78 cent coffee McDonald’s Coffee is not bad. Long Lines at Dunkin’ Donuts. Ed loves to talk about new cars. Everyone needs a 4×4. Joyrides in Chicago. IRS audits. “My Cousin Vinny”. New and improved taxes.
Welcome to our listener supported podcast Money Talk, uncompromised absolute financial truths behind financial perceptions with hosts Ed Sutkowski and Chuck LeFebvre. Let’s listen in.
Chuck: I’m Chuck.
Ed: I’m Ed and we’re having fun today. I’d like to talk about some things. First, Chuck, on my way in this morning, coffee. Right in a little area, same area, a McDonald’s, a Starbucks, and a Dunkin’ Donuts. Why would someone ever go to Starbucks?
Chuck: Oh, well, you’re preaching to the choir here, but continue with your thought.
Ed: No, I’m thinking it’s probably 120% more cost to go to Starbucks than to Dunkin’ Donuts. Well, actually–
Chuck: 320% probably.
Ed: McDonald’s senior coffee is 78 cents.
Chuck: Well, and the truth of the matter is that it used to be that McDonald’s had terrible coffee, and they decided that they were going to– that was one of the ways they were going to bring people in, I guess during breakfast time was to make their coffee worth drinking. I consider myself to be a bit of a coffee snob, and there’s not really any coffee you can grab on the road that I’m super pleased with, but I’ll go to McDonald’s. To me, that’s is nice as anything you’re going to find. I hate Starbucks coffee. I think it’s just over roasted and tastes like charcoal. Everybody who goes there, they always have to load it up with cream and sugar and everything else because the coffee itself is terrible.
Ed: Dunkin’ Donuts, tell me how you feel about Dunkin’ Donuts.
Chuck: It’s like McDonald’s. It’s what I call journeymen coffee. You’re not going to rave about it later but it’s not going to offend you as you’re drinking it.
Ed: Well, let me ask you a question. The question is, first, why coffee, but second, when I pass these stores, there’s a line. McDonald’s, maybe twelve car– why doesn’t someone get out of the car and go walk– because there’s no one behind the counter. There’s a server, but no one walks in.
Chuck: I know, isn’t that amazing?
Ed: Why would you have twelve cars at Starbucks and McDonald’s, maybe six at Dunkin’ Donuts because it’s so expensive. Why? Tell me why.
Chuck: I know, it’s weird how people don’t want to get out of their cars to go into these places these days.
Ed: What do they do? This, by the way was pre COVID-19.
Chuck: Right. It’s gotten worse, but definitely that was the case before COVID-19 and now of course, you can say in a way it’s post COVID-19, at least with respect to access to the interiors of these restaurants. People are the same way. They’d rather sit in their car for ten minutes than take three minutes to go inside, which is really, I don’t under it– I can’t answer that. There’s a lesson there about human nature, but I’m not sure what it is.
Ed: Well, I suppose if you start on a road, you’ll continue on that same road. Anyway, I also thought about the cars. I have a fascination with cars in the sense of why people buy new cars.
Chuck: Right, you’re not actually a car fan. We don’t want to give people the impression that that’s what you are saying because that you are not.
Ed: Among the many things I am not, that’s the most obvious. Specifically looking at McDonald’s this morning, Mercedes, there was one Tesla, Buicks. All fancy, fancy cars and why does someone want a new car? Can you tell me that?
Chuck: Oh, I think the answer is different for different people. Some of them definitely it’s a status symbol.
Ed: Status? Wait a minute. You can lease one.
Chuck: It’s perception. You’re correct in what you just said, but they give the perception that it’s a mark of success or whatever. I think that for some people, there’s this romanticism associated with cars where it’s a part of their identity, and they want to get like a sporty model, or at least something that’s very fast or has a big engine or whatever you could say. You just dream of that day when you’re really going to be able to open it up and drive it, like a sports car. Even if that never happens, there’s a narrative that goes on in the mind of that car driver/owner that drives their purchase decision. It’s not a true narrative, it’s a fantasy. It’s a story that people tell about themselves and about where they are in life and what the car means to them.
Ed: Advertising. I’m saying the culprit are the advertisers.
Chuck: Oh, they play into all of that, absolutely.
Ed: Advertising/poetry, the same genre. In other words, poetry takes extensive use of rhyme and rhythms and what is really not being said. You self-realize when you’re reading poetry. Advertising, we’re going to make you the Marlboro Man, we’re going to make you the Porsche driver. It goes on and on and on and on, so we’re being taken advantage of.
Ed: Manipulated by the advertisers and these people– Now the four by fours, have you seen these four by fours?
Chuck: It’s funny you say that, because when I was riffing there a minute ago, it’s one of my pet peeves is that at some point in, I think it was around the early 1990s or so that people stopped buying cars and they started buying these SUVs. There was a period of time when the term SUV didn’t exist in our language, and it showed up and suddenly everybody wants to have a four-wheel drive. We used to call them Jeeps, and now even Porsche has an SUV, that’s out there and that’s what people buy instead of cars, and they drive me nuts because I’m always the person who’s trying to see around them.
Ed: Right. What are you going to put in the back, your fishing gear? Nothing wrong with going fishing or hunting, but they’re huge and expensive and gas guzzlers and accommodate maybe two or three people.
Chuck: In many cases, they are less safe than a smaller vehicle because the higher center of gravity, the fact that if they roll, there’s so much weight going on to that passenger cabin that it’s more likely to collapse than if it was a smaller car. There’s really, except for some niche users who really do have to haul things around, it’s not a practical choice. The truth of the matter is that most people most of the time are alone in their cars and now, I’m not saying that I’m going to be the first to sign up for this but you’d probably get all of the utility that you need out of a car by having one of these little tiny smart cars or something. You just need you and whatever personal belongings you have with you to get from point A to point B, safely and comfortably.
Ed: Well, let me overstate it. In a large metropolitan city in ten years, you will not have a car. You will share a car or you’ll have an Uber, or whatever that company will be. In other words, the automobile will have lost its usefulness in a large metropolitan city.
Chuck: Yes, my understanding is that in New York City itself, it’s very common for residents there to not even own a car and why own one you have to pay to store it somewhere? It’s not the fastest way to get anywhere in the city, what’s the point of having one?
Ed: Uber, a good opportunity. I must tell you a story that I still can’t believe. I’m from Chicago and had occasion to go up there recently with my wife and I hailed a cab and went from the station to our hotel. The taxi driver, he could have been an Indianapolis Speedway driver. This guy was driving with one hand and weaving in and out and he knew exactly where to go, underground, Wacker Drive, up and left, right. I’m thinking why would I ever want to buy a car? Hire this guy.
Ed: Find out when he’s going to be in town and hey, and it was quite a joy ride. We got out of that car, that taxi, I thought, “Man.” My point is why do you need a car versus if I had driven up to Chicago in the car, where to park it, it’s $20 an hour. I was in Atlanta a couple of weeks ago and went out to eat with this friend of mine and his favorite girlfriend. There was a Rolls-Royce convertible.
Chuck: I didn’t even know it existed.
Ed: I didn’t either. I asked the valet. I said, “Hey, guy, what’s this? What about this car?” He said, “That’s a $250,000 Rolls-Royce convertible.” Wow. That’s called identity crisis. I said, “Well, what was it like to drive?” He says, “What are you talking about? That guy won’t let me drive it.”
Ed: I was thinking of that iconic movie. Remember, what was the name of it, Home Alone or whatever?
Chuck: Oh, yes.
Ed: They parked the car and the valet drove and his buddy drove the car all over the city.
Chuck: Oh, yes, you’re thinking of Ferris Bueller’s Day Off?
Ed: Yes, Ferris Bueller’s Day Off. I wanted to say to the guy, was the owner Ferris Bueller or what?
Ed: The point is that this automobile thing is amazing to me because you don’t need what you’re buying. Tesla’s nothing more than a computer on wheels. Yet, we have Hertz putting in a order for 100,000. I couldn’t believe it. Then the owner says, “I think I’m going to sell some of my stock. I sold X number of billions of shares. The market just goes down 25%.” Anyway, those are fun topics, but I want to address something that’s really quite serious. I receive an average of two to three of these a month. They’re fraudulent requests for money and look to be issued by the Internal Revenue Service. Here’s an example, one I saw just recently was a client had filed a gift tax return. Somehow this promoter, this fraudulent person, this disingenuous person created what appears to be a demand for $574,000. I said to the client, “Look, it’s fraud.” Clients get pretty afraid. Well, I have to check this out. Well, guess what? Those are frauds. Why? Chuck, as we know, the Internal Revenue Service is the subject of all kinds of procedures. If you’re going to be sent an audit, it’s going to be an office audit. It’s going to be a mail audit. Then you go through the procedure, and you have appeals. There’s a 30-day letter, 90-day letter, you get a text. These cases can take years. One we’re involved in, how long has this thing been pending?
Chuck: Well, I know the one you’re referring to. One of the tax returns in question that is in dispute in that case was filed at the end of 2018. Here we are, as we’re speaking, it’s November of 2021. We’re nearly three years into this.
Ed: Nothing of substance has happened.
Chuck: Right. So far, the IRS hasn’t even taken a position. Other than, “We’re examining the return.”
Ed: This is a gift tax return issue. Tax was paid, you have to file a claim for refund. Then you can go to District Court, which means you get a jury trial. Now by the way, if you’re on the other side of this the IRS wants you in tax court. You don’t have to pay the tax and you can go to tax court. Guess what happens in tax court?
Chuck: Well, you’re heard by an IRS employee playing the role of a judge, really.
Chuck: From a practical standpoint, that’s what you’re talking about.
Ed: You will lose.
Chuck: Well, that’s a more succinct way of putting it.
Ed: Well, in the jury trial, and all tasks in my world, tax cases must be filed by way of a refund in District Court. I spent a career in part with audits and I will tell you, you’re behind the wheel when you are in District Court before a jury. If you’re in tax court, where you didn’t have to pay the tax and you’re petitioning, so you’re probably going to be in Washington or maybe St. Louis. It’s a paper machine. There’s no jury, there’s no opportunity to explore other issues. It’s largely on the record, and guess what? You’re going to lose.
Chuck: For background, tax court, notwithstanding the fact that the word court is in the name, it is not what would be referred to as a so-called Article III Federal Court. In other words, it’s not a court created under Article III of the United States Constitution. The judge that’s presiding over those proceedings is not a federal judge who’s appointed by the President and then approved by Congress. A tax court proceeding is really a form of alternative dispute resolution when you think about it. It’s an arbitration proceeding that is occurring within the IRS. It’s a court like proceeding where evidence is presented, but at the end of the day, the judge who’s presiding is on the payroll of the IRS, as is your opponent.
Ed: Just for clarification, again, you said, we have an audit. By the way, don’t get devastated when you get a request for an audit. It’s not the end of the world. It’s a species of intimidation unless you can understand what’s going on. Relax. You get a notice. You go to your tax preparer and go through the rigmarole of presenting receipts and disbursements. Let’s assume you’re not being fraudulent. That’s a whole different issue. You’ll know if it’s a fraud audit, they have to notify you when it becomes a fraud audit. Then if you disagree with the report issued by the examination, you could have an appeal. If that doesn’t work.
Chuck: To stop you there, an appeal is not going to tax court.
Ed: No, internal administrative appeal. Guess who you’re going to get? You’re going to get someone that’s employed by the service. Remember, in the tax area, and for that matter, in the government area, in general, you only make a mistake, that is, the guy on the other side, if they say yes. The IRS employee will never lose a job if the employee or guy says no. Don’t expect concessions with someone who must keep that job. It’s not going to say yes, it’s going to be no.
Chuck: To lay a little more background here. You get an audit request; you participate in the audit. Before, just to make sure people are following where we are in the stage, the audit has to conclude and then you get a result. Before anything else happens, you get a written notice of some type. Typically, it’s called a notice of deficiency, where the IRS informs you that they have concluded that tax was underpaid, and they tell you how much tax they believe is still owed. Then at that point, you can go to this administrative appeal level, the Appeals Office. That is essentially just a second look at the same record. Right?
Ed: Yes. I must tell you an experience I had in a tax fraud situation. We spent a lot of time trying to reconcile the books and records of this really innocent taxpayer, just had terrible records. The governor was trying to set up all kinds of fraud penalties, criminal penalties, just on and on and on and we worked on it for two years. I couldn’t understand these records. It wasn’t a receipts and deposits kind of a case where you could track through banking records. I went out to DC, the Department of Justice. There’s these three lawyers on the other side. Here’s me coming in. Just had a little notebook, nothing fancy. We sat down and the lead lawyer, he said, “Well, you’ve got to have more information.” I said, “Absolutely not. I’m here to tell you that I’m going to end this case x months, I haven’t the slightest idea what happened here. If you can prove this case for a jury, set up a jury trial.”
Chuck: Well, it was a criminal case?
Ed: Yes. The guy was going to go to jail. By the way, jail isn’t all that bad because the food I understand is not too bad.
Chuck: Let’s pause to make sure our listeners understand. Ed is not providing legal advice-
Chuck: -with that comment.
Ed: This is a story. It’s a true story. After about 15 minutes, they kept, “Where is this–?” They’re really officious. “Why, we’ve got all these degrees, and what are you doing here? Peoria, Illinois?” I said, “If you guys can prove this beyond a reasonable doubt, be my guest.” I have nothing more to tell you. What else do you want to talk about?” They were dumbfounded. I said, “Well, I’m going to go see the Senate. I’ll see you guys.” I packed up, went across the street, virtually, went to the Senate, watched some proceedings, flew back home. Client said, “How’d it go?” I said, ” I haven’t the slightest idea.”
Ed: “I don’t know, but they’ve got to prove this. I can’t understand it.” About three months later, I receive a letter from the IRS. “We’ve decided to abandon the case.”
Chuck: That’s interesting because in that case, they were pursuing a criminal case where if they want to convict someone of a crime, the burden of proof is very clearly on the government and it’s to prove the case beyond a reasonable doubt. Normally that’s not what’s going on when you have a dispute with the IRS. Normally it’s a civil proceeding, or more generally it’s an administrative proceeding, and quite often the burden of proof, in those cases, is on the taxpayer to prove that the return that was been filed is accurate so you can’t have quite as much fun in those situations.
Ed: Trying to figure this out, how is this going to play before a jury of ordinary people and that’s pretty hard for those of us who’ve been schooled with all these academic issues and you think, “Boy, everyone understands–” No, no. The ordinary people, as they should, just understand certain things and it’s one issue. In passing, in the tax cases I’ve been involved in, you get the Department of Justice lawyers who are usually pretty young. They’re trying to make a record so they can go on to do big things and they do not want to lose a case. The last thing the DOJ lawyer wants is a bad case. If you understand what’s really going on and you have command of all the facts, you know that the lawyer on the other side, the younger person, although some very well-schooled, very senior people, very professional at the DOJ level. These are not turkeys. They’re quality lawyers. They don’t want to lose it. If you can make it clear that there’s a strong possibility of them losing this case, it’ll get settled. That’s an inside story, but I’ll tell you what, that has occurred on more than one occasion. The idea is understand the source, understand the person on the other side, understand the judge, understand the lawyers, understand the witnesses, spend 80% of your time on 20% of the issue.
Chuck: Again, and this is important. It might have gotten lost in the storytelling here that you’re referring to the Department of Justice which is predicated on the idea that you are not in tax court in these scenarios. You’re in a true Article III court.
Ed: Federal court.
Chuck: -Federal Court which means that in order to get there, the taxpayer, having received this notice of deficiency– For instance, use this example. Let’s say this wasn’t fraudulent and you had a notice that said IRS has concluded that your gift tax return, you’re short $574,000. That’s what we’re going to attempt to collect. To get into federal court, the taxpayer has to pay that $574,000 and then sue the government to get a refund of it so that’s a big check to write on the front end. The advantage of writing it is that once you make that payment, interest stops accruing while the case proceeds, but the big advantage is that that’s your ticket to get into federal court. Then you’re dealing with these Department of Justice employees who don’t want to lose. Like you said, people who work for the IRS, I don’t think they care quite as much about that. Their careers are not staked on that.
Ed: Then the idea is you’re before a jury and that’s where the leverage is. My personal injury lawyer friends tell me that, “Look, we get good results for only one reason, assuming we’ve got a decent case. The jury.” No one can understand– They’re typically state court juries, versus the federal juries are typically very, very sophisticated. You are not a blockhead when you get on a federal court jury. They’re very good and they understand and it’s just a positive form to have a dispute resolved but the DOJ guys and gals do not want to lose.
Chuck: Those jurors, tell me. My impression is that they’re pretty sophisticated in the sense that they can dial through all of the chaff, and they can figure out what’s really at stake here, what’s really going on.
Ed: Very quickly.
Chuck: You don’t fool them. Nobody fools them.
Ed: There’s no yelling and screaming. They’re pros and I say pros, those are accomplished human beings. The Department of Justice lawyers are accomplished human beings usually with postgraduate degrees. The only problem is most of them have not tried too many jury trials. The only way you feel comfortable trying jury trials is by doing it and you start with very low levels, and you finally realize that litigation is not the easiest thing in the world to do but that’s a whole different topic.
Chuck: So you don’t get your practice by repeatedly watching My Cousin Vinny and picking up pointers from the movies.
Ed: The tension in a jury trial in a tax case is tremendous, you’re exhausted. Fortunately, they usually adjourn on Thursday, so you’ve got Friday, Saturday, and Sunday. Three days to prepare for Monday and everything is scripted. Anyway, it’s an opportunity to have a little fun but yet you don’t do it every day. To summarize where I think we’re going, I hope we’re going here, is that don’t get all upset when you get a notice of an audit and disregard these fictitious demands. You’re not even involved in an audit for x thousands of dollars, that’s BS.
Chuck: These things you’re talking about typically come in not as a notice of deficiency, which is what you’d expect to receive at the end of an audit, but as a notice of levy or a notice of-
Ed: They’re going to go to your bank account.
Chuck: These notices, they come at you completely out of context and of course, they scare the bejesus out of people who get them. The threat that’s embedded there isn’t you owe tax, it’s, “We’re about to freeze your bank accounts.” I think what people need to realize is that if they get one of those and they haven’t had an audit and they haven’t had a notice of deficiency, they hadn’t previously been told that they owe any more tax, that this is just completely at odds with anything that the IRS is legally capable of doing, just simply coming in and freezing your bank accounts without giving you some kind of formal notice and an opportunity to appeal the decision. That’s why when you see these, Ed, and it does seem like an astonishing number of these have been coming in the last year or so, your conclusion is these are fraudulent.
Ed: It’s hard to convince a client that they’re fraudulent. “Well, it looks real, Ed–” I said, “No, look. It’s fraudulent,” and the problem is these are usually sent to senior citizens, and they know– Who likes lawyers? Even the spouses of lawyers don’t like lawyers. “I don’t want to go to a lawyer, it’s going to cost me some money.” Well, yes. Unless you find a lawyer that will pay you to allow him to represent you, which I don’t think is going to happen, but in any event that’s the threat. There’s a fear, greed, the government, and revenge that’s what’s going on in the world. The government is always there and I must tell you my experience has been the government employees are virtually all very, very professional and well-intentioned. You get some outliers on both sides of the bell curve, but that’s everywhere.
Chuck: Actually, that’s an important point with these notices. Let’s say you’re wrong and it’s not fraudulent. This was issued in error to the taxpayer. Before the IRS would actually proceed to freeze your bank account or take your assets, there would be an employee somewhere who would have to actually do that and I agree with you, Ed. I’ve seen some unfortunate exceptions, but by and large, even the much-hated IRS is typically staffed by people who conduct themselves professionally and follow these procedures almost to a fault. That’s been my experience in the handful of collection matters that I’ve been involved in is that they’re pretty meticulous about going by the book on these things.
Ed: The big area that is very troublesome and you’re going to lose on is if you’ve consumed withheld employee.
Ed: Yes. You want to pay over the money you’ve withheld from an employee’s check. If you don’t watch out, there’s nothing, by the way, even Clarence Jones can’t help you on that, guy. You’re in trouble. Make sure you pay your payroll taxes on time, if not ahead of time, and anyway, that’s a bad thing that no lawyer can help you. The rest of this stuff, and I must tell you, I agree with your analysis of the IRS employees. They’re generally very rarely other than very professional. At the DOJ level, they’re typically lawyers.
Chuck: I understand– Clients never believe me when I tell them that about the IRS, but by and large, I’ve had good experience dealing with folks from that agency.
Ed: The trouble is even if you’re candid, unless the record is absolutely clear with the folks on the other side, it will not want to compromise. Wait a minute. I don’t want to be criticized, so again, it’s know your professor, know your teacher, know the subject, know the opposition and so it sounds like anyone can do this stuff. Yes, anyone can do this stuff, but you better have done it a couple times before. If it’s heart surgery, you don’t want to ask the doctor, “How many times have you done this” and he says, “Well, you know, not very many.”
Chuck: This’ll be my first foray-
Chuck: -into the process.
Ed: I can assure you, I’m not trying to sell our services as tax professionals, but I will tell you, there’s plenty of folks around that do this stuff, but make sure, as the saying goes, you never want to hire a young lawyer or an old doctor. Experience does have value, I think, but I don’t know. Chuck, do you want to talk a little bit about this annual asset tax that is not going to go through.
Chuck: Yes, we’ve touched on it before, and I agree with you. I can’t imagine it going through and my reasoning is the same as what it’s ever been, which is that I think when the rubber hits the road on something like that administratively– What we’ve been talking about is a perfect example of that. Administratively, these asset-based taxes are so much more difficult to administer, for the service and even the taxpayers to have any confidence as to the accuracy of reporting is just an incredibly– It’s an enormous undertaking to prepare an estate tax return. The idea that above a certain wealth level that that kind of undertaking is going to be done on a annual basis is something that I think sounds a lot better if you’ve never gotten your hands dirty in the process than if you have. Income tax, income is just astronomically easier to track, to quantify, to collect, to audit, even though this might sound counterintuitive, than trying to tax wealth itself, because the issues of valuation might seem in the abstract to be extremely simple to resolve, but in practice, they’re very difficult to resolve.
Ed: Let me give you an overview. We have Senators Wyden and Elizabeth Warren, and the theory is to impose an annual tax on the excess of the fair market value of the marketable assets over your original cost retroactive to the date you founded the company. Marketwise, it’s a tax of 23.8% so you have to sell assets to pay the tax. Now, remember, this is the first time in recorded history where a tax is imposed where there’s no taxable event.
Chuck: On the federal level, because we certainly see that all the time. We see that every year with property tax.
Ed: Oh, that’s a different issue.
Chuck: For federal taxes, this is a brand-new thing. Even the estate tax and the gift tax, that involves assets in movement, they’re in transit from one taxpayer to another.
Ed: Out of the community. Husband and wife, no tax downstream out of the community. You have an opportunity, there will be some issue, some tax. Now, we have non-marketable assets and that’s interesting. You have an interest charge of 1.25% per year payable when the asset is sold. That’s non-marketable. It came down to what this would do to the stock market. Well, so everyone’s going to go private and then the tragedy is this is an attempt to reallocate, not income, but redistribute wealth.
Ed: It failed and, in my view, this will never occur.
Chuck: Well, first of all I’m not an expert on the limitations imposed by the constitution of this sort of thing, but it strikes me as likely to be unconstitutional to tax wealth in place when there hasn’t been a tax.
Ed: It’s got to be apportioned among the states.
Chuck: Setting aside that issue, again, what I just keep coming back to is the face– Look, as much as we don’t want it to be the case, the government is going to impose tax on people, it’s going to raise revenue. This particular method of doing so just strikes me as one where it has to be one of the most administratively difficult and complicated ways of going about it you could ever dream up.
Ed: What’s the value of a closeout business? I’m not talking marketable assets around the New York stock exchange.
Chuck: That’s easy. That can be done with a 10-99. That’s almost like income tax, but these non-marketable assets are, I mean, there’s just so much room for argument about what the real value is.
Ed: Real estate?
Ed: Works of art.
Chuck: Intellectual property, and that’s just looking at the assets themselves. You get into all these issues about the characteristics of how their own fractional interests, restrictions on alienation or on use that might be in place contractually and how all of those things affect value. None of those things at all have any role to play when you’re taxing income, because income is almost always in the form of cash. You just, cash entered your hands, that’s your income. These are issues that will just permeate a tax of this type. We know this because those are the issues that permeate the application of the gift tax and the estate tax, and you better believe that the number of those kinds of issues and restrictions and contractual obligations that attach to property that would otherwise attract tax will increase astronomically if a tax like this wherever put into place specifically to reduce the tax liabilities. Not only would the tax itself be a very complicated tax to administer, but the world in which the tax is being collected would become a more complicated world as a result of the tax being put into place.
Ed: It’ll never get enacted, that’s my view. It’ll never get enacted. On the other hand, if it does it, if even a little bit, the doors open a little bit, beware, once the door is open on any kind of tax, that door doesn’t close.
Chuck: Right. Again, I just would be shocked if this turned out to be if this could constitutionally pass muster, but even if it can, it would be an astonishingly difficult tax to administer.
Ed: I’ve dismissed that. I think about the alternative, the current income tax system is the European system. They collect your assets, and they send you– collect the asset information and then they send you a bill.
Chuck: By the way, this tax is different. Even though I earlier made the analogy to property taxes that are imposed by states and counties and so forth, this is, in terms of these administrative complexities, these taxes are different because property tax, even though it’s taxing property that’s in place, it’s taxing the property itself and not the owner, if that makes sense to you. All of this stuff that I talked about a minute ago, about restrictions on alienation and contractual obligations and so on and so forth, none of that can ever play a role in property tax because you’re just looking at the property. What’s the property worth? You assess it. You impose a tax, and it doesn’t matter how it’s owned or who owns it or whatever. That’s up to the taxpayers to decide how to portion the tax liability. This is different because if so, it would be a tax on property, a tax that’s assessed based on the value of a property, but it’s not a tax against the property itself. It’s a tax on the taxpayer. That might sound like word salad-
Ed: No, no.
Chuck: -but it makes a huge difference.
Ed: The world is governed by rules and if you’re changing rules that have been around for decades, that’s a tough act to sell. Chuck, one of our next opportunities to visit on sometimes related, sometimes unrelated topics. I mean this coffee thing, I don’t think it relates to anything, nor the cars.
Chuck: We could talk for an hour about coffee if you wanted to.
Ed: My fetish is I have a fetish about cars. The issue that I’d like to address in more detail at subsequent opportunity is this wealth accumulation process. What goes on in the mind of the introverted wealth accumulator, the extroverted wealth accumulator, and then when you accumulate the wealth and you have more than enough to consume, what do you do with it? I think that I’m finding that to be fun when you visit with people that have x dollars and x plus, whatever, what are you going to do with this money? I can only buy so many cars. I can only buy so many homes. I find it to be a fascinating discussion and I don’t know the answer, but I think it’d be well to at least discuss opportunities that we’ve had to experience this transaction, this transmission of wealth outside of the community, downstream. Why have you bothered to accumulate it?
Chuck: That’ll be a good talk.
Ed: Okay. Next topic. Thanks.
Thank you for listening to Money Talk. Please join us again and do check out our previous Money Talk topics.