Capitalist Investor

Are Lower Taxes Always Better? Debating Trump’s Permanent Tax Cut Proposal, Ep. 322

• Strategic Wealth Partners

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In this episode of The Capitalist Investor, Tony and Derek dive deep into President Trump's proposed "one big beautiful bill"—a sweeping act aimed at making the 2017 tax cuts permanent. The hosts break down the key points of the bill, highlighting the benefits, such as extending lower tax rates, eliminating taxes on tips and Social Security (for specific income brackets), and promoting economic growth through investment and job creation. They also don't shy away from discussing the most significant controversies, including the projected impact on the federal deficit and the heated debate over state and local tax (SALT) deductions. Plus, Tony and Derek share their candid thoughts on how these changes could affect the everyday American, the stock market, and America's global competitiveness. It's a passionate, unfiltered discussion on taxes, fiscal responsibility, and what it all means for your wallet and the country's future. Don't forget to leave your questions and comments—and subscribe for more straightforward takes on investing economics and policy!

In today's episode, we are going to talk about President Trump's one big beautiful bill act and all the controversy that comes along with it. All right. Hey, Tony, how's it going today, man? Another day in Cleveland. Another day of gray skies and rain. Yeah. 60 degrees and raining. Yeah. I can't wait. Hope June's different, man. May's been terrible. Yeah. It's not been good. No. But looking like another golf night. Rained out two in a row. First world problems. I know. So we're going to talk about the big tax bill that's sitting in Senate right now. Yep. It's gone through. It's gone through what? It's gone through the House and a couple committees and polished up, given to the Senate and they said, hell no, I don't think they said it that bad. But I mean, there's a couple things they want to modify and are cranking through it right now. But the job of, you know, this episode today is to kind of talk about some of the, the key points. We'll talk about the pros, we'll talk about the cons, and we'll kind of see what we, you know, how we feel it's going to play out for the American people. Yep. So, all right. So in a nutshell, I just, this is, this is President Trump extending his 2017 tax bill and just going to make it permanent now. And in all honesty, I really believe that the stock market is pricing in that this just gets done. If it doesn't, man, you thought the tariffs made things rocky. Wait till you see this. That's just my personal opinion, but I do feel like it is going to be, there's going to be a resolution and most of the things are going to get passed. So. But let's talk about some of, some of the pros. Obviously, we have tax cuts. They're going to extend the lower tax cuts that, you know, President Trump put in place in 2017. Without them, we would revert back to the Obama tax rates. And everyone, you know, I did some pre calculations last year, but they're Saying anywhere between 15 to 20% is how much more people are going to pay in, in tax. I don't know, I'm not an economist or anything, but that sounds inflationary to me. Yeah. You know, you thought, you thought paying $40 at McDonald's for hamburgers was a lot. Wait till you just pay more money to the government who has a tendency not to do good things with your money. Introduce, you know, they're talking about no tax on tips and Overtime, you know, things like that. And the way they're gonna really set that up, because that's just a good headline, but it's gonna be bracketed. You can't make 500 grand a year, work overtime and expect to get a tax break. You know, it is meant to help, you know, middle America and some of the, the lower wage earners. There's a big stink about the salt deduction, right. Increasing it from 40 grand to, or 10 grand to 40 grand. Big, big. That's the, I don't know, that seems to be a real hang up for a lot of people in Congress at least, because you got states that don't, you don't pay taxes. And some states you do and they're like, hey, that doesn't help us. So we're on the out, right? So I think that's how it's designed though. Exactly. Hey, what about US Social Security income cuts, right? Like no paying taxes on Social Security. Again, I think that's going to have some type of bracketing system. Not everyone's going, you know, there's already a point where you don't pay taxes on Social Security. You really can't, you can't have any other money or any other reportable income. But there's still a zero bracket in there. But I think they'll just expand on that is what I feel they're going to, going to come down with. And then the mega savings account, a thousand bucks for any babies born in, in Donald Trump's second term. I just saw that, I didn't know that that was a thing and. All right, man, all you, all the, all the Trump haters. I wonder if they're just going to give him back his thousand bucks. Yeah, they probably will. They might. But economic policies, you know, behind beyond the tax cuts, going to help invest, you know, boost investments, encourage job growth. We'll talk a little bit more about that because the, the big con on all of this is how it's going to increase the deficit. So I'm gonna, that's where I'm gonna lay in, you know, the good things that it can happen. I, I believe that. I believe that actually it's been proven that by cutting taxes, you stimulate growth. Right, right. President Trump did that the last time and I'll talk a little bit about that. And national security, huh? That sounds like a really good idea. If anyone's fighting that, like, we got problems, I got problems with that. But, you know, beefing up the Defense Department border security, you know, when we're Donald Trump out there again, love him or hate him, when he's out there saying, hey, you know, Canada, why don't you just become the 51st state? I'm sure that, like, rub some people the wrong way. I think not everyone, like, really likes us because of our mentality to everyone else and around the world sometimes. So, yeah, I feel like spending money on defense is a good idea because we seem to piss a lot of people off and then, you know, but I mean, but it's, we're talking more of like, we got that missile defense system, the, what do they call it? The Iron Curtain, the, the Golden Dome. Golden dome, yeah. Yeah. The Golden Dome is Notre Dame. The Golden Domers. Yeah, yeah. I think it is called the Iron Dome. It is written down golden dome here, but I think it is called the Iron Dome. Yeah. Restocking the national, the nation's ammunition arsenal rather than giving it away to other people. Like, hey, how about we keep some bullets for ourselves in case we need them. Right. In expanding our naval fleet, you know, they've said our naval fleet is way behind. Yes. Everyone else just way behind. But again, how many, you know, like, maybe, maybe naval warfare is more stealth submarines. And if we have submarines, you don't know about them. You know, it's like the Doge, it's like, hey, you know, he's walking around the Defense Department. It's like, hey, what's behind that door? I'm like, you can't look behind that door, man. You know, like, that's secrecy. That's the whole name of the game. So anyway, those are, those are the pros. You want to add or subtract anything from that? The. No, you know, I think the, I really think kind of the, you know. The. Argument out there right now is that the more fiscal responsible Republicans don't like the, the increase in the debt. But let's talk about that. Yeah, okay. Because I, I, I'm like, Because I know that's the biggest, that's the biggest headline with this. You're going to increase the, the, the national debt by 3 to 4 trillion dollars. Let's rewind the clock to 2017, because back then when Donald Trump was proposing his new, you know, what would, the current tax bill that got passed, they were saying you're going to create one and a half to $2 trillion in losses. That was back in 2017. Right. As the cards played out the forecasts in 2022. So five years later shows that we are going to be on pace to have a half a 570 billion higher increase in tax revenue by cutting taxes. It stimulates growth. Think about this. This is, this is the way that I kind of look at that. If, you know, a lot of, A lot of. There's a lot of small business owners out there. There's a, you know, obviously we have big corporations and stuff, but if you increase taxes on a business owner, from what I have seen from my desk and working with business owners and, and their personal finances, they don't go backwards in their personal spending. They don't make cuts. So if you tax them more and force a cut, guess what they do? They fire people. Exactly. They cut, they cut human capital. That's what they do. Or they'll spend less on research and development. They're going to, they're going, they're going to be fine. Right. It's everyone that they might employ or hire for. You know, whether they hire the human capital or just spend the money, it's over. They might be fine on this, on the surface, but if taxes are raised for everyone, then everyone has less money to spend and you know, you would assume have less money to spend on that person's business. So, you know, raising taxes is going to cause a, you know, a giant headwind for the economy. Yeah. Because the headlines are like, well, the tax revenue reduction, you know, tax revenues are going to be reduced. That did not play out the last time. We are extending this, what I just mentioned. It's, it's a surplus. Right. It's, it's, it's, it's more than they thought. Right. Than it was a decade before. It helps the rich. Well, you know, if that's what it. So be it. Well, did rich create jobs? I don't know what to say. Maybe they, maybe it does, maybe it doesn't. But, you know, the rich people make what I forgot that statistic. It's like the top 5% of earners spend 70% of the money or something. Like, like they buy 70 of the stuff. It's like 70 of the tax revenue too. Yeah. From the top 5% or maybe it was the top 10%. You know, they're talking about extending small business deductions again. If you tax businesses, they are going to make that money up somewhere else and it's not going to be in anyone's favor who has a job. Yep. And then extending the estate tax exemption, it's like $20 million. Like, I do feel that that's a little egregious. That's up there. Like it affects nobody, essentially. Yep. You're either way Below it or way above it. Yeah, you're, I mean it's, it's so astronomically high, but it is, you know, that's the way they designed it. And I could say like, yeah, we do need tax money, but you know, there's, I'm probably saying this and some rich person out there is like, that's a stupid comment. So who knows. But you know, and plus the one thing I so like talking, the deficit part is the, is the biggest part. Like it is such a headline, headline statement that, I mean, yeah, if you don't account for growth, yeah, it is a deficit. But again, the last time they said it was a deficit, it became a surplus. Right. It could happen again. And that's what Donald Trump is, you know, President Trump. That's what he is expecting. Yeah, I mean people, people choose to ignore the problem, but what we're doing, we can't continue just spending ourselves into, you know, into debt to the levels that we'll never be able to pull out of. So you know, kind of one of my points was, yeah, they're the, the fiscal conservative Republicans and in its Rand Paul basically one of the only politicians I like. But he, he's still, you know, very much against this. But at the same exact point in time, no one is doing anything to codify any of the Doge cuts and spending. You know, that, that's what this bill was supposed to be. It was supposed to be spending cuts in here as well. And you know, it's like one line on our summary here. But, but that, that's the main problem. It's, it's not, it's not a revenue problem, it's a spending problem. And until they, they stop spending so much money, you know, the government's never going to get out of this, this never ending debt cycle. Yeah, I mean if I walk up and down the street, be like, hey, do you think you pay enough in taxes? Then everyone's going to be like, hell yeah, I pay taxes. I, I pay taxes on things that, on my earnings and then I pay taxes on a house that I have paid off. I pay tax, I pay taxes on money that I make with my money that was already taxed. Like tax, tax, tax. It's like tax on tax on tax. Like, come on man, you want to raise them when we're already getting, you know, we're getting taxed from every angle. Right. So I don't know, I'm cool with keeping taxes where they're at. I don't know about anyone else, but outside of the deficit side. So I think we made a good case on what the headlines are saying versus what is being planned and not really talked about. But there's proof in the pudding from the last tax bill that lower taxes, it stimulates growth. But the one thing that will happen with this passing of the bill, 1100 pages, man, we're talking about a lot of, you know, it's going to complicate taxes specifically, probably maybe not next year's taxes. I mean the plan, the tax planning will have a problem. Yep. But next year, next April, because we're going to be filing this year's taxes and those, these are locked in. It's what all the tax, you know, it's going to be a very interesting to, you know, because we always say, like, hey, you know, it's your job to understand taxes and pay the least amount possible. So that puts a big workload on us to figure out what was passed and what are the tax strategies going forward. Because there are going to be, you know, several ways that this is going to become a maze of how does this work, how does that work? Hey, Tony, how do I keep my income low so I get tax free income for my Social Security? Like, you know, like there's got to be a lot of, a lot of things that have to happen. Yep. Right. And no, no, understanding what we need to do right now is going to be very helpful because it might involve Roth conversions. Hey, you know, like, if you want Social Security tax free, let's do the analysis. But we might need to convert a lot of money this year. Yeah, I don't know. I'm making that up. But I mean it's definitely, it's definitely something that's going to be, I feel that's going to come down on our plate, you know, to help our clients on tax efficiency. You know, another thing is, is, and I don't know this well enough because it's hard to, it's hard to find exactly the right source to understand the cuts in Medicaid, you know, in the Obamacare, you know, the subsidicity, what's the word? I can't think of the word. Anyway, the Obamacare kind of benefits and things like that. Think about this, man. Like I'm, I, I just, my, my, my skin boils when I, when, if, if I believe it, like how, like somebody who came here illegally is, is on Medicaid. I just can't believe that that would happen. Yep. But I mean, you read enough articles and yet and they say it is happening. I don't know, I don't know. I don't look at the Medicaid budget. I don't know who they're, I don't know who the recipients are. I don't think the government knows who. The recipients are, that's for sure. But you know, that is where, you know, tax cutting, the bill they're going. I would make an assumption. I, I'm not going to say they're going to, but I'm going to make the assumption that they're going to clean this thing up. The people that are taking advantage of the system that it wasn't designed for. Right. Medicaid should be for people who are out of money or. Yeah, exactly. Just, I mean, they don't, they should. They have no money and they need medical attention and they need medical benefits. That's who it's meant for. How somebody else gets on it, you know, manipulating the system. I don't know. Yeah. It seems that we just keep moving further and further apart on these issues. It seems that real debate, real conversation doesn't even happen anymore. And it's kind of a tangent here, but look at California, right. California has, I don't know it off the top of my head, but it has to be one of the biggest states tax revenues in the country. It has to be either New York, California or Texas. You know, all those Hollywood stars making movies in Hollywood, you know, they've stopped doing that because the taxes are so high. But it is just there is so many state taxes that go into California and the state government of California is so broke so far in that everything is hopeless. When, when, when you look at their, their state budget, I mean, look at the fire department. You know, the fire department couldn't even operate essentially because they had a bunch of diversity officers and underfunded everywhere else. Yeah. Or they got, I think they showed like when, when California had that, those tragic fires, like all the, all the fire engines that were just broken. Yeah. They're sitting in a graveyard essentially. Yeah. Right. And they, they not spending their money in the right place. Exactly. That is exactly that. That is the point that no Democrat will ever utter out of their mouth is that there is money, it's just not being spent well. And I'm getting to the point. California recently passed legislation to provide free health care for every illegal immigrant. It's like you can't afford to, you have no money to do that. And who is not a moral debate. Right. There's only a limited amount of things that you can do. And if we lined up 10 Democrats from California, all 10 of them would agree that that was a good move to do when there's no rationale on how it's going to get paid for in a state that is already just taxed to death. It's crazy. I agree, man. We're taxed to death in some states just hurt worse than others. Right. But again, this deficit spending, you know, like how it's going to add to the national debt. No, I, I don't believe it. Like not, not to the tune of 4, not to the tune of $1 trillion. I completely agree with you. I just don't believe it because it can stimulate growth. But I'm on board, man. Like again, I'm just blatantly saying it. I just don't think a lot of people in the world like us because the way we operate, you know, and so, yeah, spending$150 billion on defense, that makes a lot of sense to me, man. I'd love to protect our freedoms. We're free. And not a lot of countries are and they don't like that. Yep. Because it there you're. We're setting a bad example for the, the tyrants out there. Right. Or 50 billion on border wall construction. Like, I mean, how I, I need to look this up or who knows if we can even figure it out. But how much money was spent on letting just people come over the border? Yep. And you know, you hear the rumors that they put them in planes and strategically those aren't. Well, I mean, how much was spent? Because you got Clinton and Obama who, who have deported tens of millions of people and we're kicking out a plane full of gang bangers and, and the place is going crazy. Like you can't do that. Like, are you like again that these headlines that stir the pot with no substance is just, that's what I hate about today. Ever since COVID It's just what stirs the pot this day, man. And like how can I get under your skin? Let me, let me try a couple. Ways to do that. Like good God, man. Peel back the onion, do some research, read some articles. And again, the first article you read, that's what I try and do. I try and read like two to four articles about a particular thing I'm thinking about and to see if I am, if, if they all have the same conclusion. Right, right. I don't pick the first one because it could just be biased. So anyway, at the end of the day, I do feel that this, this spent, this, this tax bill a needs to be passed a Because I don't want to pay more taxes. It will wreck the stock market. Like I. Again, the market has priced in the passing of this bill. If there are hiccups and not saying that it won't pass, but just, just like any delays, any pushback that is exempt, you know, like, like really brought to the attention to like where this thing could come to a screeching halt. Any of that stuff is a. Is just. It's the, the pathway of more volatility this year. Yep. Absolutely no 100%. And you know, most of it's due to the, the taxes. Right. Yeah, it's, It's. It will affect everybody. Businesses, individuals, you name it, man. And the corporate rate goes. Yeah, right? Yes. So, yeah, it's small business, big business. Me and you just getting paid like 20% less. Enjoy it, man. It's gonna be great. That's exactly what's gonna happen. So. So, yeah, it definitely is definitely priced in 100%. So if there's problems with it, you know, you can expect probably at least a 10% pullback. Probably more. I don't even. I don't even want to. I mean, there was a 10% pullback on his hawkish tariffs. Yeah, like, everyone. The market priced in the tariffs, but not the way he came at it. Right. And then the market fell off 10%, but then everyone got a 90 day breather and the market just rebounded back to where it was essentially. So again, be prepared. You know, at the end of the day, I feel that this bill will get passed. Can it create volatility in the stock market in particular? Yes. If there is no conclusion, I would actually be surprised. Like that it's so priced in that once it's passed, like, the market sells off slightly. Yep. Just, you know, the market runs up to it and then once it happens, it. It lets off a little bit of steam, in my opinion. Sell the news type of deal. Yeah, exactly. Sell the news. I like that. So. All right, man. All right. Well, good stuff this week. Yeah. Enjoy talking about that big, beautiful bill. Hopefully it does get one. One big beautiful. And we were talking with our engineer. I'm like, really, man? Like who? You wake up and just say, man, I can't wait till that beautiful bill gets passed. And then somebody has. It's like, I like the ring of that. And just. He just ran with it. Oh, man. Yes, Mr. President sounds like an excellent name. So thanks for listening this week. If you guys have any questions, comments, show ideas, hit us up@infowconnect.com and we'll talk to you next week. The opinions expressed in the podcast are for general informational purposes only and are not intended for to provide specific advice or recommendations for any investment, legal, financial or tax. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.