- Discussing Bitcoin Freedom Vs. Government Servitude - Bitcoin Magazine
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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 ulti