What is Biden DOING?! Capital Gains and more!

Foreign.

Welcome everyone to the Main Street Business Podcast with Matt Sorenson and Mark Kohler. We're excited to be with you today talking about taxes. I know it's your favorite topic, but if you're a small business owner, an investor, someone making money, this is your biggest expense.

Yeah, it is.

The tax man cometh every year.

Yep. I don't. You're not sounding too excited today, Mr. Sorensen. I will say for those watching, I

got a buzz killed. I mean, the taxes we're talking about is Joe Biden's tax plan. And let's just say it's going to be a little bit of a buzzkill. But yeah, with bad news and taxes comes more planning opportunities.

Yeah. Yeah. And let's give the disclaimer right now that we are not, this is not a beat up session on Joe Biden or the administration. This is, we're just going to say the facts and lay it out and then you guys can decide. And hey, and I've said it before on the show, I try to tread these waters. I go into the deep end of the pool a little bit more than Matt Sorensen, but I haven't drowned yet. I think I'm doing all right. But I will say debatable.

Yeah, you got a few preservers thrown your way, that's for sure.

Yeah, you might have to throw out another preserver. But I will just dip my toe in the political side and say this. Hey, Donald Trump wasn't perfect. We all know that. Obviously we're all human. There was policies that I didn't like of Donald Trump or especially the way he would not get off Twitter and other things. And some of you hated him immensely. Some of you may have appreciated his tax plan even though you hated his social policies. There's not a perfect president that gives us everything we all want. So Joe Biden has got a very aggressive plan to help a lot of people. I'm happy with a lot of those. Is it going to cost? Yeah. And he wants to tax more wealthy people. That's fine. Some of you business owners are like, that's not going to impact me at this level or that level. Well, we're going to talk about that today because I think a lot of people think, oh, if you make more than 400 grand, you're screwed. If you're under that, don't worry about it. There's still some policies you'd like to change that could grab some of you in a big transaction. Could be capital gains or the sale of your home or a farm or Something, some big investment. Anyway, Matt, did I do okay there? That was my.

Yeah. That was very statesmanlike of you. That was pretty good.

Thank you.

That's right. You should run for office.

I can't get school board. I, the first speech on the school board, I'd be like, yeah, maybe dog

catcher Kohler for dog catcher Madison county or whatever.

Yeah. I'm like, euthanize them all. You're out. Yeah.

Oh, the, oh, the little clips they could. Snippets of Mark Kohler they would take to, you know, I can just see the political, the anti political ads. That'd be hilarious.

There was no one around here a moment ago. For Those watching on YouTube, I am on location in Central Park NYC over by the Belvedere Castle. For those of you that know the area and it's, it's beautiful. For those watching on YouTube, nice and green. Central park is an oasis in, in the urban sprawl here. But there was no one walking by like 10 minutes ago. Now I'm talking about Joe Biden and someone just picked up some dog poo and threw it at me. And I, I don't, I don't know what, what I said.

Yeah. All of a sudden you've got a crowd now gathering. This is the live podcast crowd hearing Catholic conversations.

Call it a mob. Yeah, some may call it a vicious mob, but others could call it a crowd anyway. But it's mask in New York. It's awesome, man.

Interesting.

All right.

All right, master off. Well, I wanted to just say a couple. I'm just gonna say a preliminary thing or two because we're gonna get into the taxes and the nitty gritty here. And this is, every tax is being affected. Income tax, self employment tax, estate tax, and what happens when you die. Corporate tax. I mean, no tax is going unchanged. Let me just say if he gets his way. If he gets his way. Right. And so there's going to, we're going to go through each of those. There's going to be changes in every type of tax. Now what do we get for it? All right, there are some benefits.

Okay.

Child tax credits going up to 3,000, I think 3,600. You know, there's, there's some good things though for, for kids under a certain age. So for those of you that have kids, child tax credit is going to be great. Now high income phase out on it. So it's not going to help high income people with kids. The other thing is, you know, and this is again, there's political points to this and whether you love this or not. But you know, he's providing, they're doing pre K, two years of pre K for three and four year olds that'll be paid for and then also two years of community college. There's four years of additional education that they're trying to fund as part of this bill. And I think from Biden's perspective, and his point is I'm raising these taxes to actually pay for these things. We're trying to be fiscally responsible about it and not just give stuff away. So we're going to, we're going to raise taxes here to do it. So those are a couple of the things. There's some few other things. Those are some of the main points they've been pitching as what we're going to do with this extra revenue.

Yeah. And I, the, the plan for those that have been following the news. I know it can be difficult. I wish I could turn on the news and it just wasn't political all the time. Just show me some plain old, you know, death and carnage and maybe a good hurricane once in a while or fire, but it's all political. Anyway. That didn't sound as funny as trying to make it. Yeah, that not good. That joke didn't make it.

Okay.

So anyway, he's calling it the American Families Plan. He's got a fact sheet. You can go to whitehouse.gov and look at it. And it is, there's a lot of good things. And the concept is the 1% to 3%. Most wealthy people in the country can pay more in tax. And let's help narrow this gap in between the wealthy and the poor and people that are struggling. And it is, it is really, it's tough out there. And I know a lot of people listening to our show are trying to build their small business dig out of the COVID mess and we're not. This show is not just for the uber wealthy or the disenfranchised. This is, we're talking about the American dream for everybody. So Joe Biden's trying to help and that's cool, you know.

All right.

Okay.

All right. Should we talk about some tax substance? All right, how about we start with the income tax rate, Personal individual income tax. We can bounce around to capital gain, self employment tax.

All right, maybe what we could do here, I'm going to throw out a proposal. Some of you might appreciate this that we don't, we don't like a very scripted podcast. Matt and I have found that when we actually try to have an outline, it doesn't go well.

Let's be honest. We just don't put in the extra time to do a scripted podcast.

But I think we get a better result when we're off. You know, it's true.

Sometimes just the raw, unscripted, you know, that's the best way to do it. I mean, we'd like to have a whole staff of writers and everything and producers, but

yeah, we don't need it. We're. We're cocky enough. We can say that. No, I'm just joking. Okay. Now here's what I would propose. Why don't we list the taxes. Let's stay away from corporate for a moment. Let's list the tax policy proposals that would affect those making $400,000 or more married filing joint and just say, hey, if you're not making that much money, you may have hopes, too in your small business or your investments. We're gonna. But let's just get those off the table for those people that are making that much money or more. And if some of you go, okay, cool, that's not gonna affect me. I don't know. What do you think of that? We just kind of list those. Okay. That only affect the 1 percenters. Okay. All right. You name one. Tax rates.

All right, Tax rates. The top tax rate is going to go from 37% to 39.6%. All right. If you round that up, that's 40%. So we're basically going to a 40% income rate again, that's above 400,000. Married filing joint.

Yeah. And I should say also there's a number of income limits. Some have said individual taxpayers with income over 400 and married filing joint would have a higher threshold. This is everybody, you have to realize this is, this is proposed. These are proposals. It's got it. And it has got to get through the Senate, which is going to be a 50, 50 vote. And the Democrats, some moderate Democrats, have already said Biden's not going to get all of his wishes coming true on this. So we're going to have to make this a little more moderate. So when we say this is what it is going to be, we mean this is what the proposal is right now. We don't mean in stone what it's going to be.

Right.

It's okay. So income tax rates go up next. He wants to increase Social Security payroll tax on those making more than $400,000, too. See, right now you only pay the full FICA. The F word. Social Security and Medicare. 15. Well, it's 12.4% then you combine it with Medicare and it gets more. But Social Security phases out at about $142,800 this year. You don't pay Social Security tax on payroll tax on anything more than that. Biden says, okay, cool. From 142 to 400, we'll leave it the same. But once you hit 400, we're going to put back on the table. So if you're making that much money, you can pay more social into Social Security. So that's on the table whether or not it'll pass. Matt, next.

All right, next, for those small business owners out there, even those in the real estate world, the 199A, this was the, this was the token small business got in the tax Cuts and Jobs act or the Trump or Republican tax credit or sorry, Republican tax bill. Remember, the corporate rate went down to 21%. There's a huge reduction from the mid-30s, like 37% down to 21. Huge change for large corporations. And they said small business, what are we doing for you? Well, S Corps, you partnership, LLC and stuff, you don't pay a corporate tax. You pay at the individual rates. We're going to give you a 20% deduction on your income. This is called the pass through deduction. 199A going away. If those making 400 grand or more, you ain't going to see out of it.

Now there was exemptions for like Realtors and certain types of businesses that made more than 400 grand. They were still able to cash in on 199 because it was phasing out already for certain industries. But now it's not only industries, income too. Yeah. So who knows what again it'll look like. Realtors still may get a free pass. They tend to get the national association of Realtors. Freaking awesome. Most awesome lobbyists in the world. Okay, now I've got another or I don't. I want to put off capital gains because that could affect some of you. We're going to talk about corporate. Well, I guess itemized deductions again, those that make more than 400 grand, you're going to get another haircut. Itemized deductions will probably get reduced even further in different ways. We don't know how. It could be a dollar for dollar limits limitation. But he wants to reduce. This is another way to increase the taxes on the wealthy is by limiting their itemized deductions. Okay, 1031 exchanges. We're gonna have to save that for everybody.

Yeah, we'll save that. Yeah, there's some stuff on child tax credits, like I mentioned earlier, going up to. From 2000 to 3000 per child for kids up to 6 years old and then 3600. But again, those still. Those have phase outs already that I think that are below 400,000. So those. You. Many of you may be phasing out of that and don't even see it anyways.

Yeah, and I thought I'd just. I thought I'd just point this out since we keep using the acronym haircut. I did get a haircut today, Matt, and I. And I was kind of sad that you didn't say anything. I thought, well, you might.

I thought it was just the humidity, but it does. I mean, you look great.

Get rid of some of the wings. Yeah. Oh, I did.

And, you know, I got a haircut yesterday. I got a haircut yesterday. And you also didn't notice. So we're over two. What kind of partners are we?

Yeah, now we don't. You know, you never notice the little things, Matt, that I do for you. It hurts. I'm going to bring this up with our therapist, but I am also. I went to this barber shop on 38th, West 38th. And it was just. These guys were awesome. I got a shave.

Love it.

I mean, this is like the smoothest my face has been in a long time. Just want to point that out. Okay. Just thought I'd break up the monotony here a little bit.

Those of you listening, this is an episode you might actually want to see. Mark Kohler on YouTube. He's got the greenery behind him. He's got a shave. He got his wings taken care of on the side that were starting to look a little ridiculous, so.

Oh, now you say that. Okay, all right. Wow, man. It hurts. Okay, all right, so let's go over here. Now I'm gonna let me throw this out because this is where I get some hate mail. Some people are like, and this was validly. So maybe during the presidential election debates, I would kind of get down on President Biden, or back then, it was candidate Biden's tax plan. And. And people would say, hey, hey, you need to tone it down. It's only on the 1 percenters. And I was like, okay, fair point. I need to make that clear that it's not going to be death and carnage for everybody, just 1 or 2 percenters. But this is where some of Joe Biden's proposals. There's two or three here, which I think throw a really cast a big net. And that would be the Capital gains tax. What are your thoughts on that, Matt? I mean, because we don't know how it's going to play out.

Yeah. Well, do you want me to go over the, the what he's proposing here on capital gains? Like let's, well,

that's what I'm saying. Yeah. Why don't you say what he's proposing, which we don't know if it's going to affect people only in the 39 bracket or if you have a capital gain that puts you in that higher bracket because of stacking. Does that make sense?

Yeah, go ahead. Yeah. And this is the thing. It's, it's not even a bill. Right. So if, if you have this in bill format, you can be, you have to be very specific. This is proposal format, you know, of like here's my wish list, Congress, go write it up. So yeah, so he wants to double the capital gains tax rate. And if you think about it right now, long term capital gains rate, any asset you've held a year or longer, you get a 20% long term capital gain. If you make 100,000 a year, a million a year, 10 million a year, doesn't matter. Everything's a long term capital gain. 20% is your max rate. Now you still pay state on that at whatever your state rates are if you have a state income tax. But so keep that in mind here. What's that?

And Obamacare.

And Obamacare, which is like another 3%.

Yeah, yeah, yeah.

So, so you're getting, you know, you're paying in already but now they're going to go up to the top rate. So if you're a high income earner in the 39.6% bracket, that's this new bracket being proposed, you're effectively now doubling the capital gains rate even if you've held it a year. So right now, for many of you are familiar, short term capital gains rate, any asset you've held less than a year, you just pay at your regular tax rate. So if you're in a 25% bracket, you pay at 25%. If you're in the 39 or sorry, the current 37% bracket, you pay at 37%. Basically Biden saying, I'm not giving you a break on long term, you're paying

at your rate now. And here's where it gets tricky now for some of you that would like to dive a little deeper into capital gains. I recorded a video three or four weeks ago on capital gains and it's just taken off on YouTube. I'm so grateful for those of you that maybe have watched it or shared it, I did some little diagrams and it was really helpful. I kind of took a new, fresh look at it, and it really helped me better understand or be better able to explain capital gains. But everybody, you need to know this. There's a. By the way, a bee just flew right up to my face. If I get stung and die here, I just want you to know, Matt, I love you. Let everybody, you know, let my family know. I don't know if I'm allergic to bees, but this could be it. This could, this could be my time.

Okay. And I appreciate you taking the risks and hanging in on the podcast because,

you know, well, you know, I'm a giver.

Dangerous job. Podcasting.

Yeah. Podcasting in the wild now. Yeah, now I know what you know. Bear Grylls goes through. It's tough. It's tough. Okay, now, so here, here's how it works. Stacking. Like if I make. So say some of you sell your home in California and you made a million dollars, well, your sale of home Exemption is only 500 grand if you're married, 250 if you're single. So you go, well, do I pay a capital gain that other 500 grand? Yep. Well, what if I buy another house of equal or greater value? Doesn't matter. You can't use a 1031 exchange on your own home. So you say, I'm going to pay capital gains tax. Yep. 20%. Because that 500 grand is going to put you at the highest capital gain rate then.

But say again, federal, you're still going to pay state. And California, that's just.

Yeah. 20% federal. Then you've got state. Yeah. Which across the country could range from 4 to 13%. Then you've got the 3.8% ACA or Obamacare. And that's not to be dis on Obamacare, it's just the way people call it that. But anyway, so you got the 3.8, the 20 plus state. And if you make that extra 500 grand, does the Joe Biden proposal grab that 500 grand and put you into the double rate? Now, on one hand, you'd say, well, no, I'm, I'm not in the highest tax bracket on my ordinary income, so I get the lower rate on my capital gain income. Well, in reality, right now, the current law, you, you combine both of those incomes and it's called stacking. And it can put you in a higher personal rate on your next dollar as well. So it's tricky. And so we haven't seen the bill yet. And this capital gains proposal of his could actually grab people and drag them into it. Now, we would hope it wouldn't, but you got to keep that in mind. So was that, that was garbly goop.

Yeah. No, I mean, that's. Sometimes that's just what the tax code is. Yeah. But. Yeah. So this is a, this is a big deal. I think this is one for you real estate investors out there, business owners, you know, I think every individual, like in Mark's example could, you know, you, at least you're maybe selling your home or something, and you may be lucky enough to have enough equity in it that you get outside the sale of home exemption. But for you real estate investors, business owners, even people just have a little stock portfolio on the side. This is, this is quite a big cut. This is a big cut out of gains you're trying to build and make up. I mean, if you think about it, if you're in a state that has a 10% rate, at least like Mark's example in California, you know, you're sitting back half of what your gain is in taxes. If I make 100 grand and I'm in the high rate here of over 400 grand for the year, because maybe I'm working, my spouse is working. Oh, and then we actually finally sell something that for a $200,000 gain, let's say 200 grand, okay, I'm in a. It was long term. I held this asset for 10 years, sending 40% to the IRS of that $200,000 gain, I'm going to send maybe 10% to my state of, let's say I'm in California.

Ouch. Yeah. Now here's the other factor. Some of you out there may say, well, cryptocurrency's got to be different. Nope, cryptocurrency is the same story. And in fact, if you don't hold it a whole year, it could throw you in the highest bracket of 40% or 39% plus, it could get brutal. So keep in mind you cryptocurrency investors Matt and I have been talking about, the charitable remainder trust is a way to move that currency into a tax free trust for charity and create a cash, a steady cash flow of income or sorry, flow of cash flow. Oh, man, I'm tripping on my word. Create. Cash flow, get a tax deduction and avoid a lot of tax. So the CRT is an option, but okay, so anyway, there's it. Let's not beat it to death, folks. Get over to my capital gains video on YouTube and I dive a little deeper. Okay, 10:30.

Okay, 10:31, this is the. Is the evil twin to the already evil capital gains tax rate. Yeah, the 1031 exchange. All right, this is the. This is the provision for those in real estate, again, the real estate investors. It doesn't work for crypto. The 1031 exchange doesn't work for stock. This is a real estate specific strategy. When you sell a property and buy one within some certain time frames of equal or greater value, you can avoid the gain on the sale of that property and roll it into the next property. So then when you sell that property, you get the gain on that one and the next one and you finally pay at the end of the day, unless you just 1031 until you die. But it's a way you can defer taxes and avoid it. It's been a very common strategy for real estate investors who are trying to grow their portfolio, buy bigger properties, more, but they're selling. And so it's been a great strategy.

Well,

Biden's not a big fan of the 1031, apparently, and said that if it's. If the profit on the deal is over 500 grand. No, 1031, you can only 1031 up to $500,000 a year. And so what? So for maybe some of you single

family, I had to. I had to mute because this is New York.

Yeah.

I want to give you the full ambiance. You feel it? You feel it?

Yeah.

That's nice.

You know that's fire department, right? That's. That's not police, that's fire department. Is that NYPD or nyfd? I don't know if that's what we call.

I don't know. You're right. The PD has that, you know, they're kind of a cooler siren. But I'm not kidding. Two nights ago, where we were staying, 11:30 at night, just. I just barely turned off the TV and I hear this. That was. Those were gunshots. If you didn't.

Okay. Did you fall over? What happened?

Yeah, I heard five different gunshots. I was like, then the sirens. I'm like, man, living in a war zone and, you know, getting the real

New York City experience.

Yeah, yeah. Earlier this week, someone got stabbed in Times Square. Then there was a shooting in the crowd. I mean, people are saying, but the reduction of police force, you know, and all this stuff, this is going to be a crazy summer in big cities right now. And you do notice there's just a Lower presence of cops. Last night, we're walking home from the movies because Broadway's not open yet. So we're like, what do I want to do at night? Well, we went to a Mets game. Might as well go to a movie. So we went to a movie. And this is good for my daughter and her friend. This is kind of their senior trip. I'm out here on business and personal, and. And there's this guy. I get up to the next corner, and there's this guy in his whitey tighties just, like, rolling around in the street. And I'm like, did he get hit by a car? What's he doing? And. And people are like, what the heck? And I look over my shirt. There's two cops over there drinking some coffee. And I'm like, hey, I. I felt like I did my citizens part. My daughter was impressed. I was the first one to alert the officers behind me, like, hey, hey, hey. We got this guy in the street over here, and they're like, yeah. They come walking over to me, and they're like, look over. Oh, all right. They just nonchalantly walk over there. Them. And they get over there, like, look down at him, dude, what's your problem? You know? And help them off the street. But I. It's just. It's crazy world out there, man. Just trying to give people a little bit of the. I got one other anal story here in a minute, but just.

You don't get that in Main Street, Idaho. That's just.

No.

A little different vibe there.

No. Yeah. You see a different vibe. Coyote get ran over or there's a moose. Moose on Main Street.

That's what the. That's what the troopers got to come out for.

Yeah.

Moose is loose. We got to get this.

Yeah.

New York guy rolling around in his underwear in the street. Okay. Yeah. All right.

All right, so let's get back to.

Yeah, so there you go. There's the 1031 exchange. It's.

It's.

It's going away. Much like the guy rolling around in his underwear in the streets of New York. All right, bail is 500. Set at $500,000.

Okay.

That's all you're.

Yeah. Yeah.

A lot of long order there coming to mind. All right, so. But at least you got bill, folks. At least we got bell. We got 500,000 to work with. So for many of you, seriously, I want. I'm saying this for you smaller real estate investors, and, you know, that's something to work with if that's what we get at the End of the day now, my guess is that this may go to. If this stays, it's gonna be a million or five. They're probably gonna get a little bit higher cap on it. Cause there's so much love and affection. And as Mark talked. The national association of Realtors is all over this one. In addition to the capital gains. Right. Cause these are really affecting you real estate investors. These two proposals in particular. Capital gains, 1031 exchanges. Those are a huge incentive in real estate.

Yeah. And if my. I apologize for some of you. They're like, would Kohler just shut up and let's get the content out there. I'm just trying to keep it real. But let me summarize it this way. Biden does not, President Biden does not want to get rid of 1031 exchanges. He just wants to say, you can only 1031 exchange so much. No more kicking the can down the road indefinitely on millions and millions of dollars. So he said if you sell a second home, a beach house, a cabin, a raw piece of land, a farm, the first 500 grand of gain. Sure. Go buy another property of equal or greater value or split it up over multiple properties. I've done some great little, I think, YouTube videos on 1031s. Go check those out. But he's saying anything over 500 grand, pay some capital gain. Then you have to go to Now. Okay, now am I in the higher capital gain rate or the lower rate? What's my bracket? I mean, this is going to be freaking, you know.

Yeah.

Crypto equation of all time. I mean, it's going to be crazy trying to figure this out, but okay. Job security for us. Weird tax lawyers.

Okay, I know. Yeah.

Okay. Now the last one stepped up basis. Now, no kidding around, I'll explain this one quickly. Is that okay, Matt? Okay.

Yeah.

You've got, you've got to come up with some light commentary after this.

Okay.

I know it's hard. Okay. And since it's 115 degrees in Phoenix right now, maybe you can comment on frying an egg on the street out there or something. This is your brain on, you know, drugs type commercial. Okay? So when you die, the IRS takes a picture and they say, how much does this person worth? If you're married, you can leave it all to your spouse. There's no estate tax. It's called the unlimited spousal exemption. But if you're single or you and your spouse die simultaneously or within a close period of time, and you're going to leave all this wealth to the next Generation or even to brother sisters laterally, but not to charity. There's estate tax, which can be 40% plus on any amount this year. Got my trusty trust handy dandy Kohler calendar here. I will look at it. Let me give you the exact figure it is on everything over 11.58 million. There's this estate tax that's just off the chart. President Biden says, I don't, I want to fiddle with the rape. We'll leave that alone. Maybe we'll bring the exemption down. There has been talk of that, but he says there's no stepped up basis, meaning whoever does inherit your property, usually you get it stepped up to fair market value. So you can sell it tomorrow and pay no income tax or capital gains tax because you paid so much estate tax. That's the theory. Well, he's saying, well, let's bring down the exemption and let's get rid of stepped up basis. So the family that does inherit the property and they go to sell it, they got to pay tax. That's the theory. All right.

Now he's, now the step up in basis is in his proposal. So this is, we are really gonna, he's getting rid of this. I mean, this is, he's pretty adamant on this, on any asset, okay, your stock, your. Now they are saying for family farms and small family businesses where the family is going to, the next generation is going to take it over, they're going to have some exclusions on that.

That's.

We don't know more detail than that. But this is tricky because many of you small business owners, when you pass away, would want the business to be sold, right? You may be that business, you may not have family involved in operating it, even the family farm. And so there's kind of a political reason they're throwing this in there that practically a lot of small businesses do not actually pass on to the next generation. And so we'll see if how helpful that exclusion really actually is. But this is on all assets for a step up in basis. So

it's going to hurt.

But I'll just give a little anecdote. I was talking to a client a couple weeks ago and she's a little higher income, she's a physician. And, and we were talking about all the taxes, you know, and, and Biden's tax plan. And she voted for Biden. She told me, she's like, I'm really upset with all the tax plan. And she's like, because I know what they're trying to do. They're giving away Some education. She's like, I had to pay for all my school. I still have student loans. She's like, finally, I'm making good income. I'm. Now I'm in the high bracket. And they're going to say, oh, now it's higher. Finally I'm starting to accumulate assets. And they're like, oh, you're going to pay higher capital gains tax on it. Finally, like, she's like, I feel like everything, it's like, now you're here. Oh, we're changing the game. And now you got to pay a ton of tax on it. And I was like, but working so hard for so long to get there. And I think a lot of, I think a lot of Americans are feeling that in this proposal. And I think that's a lot of the moderate Democrats are struggling with it. Even though they like a lot of things that this revenue can pay for, they're struggling with how you sell this as part of the American dream, because many of us have that American dream of building wealth. You may not be making 400 grand a year, but you could be like, well, I'm, I'm, you know, between my spouse and I, if you're married, you know, we're making 200. And dang it, I want to be making 400. And I, I want, but I, is it going to hurt me to be making that? Maybe I don't want to make that because I'm going to have to pay more tax and everything more I do. And, and so, so I don't know. So I just thought, like, that insight and that little, that little kind of grumpiness that this client had. I was like, don't worry, it's just a proposal right now. Don't, don't lose sleep over it yet. But I can understand that perspective.

Yeah. Yeah. Did she say anything about her voting

no?

Yeah.

No. I mean, outside, yeah, I'm pretty, I'm pretty apolitical. I don't really care so much. But I was like, But I thought for, you know, someone who voted for, for Biden, but, but also I think is somewhat reflective a lot of small business owners that even maybe Democrats, that it's like, man, I've worked hard to build this business. I've sacrificed so much to get here. And now once I'm here, we change the rules. And now I don't get to enjoy all that hard work and sacrifice I put in. Now the government wants to take more from me.

You know, I will say this, though. People that are, have already built some wealth and have been successful and may have voted for someone else. They're going to say, well, the rules didn't change. We've always been paying more in taxes. Welcome to the club. And so, yeah, Donald Trump's social agenda or environmental agenda, you may have hated that, but as a small business owner, you probably did appreciate some of the tax strategies and benefits we've had these last two to three years. They've been amazing. But it's kind of the bitter pill because you're like, oh, I, I, and, and so you say I've got to vote for Biden because I've just got to do what you think is the right thing. And now you're kind of taking it in the shorts tax wise. And it's, it's a bummer because it'd be nice to have, have it all and it's just tough. So, and I'm not saying one president better than the other. Just. Yeah.

And here's some other, some of the other tax news that's been going. If you, anybody's been following this, I really don't follow the news unless the word tax is included in it or ira, you know, then I'm like, ooh, some breaking news. I got to listen to this. But I was listening to the Washington Post politics podcast actually, which by the way, Jeff Bezos owns the Washington Post and he probably wish he didn't buy him because they are destroying him on his taxes. His, his and a number of other billionaires got their taxes somehow disclosed. And in 2011, Biden, or sorry, not Biden in 2011, Bezos, Jeff Bezos of Amazon, like the richest ever, the richest person in the world. He did not pay any income tax in 2011. Zero. In fact, he's had years where he's claimed the child tax credit.

Oh my gosh.

Because of all the tax stuff that he can do. Now here's, and that is frustrating. That is like obviously not right that you can be the richest man in the world and pay no tax.

But yeah,

these plans and proposals really affect those that are producing income. See, Bezos just has massive wealth. You know, he owns obviously all the stock. That's where his wealth is. And Amazon and other assets he accumulates having wealth. There's no wealth tax. And, and, and I know that howitzer from Massachusetts, Warren, Senator Warren has proposed a wealth tax and I think Bernie Sanders has been for that too. But what we're doing in our tax policy here is we're taxing production of income. And so for if you're a small business owner. You're like, wait, I'm not wealthy, but I'm out there producing and trying to become trying to be self reliant and be able to rely on my own resources, build my own retirement account, not have to rely on Social Security, not have to rely on government resources. But there's the production of wealth that we really tax here. So I don't know, I don't want to be too much of a tax geek on it, but I thought those are interesting things. We'll see how this plays out. And we'll be bringing you, of course, the breaking news on the versions of the bill that get out and of course, what may get passed here in the end. Yeah.

And one other I think since this is our we may even retitle this podcast to in the News, Joe Biden's proposal and Current Events and taxation. Here's another interesting one. I was just talking with one of our staff. I was looking at my text here this morning. Shepard Smith at CNBC was commenting on the exodus of people from the urban tax states to the non state tax states and how the real estate market has gone off the chart in South Florida. And people are saying, hey, if I can't change my federal tax rate, I'm going to at least take a 10% haircut and take a savings where I can and move to a different state. For those that don't know, because sometimes you have to Google, I'm just going to quickly go over it. I've got a cool little map in my light in my calendar here, but I'll just highlight these seven states that do not impose a state tax and then two more that have a little variation on it. But 43 states have a state tax rate and Washington, no state tax, Nevada, Wyoming, South Dakota, Texas, Florida, and these other two states that only tax interest and dividends or investment income is Tennessee and New Hampshire. But you also have lower state tax states that are dramatically different than others. Indiana at 3.23 and Illinois at 9.85. That's big swing. So I think a lot of people are trying to reevaluate where they live. And with COVID people are saying, hey, I can work remotely too. I'm out of here. So that's been in the news quite a bit as well.

Yeah, even you've seen the change from high tax state to low tax states. I mean, California in particular, you've seen them in Idaho, we see them here in Arizona. Making the real estate market bonkers is it's just they're just they're not going to zero. They just want to go from 13 to 5. You know, just. Yeah, like that's, that's good enough for me. And you know, no humidity in Florida or Texas sounds good.

So I know for, for some of you from Texas. Matt just did say no humidity in Texas. That's only parts of Texas. Let me just point that out. Okay. Okay. All right. Called the Gulf of Mexico down there. That creates some humidity for certain areas.

Okay.

It can be a little sticky down in.

Sticky even in like Dallas and. No, yeah, I mean that's. But okay, well, let me say. I was just. My last point, I was just gonna say is I think this has been something that I think this last year as things, a lot of things have changed, as Mark noted, particularly with remote work and having a little more flexibility to live in a state you may want to go to and having some tax incentives now to do it. This has been a really busy time for us as tax lawyers. Our law firm, as Mark CPA in the accounting firm and at directed IRA too is because of the higher taxes, it puts a premium on good tax planning and being engaged. And we're not saying, I'm not saying come call us and hire us.

We're busy.

We love your business, but we also just love to educate and teach you how to be captain of your own ship, so to speak. So because this is such a huge expense as you're thinking about building the American dream, building long term wealth, this will be the biggest expense and hurdle once you start accumulating and having good sources of income. This is the, this is the thing you got to play defense on more than anything else. The government is going to score more points against you than if you're not playing good defense. So, so just be proactive in it. Stay educated, stay on top of it. Know the strategies. I'll just say one here that I just want to give out a strategy. If Biden's bill passes on the, this new self employment tax where you're going to still pay it over 400 grand. And if you're making over 400 grand, what strategy is going to be awesome to implement even more than it is now? The S Corp. Right, that S Corp is even more valuable now as a tax strategy for those making over 400 grand because now you get hit back in with Social Security for the full freight of 12% when you're over 400. And so there's more tax planning strategies and opportunities to be more proactive, more engaged because you just got to play More defense now.

Yeah. Defense wins championships. And we ought to say that defense wins the American dream. That's good. I gotta trademark that tomorrow. No one's still. I was gonna throw this out to a final note on that is yesterday I was in an hour and a half audit with a client that would fit in this category of 1 percenters. And the state was coming after payroll levels for himself and family members and all that. And I just want to say, in summary, the payroll matrix came through squeaky clean. Not even one. I mean, it was. Yep, payroll levels look fine.

This isn't the payroll matrix. This is the Kohler payroll matrix.

Yeah, I wanted to be a little humble about that, but,

you know.

Yeah, Kohler payroll matrix. And we get hate mail accountants that are like, oh, you're too aggressive on the S Corp strategy and taking too low a payroll. I'm like, just in an audit yesterday, helping a client, you know, and they were looking at subcontractor issues far more than they were looking at payroll levels. They were like your payroll level for the. Your main owner is fine. Okay, thanks. Done. So, people, Matt's right on. Hit the, you know, the nail on the head there. That was the money answer right there. Well, hey, everybody. Another good podcast. Exciting.

Yeah, we think so. You be the judge, though. If you think it was crappy, send an email to mark@markjkohler.com. if you liked it, though, give us a five star review or thumbs up or kudos or whatever medium you listen to, you can do that on. It really does help other people find the show. And it gives us a nice warm and fuzzy too, because that's what we do this for.

Yeah. And I did this live in Central park and it got a little crazy. It's a little awkward because a crowd has accumulated here. You see that crowd?

For those on the. For those on the podcast, there was a crowd of pigeons.

Fair enough. You know what I was looking at?

I thought you could have. I thought you could have pulled more than a half a dozen pigeons. You know, Mark Kohler's in Central park and only a half a dozen dozen pigeons show up.

Yeah, there's this guy down at the end of the bench with his earbuds in, and he's like, he doesn't care. Yeah, he's like, he's obviously not paying a lot in taxes. So, you know, you do what you can. You try to spread the good word, you know? So thanks, everybody for listening. Next week is open forum or. Ooh, are we doing our. We may have. Well, I gotta play that bigger. We may have a special guest next week. I'm really excited about on privacy. I won't say any more until we've got that expert fully booked time and day, so. All right, thanks, everybody. We'll see you next.

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