In a recent Twitter Spaces, convicted Bitcoiners discussed the freedom this network gives them over government servitude.
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In this episode of Twitter Spaces hosted by Bitcoin Magazine, P (@phjlljp) was joined by Jay Gould, Jimmy Song, Bitcoin TINA, and others to discuss the ludicrous government proposal of taxing unrealized capital gains, and how Bitcoin can help free humanity from government overreach.
[00:00:06] P: Hey, everyone. This is P. I am the Head of Programming at Bitcoin Magazine for the Bitcoin Conference. If you haven't bought your tickets yet, you definitely should. It's going to be fucking incredible. I asked a number of people, Jay Gould, John, Amanda, Bitcoin Tina, Jimmy Song, and a few others to join me, to discuss the absolutely ludicrous proposal that Yellen and the White House made recently, that unrealized capital gains should be taxed as income. Let's dive in. Go for it, man.
[00:00:39] JG: Before we begin, I want to just read something. I think it's important, because words have meaning. From the white house, to Janet Yellen, to Bernie Sanders, to Elizabeth Warren, to AOC, and all the way back to Barack Obama, they started saying something that they're continuing to say it was on the website, actually, yesterday.
They always say something like, the rich must pay their “fair share.” These words imply that the rich are not currently paying their fair share. Otherwise, why would they say it? It is complete and utter, complete and blatant lie. I posted something today. It's a little dated, from 2009. It was from mint.com. They show different cohorts of income in this country. They show collectively what percentage of the makeup of total income bracket you are, if you're in that bracket. Then, it shows you what percentage of the dollars collected in tax revenue are. It's significantly higher, higher income, collecting the majority of the tax dollars being collected. To say, it's completely disingenuous and dishonest, to say that the rich aren't paying their fair share.
When the 1.8% highest paid above $500,000 are paying 41% of all the taxes collected. 200,000 to 500,000 is 2% of income cohort. They're collecting 20% of all the tax revenue there. That's 60%. It's somewhere like 80 something percent, and we only get to 10% of the people. It's off the charts. It's just completely and utterly dishonest, and that's where we start.
[00:02:03] P: Yeah, I think you're absolutely right. This is so clearly – it's propaganda, right? It is a narrative that is being spun, in order to push the public opinion in a specific direction. It is unfortunately, fairly effective. I think that it's the thing that is so disappointing to me personally, about this situation. Before we –
[00:02:22] JG: There's also one more thing that is interesting. I found another stat here. In 2001, the share of the federal income taxes paid by the top 1% increased from 33.2% to 40.1% by 2018. They're not paying less income tax over the last 20 years as a percentage. That's actually going up, which clearly, the gross nominal dollars being collected are also going up, and just the vast majority of all the dollars being collected. It's complete false narrative.
[00:02:47] P: Can you say again, what specifically was claimed in the White House article?
[00:02:50] JG: What she said, I don't have it in front of me. I got to find that. What she said, here's something she had said. She had Senator Shelby – this is different from the White House article. “I do support eliminating –” This is yesterday. “Stepped up basis.” By the way, I think this is, I think this is really where they're going with this, to be honest with you. We'll get to that in a second. I don't think it's unrealized.
[00:03:08] JF: It's the only way they can actually get up that.
[00:03:10] JG: That's right. That's right. It would be a nightmare from an audit perspective, as John knows, to try to do this from across all income bracket categories, etc. She said, “I do support eliminating stepped up basis. The reason is that, a very large share of the income, words have meaning throughout this whole discussion tonight, okay. Income of the wealthy individuals is simply never taxed. Individuals hold onto these assets during their lifetime. That income is never taxed. Again, it's not income. It's appreciation.
We know that for some of the wealthiest individuals in the country, they pay very low taxes overall, because most of their income takes the form of unrealized capital gains. Unrealized capital gains are not taxable, people. Just to be clear. Capital gains are taxable, currently. The Biden administration proposed that at death, those gains be taxed. Currently tax law, when you die, and you have property per se, it is passed onto your heirs, and there's a thing called stepped-up basis, which means their new cost basis is what the value of the property is at the time that they receive it. We'll get back to that in a minute.
She says, “And with careful consideration, not in any way to harm the prospects of family-owned farms and small businesses, because they would have massive tax of all events on these events on death,” they'd have to sell their farms, or get a loan to pay the tax. It wouldn't make sense. “There were substantial exemptions to protect them.” She’s trying to protect them from that. “Even if there is not actually taxation imposed that death, getting rid of stepped-up basis would mean that an heir would inherit the original basis of the asset.”
Even if they didn't get rid of it, they're saying, they're going to go back to saying that your cost basis is now their cost basis, which I don't think is completely unfair, to be totally honest. I'm not totally against all the things, but because you're not – if that's not a taxable event, unless they sell it. She’s just saying, why should you get a stepped-up basis on a cost basis? That makes sense, actually, in my opinion, but you could debate that.
When that person eventually sells that asset, the taxes would be paid and she didn't say this, but it would be on the original cost basis that your parents bought it for as an example, okay. All of this is important, because they're mincing words and they're conflating things. She's saying things along the lines that the large share of the income from the wealthy individuals is never taxed. That is not true. The current tax code is that you are taxed. There are ordinary income taxes, and there are long-term capital gains taxes. There are no longer short-term capital gains taxes, because there are now taxes, or ordinary income levels. They already fixed that one, so that means they’re taxing rich people – It is.
[00:05:45] T: I don’t think that that’s actually projected as 25%. Check it out. It’s correct.
[00:05:48] P: Tina? Let Jay finish.
[00:05:51] JG: Again, long-term capital gains, long-term capital gains have a special treatment, and they are to be taxed at a lower rate, because you're imposing risk on the investor. This is why they have this. They define that guys by profit earned on the sale of that asset, which has increased in value over the holding period. Then asset, could be a tangible property, like a car, business, a stock, as well as intangible properties, right? Bitcoin, can touch it.
Then, ordinary income is just what most of you probably have. It's if you have employment, you have a job, or it could be interest, or dividends, and then income from sole proprietorships, rents, royalties, if you're lucky to have something like that. What they're trying to say now is that if you have rents on a property, or royalties for some an asset, like you have a publishing deal for a book, or music rights or something of that nature, they're going to want to look at that asset that is deriving the rents, the royalties, the dividends, the interest, and they want to tax that based on the appreciative value of it going up year-to-year, which could be forced liquidation for some individuals, depending on who they are. It sounds like, she's also targeting, P, the top 400 richest people in the world today. That is the current narrative and rhetoric. I just wanted to get out some of the factual information here.
[00:07:00] JF: Yeah. P, can I just tag in a little bit, if you wrapped up on that point? One, short-grain taxes are our taxes, ordinary income. Long-term capital gains are based on your income. From zero to a certain percent, from zero to 50,000, I think it's just for $0 or 0%, so there is no short-term. They just need long-term capital gains.
Then from 50,000, roughly 450,000, it's at 15%. Then everything above that is 20%. The Biden proposal is to move it all toward ordinary income tax. Unless that's changed in the last three months, I don't believe it has – there's any tax accounts there that want to correct me. I don't think that I'm wrong.
The second thing I wanted to hit on Jay is what you talked about, is there's not a real practical way to actually go after unrealized gains, because they also have to go on off of unrealized losses and they haven't talked about that either, right? Literally, the methodology that's cited in this letter is going off the Forbes list.
[00:07:51] JG: It's ridiculous. I know.
[00:07:52] JF: It's a joke, right? I tried to go through their technical, how they use the data to ultimately form their calculation and their methodology. It's just basically a joke. The thing that I think that Jay, you hit on, I wanted to bring home, I think the way that they actually get this done, and just to further introduce myself, I worked in public accounting, I'm a reformed public accountant. I have not practiced in 12 years, so I don't want to come and speak from a public accountant’s perspective. P asked me to talk about some of the things that are going on with institutional adoption. Since we're talking about this piece of it, what I think is important is what can be, I think, the practical way of actually getting at a wealth tax, which is ultimately what this comes down to is eliminating stepped-up basis.
I'm not here to argue the merits for or against, whether or not that policy should take place or shouldn't, but that's actually how they're going to get at additional wealth that's trapped in these ways. I think, it's a really great way to do it, right? If you want to further the Ponzi scheme and you know that you're going to print – you’re at the printer of last resort, and where's all that money, where's all that wealth being created? It's being created in assets.
If you're going to continue to build them out to backstop it, you're extracting more value to go into your Ponzi scheme through ultimately, measures like eliminating stepped-up basis. It's a way to actually get more tax revenue from investments. I think, that's where you were headed a minute ago, Jay, with how they actually practically implement these unrealized gains.
[00:09:10] JG: Yeah. I think they're going to do it on death. It’s going to be a death tax. I think, the attempt is to eliminate the stepped-up basis to try to collect more revenue.
[00:09:18] JF: Exactly.
[00:09:19] JG: That's what I think. That's just step one, right? Clearly –
[00:09:21] JF: I think, that's how they tend to meet up with the estate tax is really –
[00:09:23] JG: Look, all they have and definitely wanted to do, John, if that's all they wanted to do, there'd be no narrative rhetoric, around about unrealized gains being capital gains, right?
[00:09:34] LW: That's the thing, right, Jay? If you think about it, this is just the destruction of wealth. Because really, what they're doing is they're trying to rebalance everything. hey know they've printed way too much money. They know they can't stop printing money. They know our economy is in the crapper, and the only way you're going to really be able to save that is through some form of UBI.
The only way you can retrieve any of this money you keep throwing out there is to figure out a way to tax some stuff that probably even shouldn't even really be taxed, just to get the money back. I think, that's why they're doing this, they're really literally throwing darts at a dartboard, trying to figure out ways to pull money back out of the assets that they've inflated. It's almost like, you blow the balloon up, and then now we need to come in and put a small hole in it so that we can pull some of the air out of the balloon, because we know next week, we're going to put more around the balloon. They just don't want the balloon to pop. They feel this is the only way they can balance this entire thing. Yeah. I think it's crazy. No, not at all.
[00:10:30] JG: A 100% of the 400 richest people's income. They took all their assets. You can't pay this off. We just keep pumping afterwards.
[00:10:38] P: I think, it's important acknowledge that this is a key tenant of modern monetary theory, right?
[00:10:41] JG: This is what I think this is. This has been going on for centuries guys. They come after the billionaires first. They take from them and the people say, “That's not me. I don't have to worry about that, so I don't speak out.” They came for the unions, unionists and the socialists and speak out, even though I’m not a socialist. Then they came for the incurables and I didn't speak out. Then they came for the gypsies and the Jews and the homosexuals, and I didn't speak out, because they're not me. Then they came for me, because there was no one left to speak out for me. Guys, wake up. They're going to come for you.
They may not come for the poorest people in this country, but the richer people in this country, the middle class of this country, the upper middle-class of this country, they're looking and saying, “Screw that. They’re the 400 richest people. Oh, I’m not them.” Okay. Then they slide it down, to the top 1,000, the top 10,000. Let me tell you something. Eventually, it's you. they don't ever change these rules. Like AMT, Obama Affordable Healthcare, the 3.8% tax. They never got rid of that.
[00:11:33] P: Yeah. A 100%.
[00:11:35] JG: They don't ever get rid of any of these things.
[00:11:37] T: Just talk about putting caps on what you can earn in a Roth IRA. I don't know other details on this, but there's a guy from [inaudible 00:11:43] financial guy, Adam Bergman was at the Bitcoin Conference, who gave a presentation who has been talking with us. He's a tax attorney, and he's got a business, which caters to IRAs and the self-directed. Now they're coming to you right now.
[00:12:01] JF: I have a great step for this fact.
[00:12:03] T: I guarantee you that in the course of the next 20 to 30 years, you will hit those caps if you have a Roth IRA.
[00:12:09] JG: Yeah, because [inaudible 00:12:09] about a 5-million-dollar cap. If you're 25-years-old, you're likely to have 5 million in your IRA in the future. Just do the math on a kegger with the amount of money that's being printed and what your growth will be.
[00:12:20] P: What is it? 80% of all the U S dollars that have ever existed have been printed in the last 14 years.
[00:12:26] LW: Yeah. Here's the thing, that 5 million is going to be worth –
[00:12:28] P: The 13 [inaudible 00:12:29].
[00:12:31] LW: That 5 million by the time you get there, it's only going to be worth about a half a million. You keep printing money like this, it’s going to make even that wealth. This is what I feel like is going crazy in this country. Right now, this wealth destruction, the ability to compound interest, all of these different things that especially, which is weird to me, because it always comes from the democratic party, which always talks about the inequality and the wealth gap.
If you think about it, when you take away the ability for people to invest in assets and actually compound that interest without being taxed on it, you are a literally expanding the wealth gap, because the people who already have, they already have. The only way I'm going to be able to make it back is to actually invest in things, so that I can actually build compound interest, so that I can at least catch up in the gap in some form or faster.
But they wind up destroying that wealth possibility by bringing in things, like unrealized capital gains tax. Then, they take that out and put it to the bottom by doing something like UBI. If you think about that, all it is the government making us more and more dependent. See, the thing is that the democratic party, they always are a party of trying to create the goodness. Just look across the entire scope of what they've done, I'm talking about when they finally changed over, when they were the racist party, it was a little bit different. Then they changed over and they still might've been the racist party, because they wanted dependence and they wound up making the dependence, those people who didn't have a whole lot, which happened to look like me back in the day.
Now, we're in a position now where the dependents, they're trying to make the entire middle-class dependent upon the government, because they understand that if they have a dependent body, what happens is that dependency makes people vote for them in the future. This is what I feel like is exactly happening right now in this country. They are establishing ways to make us more and more dependent upon government, and I think that if we have to fight back against it, and by any means necessary, and I truthfully believe, Bitcoin is the best way to fight against all of this bull crap.
[00:14:23] P: Yeah. I totally agree. I think this is all about systems of control. You remove people's upside and then you force them to take the dog food you're feeding them, and that allows you to have control over them. Jimmy, I want to give you a chance to comment, weigh in and then yellow, I want to hear your thoughts, because you've had your hand raised for a while.
[00:14:39] JS: I did write a tweet earlier today about how were cats, four times now, already on our income, and this is going to be tax number five, like unrealized capital gains. I think, there's something really crazy going on here. I thought Lamar made some really good points about how it's really a way to – They know that they printed too much money, that it's in the hands of rich people. They're trying to calm down some of the poor people by taking some of that back that and they're doing that through taxation. Unrealized capital gains is, I'm not even sure how you force that, right?
Because Mark Zuckerberg is worth billions of dollars, but the way he gets money is he keeps his stock in Facebook and he gets loans against that stock. That's how he operates. That's the way in which he could continue to get upside on his business and so on. That's how a lot of people in the US are. They don't actually have that many liquid assets. They just borrow against the assets that they have. This in turn causes this Cantillon on effect of additional money printing, because all of those loans that they get against their stock or their assets, it's all newly printed money. That in turn, causes even more money to be printed and go into the economy, that causes higher prices and stuff.
You do a wealth tax like this, they now have to liquidate this stuff. I suppose, they could take out a loan against that and hope that the tax goes away eventually, but they're most likely going to have to sell. Now you have less leverage that these people have. You're destroying this money creation avenue. You contract the money supply as a result of this. It's not going to be pretty. You do this from some of the wealthier people in the – You really contract the money supply significantly. That means that the fed has to print even more and give out even more loans on even less of a basis. You get even more fragile. I just think this thing has disaster written all over it.
[00:16:42] JG: I got a question for you. Do you see a scenario, or possibility where, because a guy like John Malone from Liberty Media, he did this. He was the master at this. He never paid any taxes. He just borrowed against his holdings and he kept growing through acquisitions and his network kept going up and just kept borrowing against it and never had to sell anything.
He serviced the debt with the loans as well. Really genius, actually. Why not, in a low-interest rate world that we have, which isn’t going anyway, going away anytime soon, and let's say, he has a 100 million dollars that he wants to borrow, and he's currently borrowing it at 3%, just say, why couldn't they just impose a very small tax on the amount borrowed, because otherwise, for him to get the 100 dollars, he would have had to sell assets. Then, he could just use the loan that he's borrowing to service the debt.
Essentially, it's increasing his interest rate, essentially. The interest rate from the bank, but then you have an imposed tax from the government, the tax from the bank, it could just be like, almost a library plus, right? He may have a 3% interest rate from the bank, and then the government says, if you're borrowing money against your assets, we're going to tax you 5% on the amount you borrow. They're not going to not borrow to do that. They're certainly not going to sell their assets.
[00:17:46] LW: They will move, Jay. I believe, billionaires are going to move.
[00:17:50] JG: I think that's true.
[00:17:52] LW: They’re going to be straight –
[00:17:54] T: Hold on. I just retweeted something that I learned about many years ago about lead trust in Harvard alumni. Go read what I tweeted. I sent it to John, to P, to Jay. Go take a look at that. Some of the things you have to understand about super rich people. One, they set up – Hold on. They set up foundations. Foundations enable you to take substantial amounts of money and keep it untaxed for centuries, certainly for decades. The power of having substantial wealth is the power of using it and having access to it. That money pretty much [inaudible 00:18:27].
There are many things in the tax code, which enable the super wealthy to very much mitigate the effects of these things. These things will fall down on upper income, not fantastically wealthy people. They will fall on people who might be considered rich, or not super rich, because the super-rich can do things that other people can't do.
When Bloomberg has the giving pledge, whatever the hell he calls it, it gives substantial amount of money into a foundation. That foundation can be controlled by family members for decades, which is the real power of having money, because you have massive social influence, political influence. This is the power of real money. People will have tens of billions of dollars, can't spend it, but they sure as hell like that political influence, and it's serious.
I'll look at lead trusts. The game is set up so that those who have well into the nine figures and above can do things that other people can't do. If you have 20 to 30 million dollars, which sounds like a lot of money, you get screwed, because you can't defend yourself from these things. When you have 500 million, a billion, 2 billion dollars, there are lots of things you can do.
It's not going to be quite what you're saying. It's going to fall on the heads of people who are successful, who want to leave money to their family, and maybe to others, but it's going to slam those people. It is not going to hit the super-rich. Really, if you want to change the tax code to change the consumption tax, eliminate all capital gains, all income taxes, because the consumption tax will capture the spending of the super-rich and there are plenty of things that can be done to mitigate the effects on substantially, lower-income people.
This was a game about power, and this is a game, when you can grant special favors and dispensation to people who were not hit by this tax code, that's the real power that Congress has. The ability to grant special tax benefits to different groups and classes of people. I think, class is not an economic class. I'm talking about –
[00:20:32] JG: Tina, let me ask you a question. Let me ask you a question. I'm aware of this. You're right. For the richest individuals in the country, the billionaires, this is a strategy. It's really funny. The giving pledge with Warren Buffet and all these guys. It was really funny when I saw – it was Garrett Camp, the founder of Uber, decided and put 50% of his wealth in there. Just do some math on that.
Anyway, if you look, and by the way, they're doing really good things. I'm not criticizing the effort, but there is a tax benefit to this. The billionaires are mostly all aware of it. I imagine, they'd have to be. They’re not, I don't know what rock they’re living under. The politicians are mostly aware of it as well. The lobbyists are making them aware of it. They're all aware, so why is there a rhetoric around this? What is the goal? Why do you think they're doing it? Because to me –
[00:21:15] T: I didn’t think it’s [inaudible 00:21:17].
[00:21:17] P: Go for it, Jay.
[00:21:18] JG: Because it seems to me, I think it's just, number one, they're pandering to their constituency base, their voters. Number two, it's a slippery slope that leads to the others like us.
[00:21:29] T: It's the politics of envy. Here's something you need to know. Everyone needs to know this. There's no point in discussing rates, if you don't discuss definition of income. Taxes are all about definition of income. When you start defining unrealized capital gains as income, that's definition of income. When people talk about 80% and 90% rates from the 50s and 60s, the definition of income was very different. The 1986 tax reformat eliminated credit card interest as a deduction. There were all kinds of tax shelters people could engage in. People do not understand that definition of income is critical. You can’t have a discussion without it.
[00:22:05] P: I totally agree.
[00:22:06] JG: That's where we started the topic to call.
[00:22:07] P: Yeah, I totally agree, Tina. That's, what's really going on here, to Jay’s point. Essentially, the government or, Yellen, the White House, they are basically putting a target on “wealthy individuals’” backs, because that is a politically acceptable way to shoehorn this, pass all the constituents.
[00:22:27] JG: They're pandering to the bottom 50% of income earners in the country. This is a true fact. The bottom 50%, they only pay 2.9% of the tax revenue collected for the government for federal taxes.
[00:22:39] JF: There was a girl who wore a dress that says, “Tax the rich.” This is a really phenomenal way to raise money and pander to your base. If you guys remember, if you look at how Mitt Romney lost the 2016, excuse me, the 2012 election, he basically was pulling neck and neck. This is the point that, I think, Jay was raising. Then he goes, 47% of Americans don't pay any income taxes. There was a secret video. Go watch the polling from that day through. This is an extremely effective way. It polls really well within certain demographics, a really large demographic and an increasing demographic, like, one where you can say, what's wrong with society? This is another one of those pointing to the symptoms and not actually to the cause.
[00:23:17] P: I do want to give yellow a chance to speak, because he's been extremely patient. Go ahead, yellow. What's up?
[00:23:23] Y: Thank you for having me, first of all, I actually have a question for a Jimmy Song. I'm a huge fan. What's his thoughts on banana bread?
[00:23:30] P: God dammit. Banana bread is an important asset to diversify one's holdings into, as you and I have talked about for a couple of days back, bananas are actually, a really interesting token, which has a physical aspect associated with it. We talked about the seeds, the fact that the Cavendish bananas are all clones and that there's a terrible fungus that's attacking all Cavendish bananas.
[00:23:51] Y: I know it’s off topic, and I'm hijacking a little bit. I'm sorry about that. I just want to know this and I'll be going that banana bread is a great store of carbohydrates [inaudible 00:24:01] through time and space. If you want to know more, you should read the banana standard and thank you for your time.
[00:24:07] P: I am going to bring us back around to this specific conversation. Let's continue.
[00:24:10] JF: We left off in a Banana Republic, or how we're leading to a Banana Republic. If that would get us to segue back to the wealth tax. I think, Tina, let a really sharp point that I think it was worthy of noting. This doesn't hit people that have a nine, 10-figure net worth. This is folks that are going to be in that seven, eight figure net worth, which probably is going to comprise a lot of people in this room, in the next 10 or 15 years at worst, even if you're really bearish like me, all joking aside.
[00:24:39] LW: It’s going to hit the people, too, bro.
[00:24:40] JF: I get it. I get it. I get it. Let me finish this thought, and then I'll let you get any pertinent thoughts in. I think, it's important to understand there are a lot of ways to manipulate this thing. By the time that this thing gets enacted, like most people have things figure it out before the actual tax laws get enacted.
When the Dodd-Frank tax after the bank said, after the 2008 financial crisis and the banks were the enemies, which they are, but any who, in terms of the political rhetoric at the time, literally of the 10 most important provisions of Dodd-Frank, eight of them, they already found work arounds for eight or nine of them, I believe, before the actual law actually was implemented. This is a function of making a lot of accountants richer. Let's take a counter and a thought here and just like, I don't actually see an unrealized tax bill being passed. I think, it's political suicide and 70% to 80% of the country's congressional districts.
I think, it's a really effective way to raise money and to insulate your power for about 20% to 30% of the congressional political districts. The reality is, very few things can get passed in this country. Things like that, I think, are going to be really difficult to do. Not just from a political standpoint, but actually, from a pragmatic standpoint. That's why I brought up the methodology they use. They're literally relying on Forbes to actually find the 400 richest people that they're citing in this particular report, or the 400 richest family.
The reality is, I think, Tina laid out that last point around where the burden will actually fall and it won't fall on that next bracket. It won't fall on the uber wealthy. This is one of those things, to bring it back to the conversation, I think, circles this all, this is what this is why Bitcoin matters. This is why you need hard money. This is why you need censorship-resistant money. This is why you need to start to build community, which I think is taking place in a much more sophisticated way in Washington than the entire time I've been. With Amanda’s efforts, with probably, Bitcoin Magazine, helping putting a lot of the content out that they are.
I know a lot of people personally that have been on the phone with senators, like Ted Cruz and Toomey and Lummis, etc. This is one of those things where we got to step up our game as well and be part of the narrative that's up for it.
[00:26:44] LW: Here's what's crazy. The part I was saying is this going to hit the people with six-figure net worth, too, John. The people who might be custodians and been saving for the last 30 years in their 401k and barely getting up to a million. You know what I mean?
[00:26:57] JF: You're not wrong, Lamar. I would actually say further, you're going to wind up having for selling. You're going to have a bunch of people selling assets, instead of accumulating assets.
[00:27:05] LW: Right. Then what happens when you started having for selling? What happens to the actual price of those assets, when you start having all of this –
[00:27:12] JF: All our volatility. You see it in [inaudible 00:27:13]. We've seen this with the point price every year in March or April, whatever, where the Bitcoin prize dips, because people have to sell to pay their trading bills, etc., etc. This is one of the things that happens with a lot of the estate taxes, even in current day, right?
Most people that are inheriting large dollar estates, aren't actually receiving a bunch of cash in bank accounts, or money market accounts. They're inheriting real estate. They're inheriting, perhaps, shares in a company. They're inheriting the family business, etc. This is where Jay was hitting in on, and Jay and I were talking about the stepped-up basis conversation. That will be the easiest way to attack it.
If you really wanted to increase revenue, especially from that targeted group of individuals, the way you do that is you basically increase their tax basis, or you remove the ability for the heirs to inherit the tax basis and you say, “Yo, this isn't a taxable event. They don't have to pay taxes necessarily then.” When they do, when you do die, or when you do give it to them, or when they sell it, then they're going to have to pay it based on a different basis.
[00:28:14] JG: John, they’ll probably do one of the two things. They’re probably going to do that. They may also say that we won't tax you on this liquidation event of your parents passing away, but if you pass away and still have it, that will be a liquidation event for your kids. You can't just keep it. They're probably going to prevent to push that down intimately and definitely.
[00:28:30] T: Hold on. You're saying, there's an unlimited elimination of the estate tax? Is that what you're saying? Because I don’t think –
[00:28:37] JG: That’s not what I’m saying.
[00:28:37] T: [Inaudible 00:28:38] about eliminating the estate taxes. Hold on. The reason you get – Hold on. The reason you get a step up in basis is because you get hit within estate tax. As a quid pro quo, you get the step up in basis. If you own XYZ stock at basically zero, and now it's at ,2000, you get the step up in basis, because for any estate over some amount, you pay a very large estate tax. You can’t forget that. You can't eliminate –
[00:29:02] P: Tina, I just want to make sure that the audience understands what you mean when you say step-up in basis. Can you define that for us?
[00:29:07] T: Okay. The basis is the price you paid. You bought Microsoft stock. You bought it back in 1989 and you paid the equivalent of 20 cents for it. Today, it's selling at 300 and some odd dollars. That's a step-up in basis. You own 30 million dollars’ worth, in the state of whatever, which is in excess of the exemption. The exemption today is 11.7 million per person.
Together, a couple can leave twice that amount, 11.7 million dollars times two to their children, with as an exclusion, and without paying a state taxes on it. They're going to drop that 11.7 to 5 million something, so you won't get as much of an exclusion, and you'll get hit on a estate tax over that amount and you'll pay the difference in the gains.
The reason Warren Buffet likes the estate tax so much is that when all kinds of people have to sell their businesses, because they can't meet the estate tax, because they may not be liquid, he gets to buy it on the cheap.
[00:30:05] JF: That's the point that I was getting. Forcing the selling in those areas for people that [inaudible 00:30:09]. It basically distorts markets. Hey, Tina, just because I think, and you're not wrong in everything you're saying, but just to repeat it, because for people who don't know what stepped-up basis is, probably got lost in the next two bullet points you are. Let me just literally recite this. [Inaudible 00:30:24].
[00:30:25] T: You do it, John.
[00:30:26] JF: Yeah, it’s fine. The tax code in the United States holds that when the person beneficiary receives an asset from the giver, the benefactor, after the benefactor dies, that asset receives stepped-up basis, in which market value at the time of the benefactor dies, a stepped-up basis can be higher than before death costs. Simply put, you when you're inheriting an asset, you basically can get the market price of the asset as your basis when you receive it, because the person who likely has given it to you, this is assuming that it's higher than what you received it at. If you're getting a piece of real estate that is now worth a million, but it was bought for a 100,000, stepped-up basis now allows for you to own that real estate at a million. When you sell it for 2 million, you would now owe a million dollars in taxes, versus 1.9 million. Is that more clear, P?
[00:31:12] P: Yeah, absolutely.
[00:31:12] JF: Should I try that one more time?
[00:31:13] P: No. Thanks, man. I also want to give just a chance for Shannon, you requested to speak. You’ve been up here for a while.
[00:31:19] JF: Hey, really quickly, P. Can we let Tina finish that? I think he's about to finish the last thought that I think it was really important. Tina, if I didn't interrupt you. And then Shannon, if you want to jump in on that. I think, you were really winding a really important thought that I was trying to –
[00:31:31] T: I don’t remember what thought. If you do, you can fill in for me, because I completely forgotten what I was saying.
[00:31:37] JF: No worries, Tina. What I think what you're doing is basically, tying the additive component of where you can extract more of more tax revenue, right? Just by using the illustration I do, so if you basically eliminate stepped basis, you're able to actually hit that group harder, and more likely than not a bunch of people that don't have the ability to pay that tax with liquid cash. What they wind up doing is they force sell assets, especially things that might not necessarily have huge market.
Imagine if you're buying – you get a piece of real estate, because your parents have had the family home for 30 years. Cantillon effect of inflation, etc., and has now driven that price. This is a middle-class home, probably in Chicago. It's now worth a couple million dollars, perhaps. Now, obviously, fast forwarding 10 or 15 years, the way that they'd be able to get more tax revenue is to obviously tax you on the basis that was the original acquisition of that asset. An example I used before, a 100,000 versus a million, obviously taxing 1.9 million makes that a lot more tax revenue, but also it distorts markets, right?
One of the reasons we have wash sale rules, P, and this is where I was trying to bring this thought home on market distortion, or perhaps, even more volatility, is that people are going to be selling for no other reason than to pay a tax bill, that they wouldn't have had, if someone didn't die, or someone didn't hand them something.
It doesn't allow for intergenerational wealth. It doesn't allow for you to transfer your energy through time and space in the way that Bitcoin is perfected. I think that's why it's like, this type of thought is super, super anti-Bitcoin, and I think something that should be concerning, even though I actually don't think that it's super practical.
I think, the stepped-up basis attack is definitely practical. I think, the ability to start taxing people on appreciation is going to be much more difficult, not only politically to pass, but also from an accounting standpoint to enforce.
[00:33:37] JG: They're going to try to tax you on the money you borrow against assets.
[00:33:42] LW: I think, also from a political standpoint, like you were saying earlier, if you even look at the whole idea of tax the rich, the problem is what I was saying earlier, I think, there is asymmetric information about what's really going to happen. The people who are on the bottom rungs of society that actually need to save and start investing in assets to start building up their own net worth and wealth, they don't understand that those same laws are going to be affecting them, because it's not affecting them immediately.
The problem is as those laws begin to affect them, they are going to be further behind in the wealth gap, which is not good for anyone who is trying to actually grow generational wealth to pass down for generations, so that the next generations can stop being in the situations that they're in.
I think, that's the part from a political standpoint that it almost is manipulative, to be all the way – What politics aren't manipulate? Let me rewind that. It's just politics as usual to try to manipulate a base to make them believe that it's us versus them. When the truth of the matter is, the us versus them is probably really supposed to be the government versus the people, the state versus the people.
I think, that's what really, we need to start looking at and understanding that some of these policies and the things that they're encouraging is not going to only affect these “billionaires” that they are targeting, but it's also going to affect everyday people. I think, that winds up putting us into a far darker hole when it comes to marginalized communities in this country, man. That's the part that makes me very passionate. That's the part that just makes me very upset that they try to do things like this, because you never can get out of the hole if every time you get out of the hole, they change the rules about what the hole is, you know what I'm saying? And what income is.
[00:35:31] JF: I’ll tell you, it’s also probably worth just to bring this home a little, P, and I won't be very long. This is just a Cyborg Yellen, pretty much. This is political suicide, I believe, for 70% of [inaudible 00:35:42]. Take a different position than me. That’s mine. It's okay for us to disagree. Let me just say this. Right now, this isn't a serious proposal that's getting any traction. These are the types of things that have been talked about for years.
It’s not like, I’m just putting this out there from a perspective of anybody that's sitting there and listening, worried about calling their accountant tomorrow and being like, “Yo, what am I taxed?” Take a deep breath. There's no new tax done.
[00:36:05] P: Great. Jay, before you jump in, I just want to comment and say, that's a very – Lamar and John, you just framed a really eloquent way of thinking about this, which is that it's ultimately an attack on what Bitcoin is designed to fix. Specifically, it's an attack on low-time preference. It basically forces you to have a higher time preference. I think, that's a really important frame for us to acknowledge, because that is the type of attack, the type of insidious attack that we are most likely to see on Bitcoin going forward.
Bans like the one that China has implemented, it's comical at this point, right? We all laugh that price barely is affected from just yeah, trying a good fucking luck. These types of things where the narrative is being shifted and more importantly, the incentives are being shifted. That is really fucking dangerous. I think, it's so important that we are – whether or not these are imminent threats as some of us think they are, or just proposals, John, as it sounds like, you think they are. I think we have to be hyper-aware of these things, regardless, because these are the types of threats that have a largest likelihood of undermining everything that we're trying to achieve with Bitcoin.
[00:37:13] LW: P, can I say this really quick, Jay. Just really quick.
[00:37:14] JG: No, man. Because I’m trying to talk. I try to be respectful here.
[00:37:17] P: [Inaudible 00:37:17] Go ahead, Jay.
[00:37:19] JG: Apparently, it's different in Spaces. You got to wait for everybody to finish. John, I agree with what you're saying, but I don't in a way. It's dangerous to have this thinking of, there's nothing to worry about. Joe's in here as a listener. He's not on stage. He generally does a lot of this.
[00:37:30] JF: No, that's not my take. Just for the record, that's not my take. That's why I'm here to join the conversation. I didn't want people panicking and calling their accountants and figure out, like thinking that this is a tax bill that we're talking about, like the infrastructure bill a couple weeks ago or something. I just wanted to put some component of it. That's all. Or some context to it. I do think it's important, and I do think it's a threat.
[00:37:50] LW: That's my whole thing though, John.
[00:37:52] JF: Hey, Lamar. After you're done, though, let Tina jump in, because he's been waiting for a while.
[00:37:56] LW: Yeah. Quickly, go ahead, Jay. Man.
[00:37:58] JG: I didn’t asked you a damn thing. I just wanted to say, that I think it's important to understand that I started the call off when we started this room, saying that words have meaning. they started this rhetoric in 2008 under Obama's hope, whatever the fuck campaign he had, when he kept saying they're not paying their fair share. the fair share line, I've never heard before. They've been pounding that drum and slowly introducing more and more overreaching tax strategies.
The first one was the Obama Affordable Healthcare Tax. Obviously, it made sense if you believed in doing the affordable care for the day, to try to have to pay for it what they say. They could just put in more money. They had the 3.8% tax. Then when Trump comes in and has his told tax plan and tax cuts, doesn't cut that tax, right? They’re never going to take these things away, so they slowly creep these things in. They start with the rhetoric. They start doing it this way. They lean it. They do the same thing at the fed, right? Where they'll say things like, “We're thinking about tapering,” and then they want to see how the market reacts. If the market doesn't overreact, they might actually try it. They try a few more signaling aside, a verbal expression. Then, eventually, they try it and they see how the market reacts there, then they push further and they push further. They're doing the same thing here with this stuff. This is what their strategy is. They push it out there.
[00:39:11] JF: They tax the rich –
[00:39:11] P: Wait a minute. Hold on. John. John, John, John. John, wait. I do want to give David a chance to speak and also, Shannon.
[00:39:17] JG: Okay. Nothing's changed, John. It's always been the same, right?
[00:39:19] JF: No. The first time that said [inaudible 00:39:21].
[00:39:22] JG: John, it is a strategic words. Listen to the words. Listen to the rhetoric.
[00:39:26] JF: I get it. I'm saying, you just said the first time you heard it was in 2008 with Obama. I’m telling you that this goes back to the election of 1890 with –
[00:39:35] P: John, hold on, hold on, hold on. John. John. I take a point. It doesn't actually matter when they are pushing this narrative. Jay's point rather still stands, which is that –
[00:39:42] JG: It’s accelerating.
[00:39:43] P: It is accelerating. Absolutely. Jay, you and I were talking about how I feel foolish being continually surprised by how rapidly we are accelerating along this timeline. This is how it goes to your point. You're absolutely correct. It's narrative and it's how does the public respond? Then, it's basically, okay, they didn't respond too harshly, or maybe only a little bit harshly. Great. We can lock us in and it will never be removed. You see this in every single aspect of our lives, including like, fucking bridge tolls. I live in the SF Bay Area, the Golden Gate Bridge, there was not supposed to be a bridge toll on that, and they have increased it every fucking year and every fucking year. It's announced as being a temporary measure that is never going away. I think, that it's so important as you said, that we are understanding these ideas as attacks.
[00:40:24] JG: The thing that gets me the most riled up, like I was the other day –
[00:40:27] P: Jay. Wait, hold on. Go ahead and finish this thought, and then I do want to let Shannon.
[00:40:31] JG: The thing that really gets me going is that it's a class warfare. It started with Obama creating this class warfare of the rich and the poor. Yes, John, they've been doing this for many years, but not as strategically calculated as they've been doing over the last 15 years, 13 years, I should say. Very strategic. Now, it's just dumping over into people, like Elizabeth Warren now, that are acting on the total polar opposite side of Donald Trump and the way the politics are, and they have AOCs, and you have multiple ones on that side of the aisle that are getting more and more radical.
It's dangerous and a rhetoric that needs to stop. You need to have people step up in Congress and stop this shit, because it's class warfare. It's pitting the majority against the minority. I don't care what the reasoning is and what those classes of people are. Whether it's race, religion, creed, wealth. I don't give a shit what it is. When you're pitting people against each other and it's a farce, because they're the ones creating the problem with the money printing, they know they are, it's completely and utterly disingenuous at best, what they're doing right now. Because they're blaming the rich. They're not saying it per se, but they're saying, they are paying their fair share. It's an implication.
It's very smart what Obama did and his team. They've latched onto it and they haven't let it go, because it assumes to the average person listening, the rich people are getting richer and they're using words like income. They've been doing this in the media, by the way, for at least a decade, when they would say, the stock market's roaring and Mark Zuckerberg’s income last year was way up, and because the stock is up. It’s like, that's not his income. They've been saying that. I've been correcting that on CNBC for years and they say it on CNBC, guys.
[00:41:56] P: To your point, and then I want to – I do want to let Dave and Shannon speak. I also want to welcome Dustin and Joe to the stage. This is a classic playbook. You take a minority that people are already biased against for various reasons. Then, you focus that ire and you focus that anger, and then you blame them for the things that you have, actually, the problems that you and by you, the government, or any specific entity that's trying to amass power has actually created.
This is a classic scapegoat strategy. This is, I hate to fucking bring this up, because if you immediately are an idiot if you bring this up, but this is exactly what happened in Germany, and this is exactly what we're seeing here. I'm not saying that – I’m not comparing Nazi Germany to America, but these are very tried and true tactics. Isolate groups, create narratives that divide them and then ferment anger between various groups. Then once you eliminate one group, you shift to a different group and you move them out as well, because the rules never go back.
[00:42:56] LW: We got a ton from Adolf Hitler, My Struggle. You can read the book and he can teach you things that do this.
[00:43:02] P: Yeah. Lamar, to your point, this happens with race and [inaudible 00:43:04] laws and everything.
[00:43:06] LW: No. I'm talking about race. I'm talking about, think about it, vaccinated, not vaccinated.
[00:43:11] P: Yeah. Perfect. Perfect example.
[00:43:13] LW: Think about it. It’s like, there's a division constantly being had, because what people don't understand is as long as they can keep you divided, they can keep control over you, period. I don't care if it's race. I don't care if it's class. I don't care if it's vaccine. Once you start to realize is these narratives, and that's why, when John was saying it, I thought he was saying the same thing Jay heard. The truth is that these seeds that are being planted, man, these seeds are being planted over and over again, just looking for fertile enough soil to make people believe that even things, like potentially socialism is better than capitalism.
You got all of these seeds that get planted. Then, what happens is now you have people who think socialism is better than capitalism, who think capitalism is better than socialism. Whether you have what P said, a divide, the seeds get planted first, then the divide comes later. It happens over and over again, and we're seeing it with this rhetoric of we need to go after this income.
When Jay said earlier about Mark Zuckerberg, the really wealthy in the world are not having income, because they're borrowing against their assets, so there is no income. The only people actually making income are us. It's not the billionaires. It's us. We're the ones making income. We're the ones going to get tax for that income and the same way that large corporations don't hardly ever have to pay tax, the same way large billionaires don't ever have to pay tax. It's always comes down to us.
[00:44:41] JF: Shannon, you better jump in right now, man. I'm going to try to block for you for three seconds. Do it.
[00:44:45] P: Shannon, go for it.
[00:44:46] S: I think, the moral of this story is that you need to have an off-grid Bitcoin mining farm that people don't know about, instead of investing in other assets. More importantly, what are you supposed to do about it? That's the big problem, right? The government tends to do whatever they want and they have a bigger voice. Tina's loud, but their voice is bigger.
[00:45:03] JG: To me, it’s memes.
[00:45:05] T: I'll chime in on an opinion on that, if you'd like. What I think, what's really critical is Bitcoin needs to get big. Bitcoin needs to be in the tens of trillions and hundreds of trillions of dollars, because basically, the bigger Bitcoin gets, Bitcoin effectively almost becomes its own nation state. It becomes a weapon and they know it.
We need to get other people to own and hold Bitcoin, because that does become an immensely powerful tool. People usually like to protect things that they own. It's not perfect, but it really does become very helpful when people have their own wealth to protect. You really want to encourage people. This is my opinion, and probably others disagree with that, but it's an amazingly powerful tool. Bitcoin we'll get to some size. Bitcoiners will be able to have significant influence on politics, because they'll be extremely wealthy, and to be able to hire lobbyists and do the things necessary to influence the way things work in this country and other countries. That's my personal opinion.
[00:46:11] JG: I think, you need memes. I'm not joking when I say that. The pay your fair share is basically a meme. You need taglines. You need something that resonates, that's digestible and easily repeatable, so that people can understand. What that is, it needs to be telling the truth. It needs to educate people with the truth and taglines. It's the only way to counter what they're doing and their taglines.
[00:46:31] P: I could not agree with you more. Yellow and I are literally chatting in the background about how funny it was that he came up and made the joke about bananas. I think, that is so important, because one, humor is one of the most effective ways to communicate. Especially when it is strategically interspersed in super heavy, or dense topics. More than that, Yellow is part of, what is it's like? The meme factory (This is not a real thing). I think, those types of initiatives are, they're funny, but they're also super, super important.
[00:47:04] JG: P, remember when Zuckerberg went to Congress and the Congress people asked him the stupidest questions and he's divestment, we sell advertising, when they were like, “Where do you get your revenue from?” That’s an hour of talking about how they derive their revenue. Those kinds of things, we have to find that type of shit and make that viral, to show that the people that are actually out here proposing these ridiculous things, it is ridiculous, because look at all the other ridiculous shit they're saying, and then you explain that. It's got to be 30 seconds to a minute on those types of clips.
[00:47:34] P: Yeah, totally. Okay. Shannon, it sounds like you got your – you were distracted/forgot what you were going to say. David, what'd you got for us?
[00:47:41] D: Two things. One, is Ron Wyden has already taken the stance that it's the billionaire income tax. That is the messaging now. It's a billionaire income tax. The stat that I think everyone needs to remember with this is in 1913, when the 16th amendment went into effect, less than 1% of people paid a 1% net income tax. That was where income taxes started. It's not going to stay with the billionaires.
[00:48:05] JG: Slippery slope.
[00:48:07] P: Yeah, totally. Again, this has nothing to do with facts or reality. This is a narrative game. This is about convincing constituents that a thing is true, that is not necessarily true. In this case, definitely not true. That is the terrain that we are fighting on, and I think it's really important to acknowledge that. Joe, I want to acknowledge you and thanks for joining us. What are your thoughts? Then I want to go to Dustin.
[00:48:30] J: Thanks, P. Thanks for all the great discussion in the room. A lot of great points. I was really enjoying listening. I will say this. I believe that this is a threat to be taken seriously. I believe this creep towards additional taxation is not to be minimized, or just pushed off as something that'll never occur. I think, it's something that we really need to look at very closely.
That being said, I do think part of the messaging and the narrative that we've overlooked here is that people are seeing the real way to stay flat. They're seeing a lot of situations where the middle-class, particularly the poor are trapped in these cycles, where they can leverage the Cantillon effect that a lot of other classes can. They are desperate for politicians to be relatable, to put on a dress and say, tax the rich and make them understand, or feel. It just shows some virtual signaling for why they understand their plight.
I think, that's a big part of this. Because if you actually look, and Jay made this point earlier, the amount of revenue under most of these proposals, it's not going to solve the spending. It's not going to be budget neutral. This will be taken on a tremendous amount of debt that is essentially monetized by the fed. You have to look at really, what is the point of this? Why are you emphasizing these tax changes and going after the wealthy elites here, if it's not going to solve the spending problem? In fact, in many respects, it's going to actually be negative and it's going to result in lower tax revenue for the reasons Tina said, because you're going to just find more and more loopholes and way to safeguard that income.
I think, part of it is