I think there's a couple things that we we we should start off with just to kind of you know basic understanding of some of the tax stuff that's going on. So first ⁓ the difference between a marginal and effective tax rate. marginal tax rate is just where is your next doll what what's your next dollar going to be taxed at? Because not all not everything is taxed the same and furthermore you're not taxed on something you haven't made yet. So if you're in the lowest tax bracket, ⁓ but you're about to move up a tax bracket, then you know that's where your marginal rate would come in. Your effective tax rate is ⁓ what you Everything that you've earned, so your overall tax bracket minus your deductions, credits, et cetera. So in most situations, what we're actually talking about is the effective ⁓ tax rate. So with that being kind of explained, ⁓ I think also probably important to know. So people that earn under fifty K a year, their effective tax rate is usually between nothing, zero to like eight percent. If you are in the 75 to 200K range, ⁓ your effective tax rate is usually between ten and twenty percent. These are very vague numbers, by the way. and then if you're in the upper to middle high high earners, so anywhere from you know 250 to a million, your effective tax rate is typically between twenty and thirty percent. And then once we get into the ultra wealthy, ⁓ that goes bonkers because it can be all over the place depending on how they structure their taxes and who is doing their taxes. So I guess let's start here, Elwyn. Is our tax system fair for everybody? Elwyn: No. ⁓ no. Are we done? Are we done? Okay, cool. ⁓ Derek Peterson: Case closed. Yeah, we're done. So that's enough talk about taxes. Elwyn: Yeah. No, I think that the there's a couple of important things in there. You know, one, I believe it is a a progressive taxation system where you have lower rates, lower statutory rates. I think what you were just talking going through was kind of the effective rate. But where you have lower statutory rates at lower income levels and the more you make, the higher your marginal rate goes up. I believe that's fair. ⁓ and I'm gonna divert for a second because one of my one of the absolute brain buster arguments that I hear is a bit against higher marginal tax rates is like, I'm not going to start a company because I don't want to pay a fifty percent tax rate if I'm making a million dollars a year. And I'm like, Motherfucker, you are so far away from making a million dollars a year. That's not the reason anybody decides to not start a company. You know Derek Peterson: And I've never met a single person that that was in that camp. The flip side of Elwyn: Yeah, like I've I've heard that it's it's like this academic argument used by, you know, low tax by Republicans and you know no tax type conservatives who are like, This stifles innovation because you know nobody's gonna want to start a a a boomingly successful company because they don't want to get to the point where dollar one million and one is taxed at a three percent higher rate than dollar nine hundred ninety nine thousand nine hundred and ninety nine and ninety nine cents. It's it's insane. It's insane. that anybody buys that argument, but they do. ⁓ so in general, I think that the marginal tax structure, the a progressive tax structure that we have is fair. And I think that it's important to note that like when you talked about the effective tax rates, they're all less than the marginal tax rate because there are a number of deductions that almost everybody takes. So, you know, somebody who makes eighty, eighty-two thousand a year, eighty thousand a year, without kids is probably going to have a higher effective tax rate than someone who makes eighty thousand dollars a year with kids because the person with kids can take the child tax credit. So that's going to reduce their their effective tax rate. So there there's stuff built in there, but to me, as you get more and more income, you start to have available to you more and more deductions or credits or access to tax attorneys that will find deductions in credits, or the ability to create trusts or business partnerships or charitable foundations or, you know, anywhere along the line. ⁓ you like we talked earlier today, the car you have for your real for your real estate business, right, it had to be a certain size in order to get a certain tax benefit. And That's not saying you have to spend X on a car to get the tax benefit, but larger cars cost more. So if you don't have the money to buy the bigger car, you don't have access to that tax benefit. And I think that there's a lot of ⁓ little loopholes or they're not loopholes, but credits and deductions along the way as you go up into the, let's say, the five, six hundred thousand dollar range that ⁓ are not available to you until you have enough money to buy that, to buy something. Derek Peterson: And Elwyn: to spend, to pay to play and get that tax benefit. Derek Peterson: Yeah, and you're not wrong because the the more expensive car that I purchased, the higher the tax write off was. ⁓ which was actually for me a very calculated setup. Like I knew I knew how much I needed to write off to drop my tax bracket, so I was paying less in taxes via my tax guy, and I went out and purchased a car that hit those numbers. So to make sure I was optimizing my tax bill, which, you know, was within the ⁓ which isn't within the realm of everything is okay, meaning like I wasn't doing anything shady. I'm following the tax law, but it's yeah, the tax law in this situation benefited me. And that's largely because the year prior to that, ⁓ I wrote a check for to the IRS that was ⁓ more than I'd ever paid for a car in the first place. So ⁓ yeah, once you've done that a couple of times you're like, and then you also realize too and it's not it hurts to it hurts to write checks to the IRS. ⁓ it hurts more writing checks to the IRS knowing that my money is going to a J Sixer and a piece of shit. So like there is like how that money is spent actually matters. And so with progressive tax, you know, ⁓ restructuring and reform, which is something I hope we get into. in coming and ⁓ in future administrations and I hope that a lot of the people that are running on this platform of taxing the wealthy, i if you get into office, I I hope and pray that all of this stuff actually starts to pan out because over the last forty years, our Congress has not closed one single loophole in the tax ⁓ in the tax code. It there's been more and more created. And Democrats are not are not innocent in all of this ⁓ because democrats have in power for a number of years where there was plenty of opportunity ⁓ to ⁓ to to some of this stuff up. So I think that's also important to note that yeah like ⁓ this ⁓ it those that those in at the moment and it's I think it's important to note that as we ⁓ talk about solutions and things in future ⁓ It's critical that we're voting for people that are willing to vote against their own personal interests and all of this. Elwyn: Yeah, I I I don't even know if it's their own personal interests. I mean, not every member of Congress is rich. I I think it's just who are willing to not listen to the lobbyists, because the lobbying groups are the ones with the money. ⁓ and and they're the ones you know, the the more I think what peop what drives people crazy to me about the the what drives me crazy about the tax structure. Th there was a time ten or eleven years ago when I was in sales and I had a a particularly good one like re really big sale. ⁓ and my bonus on it was, you know, a lot. ⁓ and we knew right away that we would have to take 50% of that bonus and put it away to pay our taxes. And, you know, it was close to six figures. It was an incredible ta an incredible amount of taxes to pay. And my thought was Derek Peterson: Mm-hmm. Elwyn: Why the fuck do I have to pay this? Other people who get this, like rich people, there's no way they're paying 50% on this. They're finding some way to not pay it. ⁓ and I think that is what people, most of the people feel, right? So there's a lot of stuff to go back to kind of the pay to play thing. You know, you can get a tax credit for ⁓ replacing the windows in your house and putting in energy efficient windows. You have to buy the windows. You have to pay for the windows to get the tax credit, and it's not dollar for dollar. Yes, it reduces your taxable income, but you still have to have the money to buy the windows. When there was a federal EV tax credit, you have to buy the f the EV in order to get the tax credit. You know, if you want the the 401k deduction, you have to work for a company that's giving you a 401k or a 401k match. All of these and fifty percent of the country doesn't have that. Fifty percent of that country doesn't have retirement funds. So I think that in the in the lobbying and in the the increasing complexity of our tax code, you know, therein lies the built-in unfairness, and it's not an accident, right? It is completely a fun it it's a it's a feature, not a bug, that the more opaque you make this benefits the wealthy because one, they obtain knowledge through experience about you know ways to get around this stuff. And two They have the money to pay for the best tax attorneys, whereas, you know, you or I or the the couple making eighty thousand dollars, they're going to H and R Block or downloading TurboTax and just plugging that shit in. They've already paid their taxes. Their taxes come out of the W-2. You're hoping for a refund. Right? A refund is a money because you've overpaid your taxes. ⁓ so I think there's just this people see it very clearly. Like, why do the wealthy get away with paying so little? When they have so much and it leads to stupid policy discussions, but the core of the rot is is honest and true, I think. Derek Peterson: Agreed. Yeah, and you know, like we so we hear the argument all the time, right? Is that the top one percent pay forty percent of the taxes. So ⁓ I know we've talked a little bit about that, but explain that. Elwyn: Yeah, so it's you know, that stat is true. ⁓ you know, it but it's also a little bit misleading because if you were to drill down beyond the top one percent and go into like the top tenth of one percent, you start to see that in that delta, in that point nine that that I've eliminated are a lot of people who are making $300,000, $400,000, $500,000 a year, their doctors, surgeons, ⁓ partner, you know, lawyers, they're making great money. Like this is not to weep for them at all, but they are paying 40 to 50%, right? They don't have enough yet to set up a charitable foundation or to set up a partnership. And they, yes, they can take advantage of a bunch of shit that I just described that somebody making $150 can't. They can put new windows in their house. Maybe they can buy a vacation house and take Airbnb it and take some tax credits there. But the nut of it is they're still working down from like a 50% marginal rate or a 50% effective rate when it's all when their tax bills are all added up. So yeah, the top 1% do pay forty percent of the taxes, but the people who are screaming that stat out are not the $500,000 a year doctor. They're the $30 million a year hedge fund partner. They're the tech bros. They're the people who are able to take their money and structure it in a way that they pay very, very little effective tax rate. So they use this as a cover. They use that status as a canard to say, no, look, I'm in the top 1% and we pay 40% of the taxes. They're bootstrapping their own, you know, ⁓ ability. To fight for low taxes on the backs of everybody who actually is paying a high tax rate. You know, it's it's why Jeff Bezos has an annual salary on the books of $82,000. Why Warren Buffett has an annual W-2 salary of $82,000. You know, because they pay a little bit and then they get that tax rate, and everything else is structured in a way that they don't have to pay taxes. And that, I think, is why that stat, while true, is a little bit misleading and certainly used to make an argument that that stack does not support. Derek Peterson: Correct. Yeah. Well ex I think that's exactly correct. Because, you know, we're talking about the top one percent here are the earners that we're talking about. We're talking about the top one percent of earners that are paying the top forty percent of taxes. And this comes into this gets into a bigger question because if you the money that you if you are an earner, that means in my opinion, you are contributing to society. You are out working, you are active, you are bringing income, you are running businesses, you are doing something. ⁓ something l most likely labor intensive to some degree. So we're we're taxing labor far more than we're taxing assets because once you get to a certain point, once you get to that, you know, ten, twenty, thirty million, hundred million, you're in a different place, right? And what's happening there is the ⁓ and the the loophole that's been created and and figured out is that There is a bunch of people that will lend you money against secured assets. So if you have a fantastic stock portfolio ⁓ that you can borrow against, you can borrow against that stock portfolio and find lenders at interest rates that are far below what market value is and essentially live on a calculated loss, you know, like. ⁓ and then furthermore, they're writing off the interest on the loans that they're borrowing against to basically pay themselves a salary, ⁓ and sometimes in in differ different situations, just opening new loans to pay the previous loan off and starting again. and this is where I think Americans and people like me, as I'm starting to unpack some of this stuff, I'm like, yeah, like dude, this sucks. the I'm getting effectively taxed. And in my good years, I'm in the highest tax bracket. So I yeah, I'm giving up somewhere between, you know, 30 and 50 percent of my income, depending on the year that I'm having. And dude, it hurts. It's the difference between us buying a bigger house. It's the difference between us buying an investment property. It's the difference between us getting that car that I want and I don't want. You know, like and Granted, like those are good problems for me to have, and I'm not complaining about that. But yeah, it's but then you look at the lifestyle of like once you get over that hump and your assets are ⁓ you've accumulated enough assets to then borrow against this is where things get really dangerous. And furthermore, and I I want to talk a little bit about the estate tax as well, because I think what one of my biggest fears is you know, like ⁓ we're about to step into a situation where there's there was a lot of earners that built wealth to get themselves into these, you know, tax brackets where they can do this. And they're about to hand their money down to their children, ⁓ who are have lived a lifestyle that has made them fucking terrible human beings, who are then going to take over and inherit all of that money. And in my opinion This becomes a this is gonna become a huge issue for us ⁓ in the next ten to twenty years. Elwyn: Yeah, I think the so when we as we shift into the estate tax and and gift tax, mostly estate tax, ⁓ I think it's important to go back and say, like, well, what is the income tax supposed like what is the theory? What is the crux of an income tax? The crux of an income tax is that as you receive income as a member of society. You pay taxes on that income so that we can have roads and airports and you know, a society, a military, if you love the military and you want them to have $1.5 trillion, you know. ⁓ you can get income from any number of ways. And one of the ways that you can get income is of course having a job. But another way that a lot of people, if not most people, that's probably not most, but certainly a a really high percentage of people. realize income at one point in their lives is through an inheritance. Their parents die, their uncle, favorite uncle dies and gives them some money. Well, okay, so that is income. And we have an estate tax to tax that income. And we've also in the you know structured that estate tax originally to recognize that some amount of the money that su that an estate is worth should be exempt from taxation. ⁓ so if you have if if you know if a f ⁓ my mother dies, you know, I hope she doesn't die, knocking on a wood, okay? But, you know, so if she dies, she has a condo in Florida and some stock, right? Let's say that's worth a million dollars total. ⁓ and she gives five hundred thousand to my sister and five hundred thousand to me. She splits it evenly. Well There's a policy choice in there to say, okay, you know, people you want people to be able to pass on money to their kids. They have earned that money. you know, we don't want kids to be burdened with a huge tax bill that they can't necessarily pay because maybe that is in the house that's get the money is in the house that gets sold. So we have exemptions under a number at which estates do not have to pay estate tax. And for a long time that was around a million dollars, and then it went up to three million. Now it's fifteen million dollars per person, so thirty million dollars for family under which no estate tax is paid. Okay. So, you know, you'd have to think then who is what does it take to have an estate worth thirty million? It takes a lot. It takes an awful lot. You're talking yeah, you're talking multiple houses, you're talking investments at the time that you die, assets, maybe art or whatever. You're talking Derek Peterson: A lot. Elwyn: A lot of shit to get above that 30 million. You're talking about a lot of shit to get above 20 million, but at 20 million year exempt. And the s the the rate on that is like 40%. So there is a ton of money that is being lost by giving such a high ⁓ estate tax exemption number. And that was part of the the big beautiful tax bill from last year, that raising it to thirty million. So there are by some estimates ⁓ four hundred and fifty X our total GDP available in unrealized estate tax gains. There's like fifty by some estimates, and these are higher, fifty-five trillion dollars that passes each year that is not taxed that ⁓ under the estate tax that should be. There's like fifty by some estimates, and these are higher, fifty-five trillion that passes ⁓ each that not taxed under the tax that should be. Or that would have been under the one million dollars or that it's a that is not taxed through loopholes. If that was captured at forty percent, that's like twenty some twenty trillion dollars, right? Our deficit is like four trillion. Or that would have been under the one million dollars or that it's a that is not taxed through loopholes. If that was captured at forty percent, that's like twenty some twenty trillion dollars, right? Our deficit is like four trillion. I talked earlier about the that I believe a progressive tax ⁓ policy is inherently fair. ⁓ I think so. I think it's more fair than a flat tax disp which disproportionately affects those at the lower incomes. ⁓ So an estate tax that's progressive is also, you know, ⁓ fair principle and and there are ways to ⁓ Derek Peterson: Yeah. Elwyn: You know, you you just don't want to burden somebody who inherits a house with the tax hit of selling that house. Right? You want them to have the benefit of of the money that they've worked for. ⁓ but within that, you know, one of the biggest giveaways is when somebody dies, their property, let's say the house steps up in basis. And what that means is, you know, if you live in Lost Creek in Austin and you bought a house in nineteen seventy-five for $180,000. Now that house is worth 1.6 million. Okay. ⁓ when you die and your kids inherit that house, the basis on that house is 1.6 million. They don't have to pay any gains. There's no tax on the gains between 1.5 the the 150 that it originally cost and the 1.6. It's like because of the exemption in part. So should there be a step up in basis? I don't know. Maybe, maybe not. I understand that you want to bequeath a house, but like there's an awful lot of money to be gained there, and it is a realization event. If that house gets sold, the heirs have realized income. And we treat the estate tax in particular through just the genius of rich people's political messaging, right? It's called the death tax. ⁓ of course no one wants to pay a death tax. I was taxed when I was alive. Now I'm gonna be taxed when I'm dead. Yeah, you know what? You're not being taxed, but above a certain level, your heirs can afford to pay an income tax on their income. The money they just got is income. and you know, it it was just you sent me that podcast by ⁓ Scott Galloway, where the tax expert was talking about this. The numbers are staggering. in the amount of money that's there to be claimed and also the effectiveness of the like we don't want a death tax lobby because about twenty years ago there were something like 165,000 households a year that would be subject to estate tax. Their estates fell above the exemption fell above the million dollar seven hundred and fifty thousand dollar exemption, whatever it was at the time. Now there are one thousand nine hundred estates that are sub that get estate tax at all. That is by design. That is, and they don't want to eliminate the estate tax because they use it for a billion different loopholes that benefit them in ways beyond not paying taxes when they're dead. You know, they use it for generations ⁓ for grats and cuperts and all these like things that I don't understand what they are, but they're all ways to structure trusts and partnerships and Derek Peterson: Yep. Elwyn: foundations and buy assets that aren't going to be taxed and they need all that and all that sits in the estate in the estate tax law. Derek Peterson: And this is this is where the frustration of people is at right now with the with the whole rhetoric of like we need to tax billionaires, right? Because it stems from these kind of statistics that we end up learning about where we're like, ⁓ there's all of this money that is being left untaxed on the table from the wealthy. ⁓ and our tax dollars, meanwhile, we're being told universal health care is out of reach, ⁓ universal child care is out of reach. We can't pay our teachers more. ⁓ our public school system in Texas particularly is getting run into the ground. Like all of these things that ⁓ our roads in most states are shit. You know, like the infrastructure of our country is and we're constantly being told we don't have the money. We don't have the money. We don't have the money. And meanwhile, what we're learning is that ⁓ the money is there, it just depends on what circles you run in. And ⁓ because if you're government adja if you run a business that's government adjacent and you you have access to government contracts and ⁓ government funds, ⁓ you're probably going to make a lot of money. ⁓ meanwhile, if you run in the right circles and you know how to, you know, the you know, the additional what there w the tax code used to be like four or five hundred pages and now it's over four thousand pages. So The additional thirty six hundred pages of the tax code benefits somebody. ⁓ and it's likely not the people that run in our circles, you know? Because, you know, like I remember a couple years ago when my mom my grandpa passed away and my mom inherited a very small amount from my grandpa. To be honest, ⁓ with the amount of shit she put up with, it should have been a lot more. ⁓ but but dude, she Elwyn: Yeah. Derek Peterson: She her tax guy forced her to set a huge chunk of that aside, even still to to because it it was a a healthy chunk of it was still gonna face ⁓ income tax for my mom when she when she took it on. ⁓ and obviously she's working with a CPA that didn't understand all of the ways in which she could funnel that money to specific places to write it off. So it's like, yeah, dude, you're you're absolutely Absolutely constrained by your ability to your knowledge and information. But furthermore, also the amount of money that you're inheriting it allows you different options and your ability to hide it. Because the more money that's out there is the the easier it is, which is insane, but the easier it is to move it to assets or somewhere else where it Can't be touched by the government. And these are the kind of things that I you know, after hearing that Congress has not closed a tax loophole in almost 40 years, I'm like, yeah, like this speaks foundationally to the problem and why people don't trust our government on either side. And look, Republicans right now are the ones that are making this blaringly obvious. The corruption that's going on right now in front of our eyes is is insane. But We'd be remiss to say that this, you know, like that i even when Democrats were in power, that the shit was not changing for the better. So standing on the moral high ground that that we should just tax billionaires ⁓ to do everything, and it's you know, that Jeff Bezos did you hear the clips of that Jeff Bezos interview when he was talking about it? Yeah. He comes across like a complete asshole, but the flip side of that, the sediment that I Elwyn: Bonkers. Bunkers. Derek Peterson: genuinely kind of agree with him is that Jeff Bezos tax dollars doesn't move the needle on just about anything in our country because we have a bigger problem of how we spend our tax dollars and who's in control of them. And that also needs to be addressed. And so the it's a it's a twofold on some of this stuff. But I like with a progressive, a more progressive tax system, in my opinion, that needs to go hand in hand with W with what what are we doing with that money? Because it's like that also matters. Elwyn: Yeah, I mean I think of course you can't fix a the type of deficit that we have s by only focusing on one side. You know, so yes, you have to increase revenue, you also have to decrease spending. But I think that, you know and you're right, that nobody has fixed it in decades. And I think at the heart of it, the the the most salient thing point that you made was it used to be four hundred pages, now it's thirty, six hundred pages. Because tax reform now I think is just a disguise for increasing tax complexity. You know, and Lisa works she has an LLM in tax, which is a basically one level above a law degree. ⁓ so it's a master's in tax law. So she and she's worked with ultra high net worth clients, she's worked with firms that deal with this stuff. She's really quite smart when it comes to structuring people's money in a way that it helps them to avoid taxes. ⁓ And it's all legal, right? There's no shame or shade about it. It's legal. My cousin did it for corporations. ⁓ I asked her what the problem with with the you know, what her number one sort of gripe about the tax code was, and she said it's too complicated right away. She's like, that number one answer is too complicated. She's like, I have wealthy clients who don't understand it. ⁓ their tax attorneys don't understand it. People at the lower end don't understand that you can get tax breaks for new windows or for HSA spending or you know, that there's a million tax breaks out there that people simply don't know because it is so complex. And I think that's right. And I think that it is a feature, not a bug, because you you don't want to be a billionaire running around saying I shouldn't pay any taxes. No one is gonna no one is gonna support that. They're gonna be like, fuck you, pay some fucking taxes. I pay taxes. ⁓ But if you're a billionaire who on the one side is talking about, you know, ⁓ our tax system is unfair. It needs reform. And on the other side, you're talking to your senator, and you're saying, yeah, reform this, but reform it in a way that provides all these additional loopholes for me. Well, now you got something. Right? Now that billionaire is like, yeah, cool, I'm in. And I think that's what Jeff Bezos like, I think that's ultimately his play. You know, so it's like, Would that help? Would doubling his taxes help a single teacher in Queens? I don't know. I've no idea. You know, and and I'm not gonna argue too much with somebody who says, probably not, our tax money is spent wastefully. But I am certainly going to be in the camp of people saying, Shut up, Bezos, and let us try. Why don't you give us the money, since you can afford it, and let us try? you know, I would certainly be in that camp. Derek Peterson: Yep. Yeah, I and we've talked we've touched base on this a few times now, but I think it's important like I'm not one that I'm like, man, billionaires shouldn't exist. ⁓ I'm not I've not been in that camp because I think it's as somebody that grew up relatively poor and has fought my ass off to try to not me try to generationally change that for my kids, hopefully. And hopefully to use some of these hopefully to have enough that I can leave some money to my kids when I'm old and gone and that ⁓ some of these some of these, you know, tax policies impact my kids in a in a positive way. I I still genuinely believe that getting to a billionaire status and maintaining it should be much harder than it is. and there needs to be more ⁓ you know, taxable events on capital at a certain point and at a certain wealth category because the what's going on now is basically allowing the we're allowing the wealth dispar the the wealth gap in our country to grow so increasingly fast at this moment where you get into the upper tax bracket and it and your wealth accumulates at a pace that is unlike anything else compared to what it the amount of work it takes to get there is becoming more and more unreasonably ⁓ difficult. And so the the gap between these two things needs to be closed. And I think that that has to come through policy and it has to come from electing people to Congress that are going to vote against the the vote against being just In general wealth. Yeah, being bought. I guess that's the right way to say it. Elwyn: Yeah. Well, you know, I don't I I understand the appeal of abolish billionaires. Billionaires shouldn't exist. ⁓ you know. and I think it exists for two reasons. One, you have a lot of billionaires right now who are complete twat waffles. ⁓ you know, who are just ⁓ yeah. But they're just they're just terrible people. ⁓ so people are like Elon Musk is just a terrible person. Derek Peterson: Yes. Twat waffle, that's a good one. Elwyn: And he shouldn't exist with it. Someone with his wealth shouldn't exist. Jeff Bezos is a terrible person. Someone with it, like, I get that. But it lacks nuance in in every way. It's just a function of anger and frustration. And I also do believe, like, look, if you are hardworking enough and fortunate enough to become a billionaire, congratulations. You know, don't don't turn into an awful person. ⁓ but Derek Peterson: Mm-hmm. Elwyn: You know, yeah, to some extent, you have you need to pay your share and and not have a way to reduce your share. You know, it's like one of the things Warren Buffett does, which is like a little bit hypocritical, is like it's not fair that my secretary pays, you know, has a has a f higher effective tax rate than I do. Well then change the law, man. You know, you can get people to change the law. Derek Peterson: Yeah. Be the problem is is that once you get to that level, there is very, very it takes a very unique human to actually vote against their own interests or push to change things against their interests. I think I've heard one person actively speak towards it, which was ⁓ I I've heard Mark Cuban at times talk about, you know, ⁓ different things in regards to this. But yeah, like they're My hope is for the future that our tax code does change in a way because look, if you if you are collectively have a billion dollars, you can live a life unlike ⁓ just about anybody on the face of this planet. And if you are getting taxed beyond that at an un at a extremely high rate and there are more taxable events to extract ⁓ chunks of your wealth Like, I'm sorry, but like, yeah, like there there comes a point where there's an amount of wealth that is completely unnecessary. ⁓ and not only that, like, yeah, it it causes people to become terrible fucking human beings. And this is just that's just historically true. You know? Wealth wealth dispar Elwyn: To me to me like a a a dream would be to have enough money that I can live off of the interest. Right. So if I have two million dollars in liquid assets and I can confidently invest and get a ten percent return on on that, then I can I have two hundred thousand dollars a year to live on if I just you know, it live off the interest or the returns on my principal. And you know, if you're if you have a billion dollars, you could put that money in a three percent C D and your annual income is thirty is thirty million dollars. And I promise you that those people make more than thirty million dollars in in a couple of weeks. You know, that so Derek Peterson: Correct. Correct. Yeah, this is what I'm talk this is what I'm talking about. Wealth builds more wealth, correct? And so like, yeah, there needs to be more taxable events to a prevent things from getting out of control. And, you know, we're running short on time, so I don't want to get into it. But the flip side of it is that, you know, this all connects through these people using their wealth to then change policy and the Citizens United case all bleeds into this because They can spend unlimited amounts of money to do so. So yeah, in until we end up going down the path where we are committed to actually changing this, ⁓ this gap is going to get wider and wider, faster and faster. And the worst part is is like the next generation of people to inherit this wealth is worse than the generation that's currently controlling it. So we've got that to look forward to as well. So Elwyn: And that's why people are out there with ⁓ pitchforks, torches and pitchforks, going after the billionaires, 'cause they're just like, This is so unfair, no one's fixing it. Clearly the only thing we can do is burn the whole fucking thing down. Derek Peterson: And and ⁓ Democrats, if you're listening, there's some stuff to be ⁓ learned here as far as running f what you're running on in the next few years. So well with that being said, who are we telling to shut the fuck up today, Elwin? This is my favorite part by the way. ⁓ Yes. You know how much I hate the New York Knicks? Elwyn: New York Knicks fans. Yeah, New York Knicks fans. Just like th they are out of their brains right now. Out of their brains. And I used to be a Knicks fan when I was younger. And now I'm like meh about basketball in general. Like I'm actively rooting against the Knicks so that their fans can suffer. Derek Peterson: Yeah. Elwyn: ⁓ and I don't know why. I d I don't really have a good reason, except for right now they have played a bunch of shitty teams in the playoffs. They haven't played anyone good, and their fans are treating them like this is the best basketball team that's ever braced us by tying up their laces. You know, and That other series in the West is gonna go, you know, at least another game, maybe seven, that the s the finals don't start till Wednesday. And that is just too many days of listening to New York Knicks fans tell me ⁓ how amazing Jalen Brunson is and that Carl Anthony Towns is the greatest thing since sliced bread and OG fucking whatever. So you haven't won anything yet. I get it. It's the first time in like twenty seven years you made the finals. But you know what? Nobody gives a shit about conf conference chair being banners. Win at all. Derek Peterson: Yeah. Correct. Well, ⁓ I actually have a decent reason to hate the Knicks. the the music company that I worked for previously in Los Angeles, they ⁓ yes, they managed so and only because he was the owner of the Knicks, we so we manage major A-list artists like Janet Jackson, you know, the Elwyn: ⁓ Charles Dolan. Derek Peterson: Eagles, Neil Diamond, Christina Aguilera, like the company I worked for, managed all these artists. And we also happened to manage JD and the Straight Shots. JD and the Straight Shots was Jim Dolan's band. Jim Dolan's band was the Eagles backup band. And it was the worst blues music you would ever hear. And the only reason anyone showed up to watch him play at sold-out. shows at the Roxy were because they worked for the guy. ⁓ and after spending a number of nights sitting and being forced to listen through that, I grew to ⁓ absolutely hate Jim Dolan and anything that he touched. So I will I'm like, if you can't even produce ⁓ mediocre blues music with the Eagles as your backup band, you should not be playing music. And I am very anti Nix as a result of ⁓ everything that ⁓ James Dolan does as a human. Elwyn: Well James Dolan is is a unique turd also. Just the whole Isaiah Thomas thing is a complete piece of shit. I mean Isaiah Thomas and sexual assault and you know, now he's like secretly recording it came out that he was secretly recording a woman who they believed to be who was trans, who was a big fan, was doing nothing wrong. They were like they had the cameras following her around the stadium. They had minute by minute reports of what she was doing in in security briefings. Like Derek Peterson: Yeah, he's also historically a piece of yes. Yes. Elwyn: He is just a complete piece of shit. ⁓ I will give it to the Knicks fans. Like they I don't know if you watched game one when they came back, that big comeback. There the fans are are on it in the game. They are on it. And it's a hard place to play. But one of my friends had the other night, he was like, I regret not driving seven hours to see this game. And I've been up all night listening to Inside the NBA. Derek Peterson: ⁓ that was the most got ri Elwyn: This is like the greatest moment of my life. Just shut the fuck up. ⁓ my god. I think they're gonna get stomped. I hope they get stomped and then it's just like, what was all that for? Derek Peterson: Correct. Well, ⁓ which is most likely gonna happen, but I will also say that ⁓ any if you're rooting ⁓ when the playoffs hit, any team that has James Harden on it is going to get crushed in the playoffs at some point. So the the the Cavaliers just got ja I've been a Rockets fan and a Clippers fan, and I've watched it happen a number of times, and so you know, like don't get too excited, New York, 'cause ⁓ you have a Elwyn: God, he was so bad. Derek Peterson: two teams i in the West that are going to be a much more formidable foe than the ones that you've Elwyn: James Harden looked like a a beat up Volkswagen Beatle from like nineteen sixty five that hasn't been restored or made in any way interesting. It's just belching exhaust all over the court. He was awful. Every time he had the ball, it's like, ⁓ my God, this is gonna end poorly. And it always did. Derek Peterson: Did he I always did. See, James Harden has made a career out of being the best player in non-important games ever. And as soon as the games matter in any way, like dude, ⁓ game one or game two of a playoff series, James Harden, James Harden will give you forty five and go off. In a game seven, he's gonna go for twenty-five and with eleven turnovers. So it just it's just how it goes. Elwyn: Yeah. He's been doing it for like seven straight years, eight straight years, just massive chokes in in the playoffs. When it matters. Yeah. Derek Peterson: Two he is him and C P three are the worst in in when it comes to all this. So all right, well what are we talking about next week, Owen? Elwyn: Still have no idea. I never think about that. I don't I think my my fire hose and my shut the fuck out. Yeah. Derek Peterson: You know, I ask you every week this question. I'm I and I'm always surprised at who your shut the fuck up is. So ⁓ I think you need to ⁓ bring a little more to the table when it comes to what we're talking about next week, all right? Yeah Well, we'll figure it out. In the meantime, ⁓ for all those who made it this far into the podcast, we'll see you next week. Elwyn: What are we doing next week? Yes, thank you all.