 Back with community matters in Roger Epstein, we're going to talk about why we need to raise taxes on the rich, and notice that need has got a capital N. Welcome to the show, Roger. Nice to be here, Jay. It's always a great pleasure to discuss these things with you. Well, let's talk about the tax reformatments when the capital R of 2017, the one that Trump did without hearings back in very few weeks after he was inaugurated. What did that provide? And what is the problem? And does that problem finish now? Well, the biggest piece that hurt the country in terms of revenue was to reduce the tax rates on corporations. And it was the largest tax reduction in the history of tax reform, tax laws, and it raised the national debt by something like almost $4 trillion. A trillion dollars is so much money you can't even fathom it. If you took a $1,000 bills and you stacked them up so it was a million, be one foot high. If it was a billion, be high as a hundred story building. If it was a trillion, you'd have $1,000 bills packed up a thousand hundred story buildings. Oh my goodness. And he raised it somewhere close to $4 trillion with just that one tax cut. It's a little hard to measure because he also raised it because of the pandemic. So he was the third largest percentage raised in the history of counting our debt and almost $8 trillion increase during Trump's period when he promised to reduce the debt and do all kinds of other things that would be helpful. But it was very disastrous. It's ironic that now the Republicans, that's the same party, erratically, is saying that we're spending too much money and that we should stop spending money and reduce the size of government. I can't wrap my mind around that. So first you reduce taxes and then you reduce government and all the while you're increasing government spending so you don't have enough money because you have reduced taxes. But you tell the Democrats they're spending too much money, even though you spent too much money. Anyway, so it boggles them on. The theory had been the only way to force a reduction in spending was to eliminate reduced revenue, sort of starve the beast. That was the concept. But unfortunately for Trump, he reduced all the revenue, but he didn't reduce any of the spending significantly. And so we end up with what we've had in the past with this same theory from Republicans, additional debt. When Reagan took office, the national debt was under a trillion dollars. Now it's somewhere in the range of $33 trillion. But that was the beginning. We used to say Reagan took us from a predator nation to a debtor nation, but that may be we may have been a little underwater coming into his regime, but he dramatically reduced taxes. So the theory was one of the theories, the one I just told you that you starve the beast. The other theory is that if you cut taxes enough, you will stimulate government business enough, so you'll have additional revenues. So you cut your rate, that increases the number of transactions and business that's stimulated. So you actually get more money, even though you're paying at a lower rate, because you've got so much more income. So we had to talk about the detail of that 2017 act, because my recollection is that the rich guys got a big cut and the middle class got a smaller cut, and then the middle class cut was slated to go away, but the rich guys cut stayed. Tell me if I'm right or wrong. Well, we actually got a huge reduction in the small guy. There were a lot of people who are now off the income tax records. They don't pay it, but and this is where we really get confused. Everybody, whether you make $1,000 or $100,000, pays self-employment tax, but it's not treated as a tax. So let's say I make $20,000 a year. I don't pay any income tax, but I got to pay like maybe $1,500 of employment tax, but it doesn't count as a tax. And then the Republicans say, this is a big benefit that we're giving people, even though they've paid in their whole lives. We got to cut back on Medicare and Social Security, because they're going to go broke. So we've kind of confused when you say a lot of people don't now are below the income tax threshold more than we're in the past, but they're still paying self-employment tax, which is a dollar to them. And because interest rates have been so low historically and actually still are low, even though we're complaining about how high they are historically, they're fairly low. And so money doesn't earn enough. So when you put this money into the Social Security Fund, it's not earning enough to grow enough for people's... It's like the pension funds. You know, this is a big problem for our country. And another reason why we have to raise taxes is because people's pension plans got cut out. We've talked about this before, Jay, but somewhere in the 90s, 2000, all the big companies, their formulas were, if I put in $100 today, it's going to be worth $250, and I can pay out a percentage of somebody's salary when they retire. That's a real classic pension plan. But if your money only grows to $150 instead of $250 because interest rates were 2%, now you don't have any money to pay. So the big corporations were saying, we're going bankrupt. So they changed the law to bring in 401K plans, which essentially is your money put away for your retirement, and then sometimes the companies match. Sometimes they don't. But whatever it is, what's in your account is nowhere near what an annuity for life at 30% of your past compensation would be. So we're just at the critical point. We're just above it where those pension plans were cut out so that you and I, we still have some pension plans if we were in that situation. But people after us, they got $100,000 in their 401K. So not only are we going to have problems with Medicare and Medicaid and Social Security, we're going to have seniors living on nothing. So we actually have to increase those payments unless we want more people out in the streets. Well, I take it that since 2017, the federal government has not reversed the reduction of the Tax Reform Act of 2017, and we have not increased any taxes. Yeah, that's true. And we still have the tariffs on Chinese goods, which means prices are still up because of that. So Biden did not reverse those things. And I don't know why. I heard he somebody advised him that if you reduce the tariff, it's not going to lower prices. But that to me just sounds impossible. Somebody's paying that tariff. Trump claimed it was the Chinese, but you know, you pass it off to your customers. Have to. Everyone does. Sure. As far as the tax cut goes. Now remember, I told you a long time ago when I started as in a tax business in 1967, as an internal revenue agent, the highest rate for individuals was 70%. And corporations were 50% after a small threshold. And so it could have been higher. Wonderful. Anyway, 70 and 50, and then Reagan started bringing it down and now it's 21%. And so one of the arguments against soaking the rich, so to speak, is that it won't be enough. Okay, so it won't be enough, but it'll be something. Why did we give them all these tax breaks? And now we say, oh, if we raise taxes, we're not going to give that money back from the rich. They're already paying 90% of the tax. Well, they've got 90% of the assets. So now you know, it's like this administration is afraid of a next election. They're afraid of losing support among people. And everybody said if you raise taxes, you lose support because everybody's mad at you in raising their taxes. Biden is fighting a guy who's got 91 indictments, all kinds of issues, already paid $25 million from his university that defrauded people 160 million out of his corporation, which has been banned from doing business in New York. And he's still leading the guy, leading Biden for a whole bunch of other reasons. And so yeah, are you going on top of that if you're Biden, raise taxes on everybody? I was saying nothing of the way he's handled the Middle East. So all that is affecting his popularity and raising taxes would seal it. He would lose a lot of, what do you want to call it, independent support. But in a perfect world though, Roger, and assuming that this administration was not concerned about those questions of popularity, but simply wanted to do the right thing, what would they recommend to Congress, even assuming Congress would do anything? Because even if Biden suggested a tax increase, and she was, Congress is not allowed to do that, is it? No, the Congress is not likely. But if you keep pushing for it, maybe you'll get it. The Congress is pretty close. Maybe this next election, the Democrats will get in, but will they have the guts to raise the taxes? Now, there is a proposal. This is something I looked at before we talked. There is a Republican proposal to eliminate the income tax, and instead have a sale, a national sales tax at 15%, which it's just insane when you see what's happened to and what has skewed the rich and the poor. Well, as I recall, Roger, a sales tax is a perfect example of regressive tax. Of course, exactly, Jay, and that's the concept that the Republicans say is fair. So look at this, there's a national, there's a sales tax, you're making a million dollars, and you're spending 200,000. So now you pay $30,000 in taxes out of your million. You got 800,000, well, you got 770 left because you spent 200, you got 30, okay. If you're making $60,000 and you spend in 100% of it and you pay 15%, you pay $9,000 out of your 60. And of course, you can't live on $60,000 and not in Hawaii and not in most big cities. And so you're totally underwater. And this guy has 800,000, 750,000 disposable income. And that's supposed to be fair. As if the country doesn't do anything for you. That's the point. The country doesn't do anything. You did it all. You deserve all the money. Living in a country that has laws that enforce what you have has all kinds of infrastructure with banks and all the things the United States has led the way it. And you don't get robbed because we have good beliefs, there's less corruption, all these things, that didn't do anything. You did it. And when you look at how now we don't manufacture as much, financial income is what we produce. And so dividends are taxed at 20%, whereas your salary is taxed up to 37.5% and you got to pay this employment, social security employment tax. So who is honestly looking at these numbers and saying, we just went nuts in the last 50 years, 60 years, and I mean, 70s and 80s, we've really got going. What are we doing? Is that the society we want where people are living on the street? Where we're going to have all these senior people who, we just spend enough money to begin to redo the roads and infrastructure and some bridge collapse somewhere. I mean, I don't think, I think we want to look at the country and say, how much money do we need to run this country? How much money do we need to keep people from living in poverty? And of course, Hawaii is a perfect example. We instead of building affordable housing, we've got every time you turn around, there's another site in Kakaako that's become in a high-rise building, 80% owned by foreigners, 50% utilized. And then we're going to build a housing development in the center of the island so people can take two hours to get the Waikiki where they were. And so we've lost that sensibility all the way around. And you know, Jay, you don't make major change without somebody getting hurt. And the way people got hurt, the last time we did this was in the 1900s when we had the robber barons. And they owned so much and everybody else was poor. Everything collapsed and we had the Great Depression. And so I don't think you keep squeezing it until you get to some point where people bell or the system falls apart. But I expect with the elimination of the traditional pension plan now catching up with us. Didn't catch up with us because a lot of people were grandfathered in. But now those people who were starting or in the middle somewhere when the whole system changed, now they're stuck and they're beginning to retire. They're not going to have enough money to live on. So one thing you mentioned that troubles me, that maybe enlightens me is that we have this huge homeless problem. And the homeless problem is a function of the availability of loans and the price of loans. And I think you suggest and I totally agree that if we had a tax structure that cared more about the social safety net that these people would not be homeless. It's a huge problem. And one solution would be to make the tax structure more egalitarian. Am I right? Oh, sure. Oh, definitely. Or other things we could do. You build a high rise down in Waikiki that nobody will either rent out or use for themselves because it's just a vacation that they spend two weeks or a month there. Why dribble their real property taxes? And let's pay for something else. We have an opportunity now because of COVID to revitalize downtown Honolulu, turn it into an affordable housing, homeless section. We could do that. We could tax just the foreigners on their real estate and many other solutions. But it's hard to tax more people. And it's all so hard, Jay, to come up with solutions that actually work. And there are cities, many cities around the country are left with all these commercial and office properties. And that's exactly what they're trying to do. But you've got to have thoughtful people in the legislature. You've got to have consultants here who understand our society. You can't just bring in people from New York or Los Angeles. They don't have the same mentality. And so we got to trust ourselves to do something. And somebody needs a holistic, comprehensive plan. Well, you know, one thing about reforming the tax structure, I mean, and providing a social safety net and returning to a time where the government cared about people requires greater taxes. But I guess the problem I see is that if you want to tax the rich or tax people in general, that is a political issue. And the public doesn't understand what you are saying what we are saying. And the public would oppose it. The public would oppose any candidate who calls for greater taxes. And we right now let's assume for a moment just for this discussion, that Trump is running on one side and Joe Biden is on the other side. Neither one of them will be will include a platform point to raise taxes, neither one of them. And if you have, you know, lots of elections and campaigns in the Congress, very few of those candidates are going to be seeking the tax reform and tax increases and increases on the rich. I want to add one more point. And that is money buys votes. So if I am wealthy, if I have a wealthy corporation, I spend money to buy the votes for those candidates who would not get a raise taxes. And this perpetuates the benefits that go to the people who have the money to spend on the campaigns. And then when you add Citizens United, you know, that that that, you know, that accelerates the whole process. So what I'm saying is the problem is there. Solutions we when I can come up with solutions that they are worth trying my tax reform. But there's an enormous political juggernaut working against tax reform. Am I right? You are absolutely right. There's no question about it. And think about this. Just think about this in a big picture concept. In the 60s, we had a huge increase in federal government in large part to counterbalance the states activities in civil rights. So we put a lot of money and organizational structure into enforcing civil rights in the South and all. Okay. So the whole idea in the 60s was, yeah, the federal government will help us do everything. And the southern states were saying, no, states rights, don't you can't make a one one size fits all. And of course, Reagan came in and he said, government is not the solution. It's the problem. And we we let that become our overriding concept, even for Democrats for everybody, even though maybe the Democrats didn't believe it as much, that was still the playing field that you were working against. And now we've got it way down federally. So if if if a corporate tax rate in Hawaii is 6.4%. And the federal tax rate goes down from 35% to 21%. So that's a 40% decrease. A lot of that money was going to the states in different kinds of grants. So maybe it's time to go the other direction, let Hawaii do what it needs to do to become a good place to live. People in Texas and Arkansas, the cost of living is nothing down there. They don't have the same problems we do. Maybe federal money isn't important to them or sufficient, although they're all living off of it. But anyway, all I'm saying is maybe we should look maybe we should add a 40% increase in the corporate tax rate to make up for what we didn't get from the federal government. So and also we're a homogeneous place in terms of everybody here loves, you know what I'm saying, we the average person is here because they love to be here, whether they're born here or they're not. And we all believe to some extent in the term aloha. And so this is a perfect place to try to create a model for how to do this. Who should be paying the taxes? How should that work? Let's not make matters worse. Let's do things that lower the value of real estate. Nobody wants to lower the value of real estate, Jay. But that's why people can't buy in addition to salaries not being high enough. Well, that's why they're on the street. Exactly. So would it hurt? Okay, my house is valued over $2 million. 50 years ago, I got in what seemed a high time to me, but it was much less than it is now, I paid $125,000 for that house. Now, suppose the house was worth a million, the value was cut 60%. I'm still living in it. I don't care. I mean, I do and I don't. So I've always thought, what could we do to separate the investment value of housing and the shelter value? There's many plans for that, but people, real estate brokers want to keep it up. And that encourages more people to buy, but wouldn't it be better if the prices went down? Alert with the appraisers for a moment, Roger. There was a bill and some litigation, maybe 15 years ago, which was intended to change the appraisal techniques, because the appraisers work for the big capital. The big capital wants higher prices, higher valuations, and so it goes higher and higher. The entire real estate industry wants it to go higher and higher. And so there is a methodology possible, and that has changed the way valuations are made, and thus reducing values and ultimately reducing the cost of occupancy. When you take that and put it on top of the fact that we have limited land and put it on top of the fact that the state is the biggest landowner in the state, and some big trusts are the biggest landowners in the state, nobody wants to see it go down. Everybody wants to see it go up, and the population, the people, the citizens, they're the ones who pay that awful price. But I agree with you in this sense, I want to offer this. If you go to Europe these days, even with all the trouble they have in Europe, the fact is the taxes are much higher, and the social safety net is much higher. The government takes care of you, and they're ahead of us in terms of appreciating the need for people to have a reasonable life. Your thoughts? I couldn't agree more, and I remember seeing a program not too long ago where these people were being interviewed and they said, oh, we would love to move to the United States. It's just 10, 15 years ago. We'd love to move here. It's really nice. And then the guy starts saying, well, you know, in the United States, you only get two weeks vacation. Why? We just spent a month in Australia, and we still got another month to go, and I just visited France, and the people I was staying with only worked six months a year. In fact, the daughter is a lawyer, and she stopped practicing law because in the UK and in the United States she had to work a whole 12 months, but think about it. Yeah. And so, Jay, I think where things have to get so bad before they evolve, and who's ready to give up their own values? Who's ready to let their house go? I'm happy to see the other guy's house go down, but you mean mine's going to go down? And so these things are difficult to implement. But you and I know because we're kupuna. We don't have to say what are we going to do when we grow up, but we're seeing our kids and our grandchildren not be able to afford houses, and we're seeing more people on the streets. And do we have the guts? Do we have the political will to change and say, I'll give you one more example. I was in Bhutan in 2019. Bhutan is surrounded by India and China, and as the king there, there's only 750,000 people, and they're all the same religion. But the king saw that they were getting into this capitalism and becoming the first world instead of third world, traveled all over the world. And he said, what he saw was people with a lot of money who were unhappy. And he said, we don't want to be that way. And he said, what you measure is what you put your attention to, what you put your attention to is what you get. So we're not going to measure gross domestic product. We want to be happy. We're going to measure gross national happiness. And that's the goal for the country. And they have a survey every year. I'm trying to get one implemented here. And let us see how happy we are. I'm seriously working on this, Jay, with a number of really good people. And happiness has become a byword Yale University did a course in happiness was a most heavily attended course in their history. And they put it online, I did an online course, they have a regular webinar, and now Harvard has a program on happiness and Stanford. So I feel like we're getting to a point where things are so lousy. Maybe we're ready for a meaningful change. The word aloha can mean love can mean community can mean working together, so that we all have a good life. What, you know, why not, but it's going to take a huge change. And not a tweak of what we have, we've got to change our mentality, maybe in a way that the Bhutanese did to say, we want to live in a place where people live aloha. But Walter Dodd should have tried to make that a statement years ago as the head of the first Hawaiian Bank. But I think it's possible we could do it. Can we do it next week, next year? Could our grandchildren put it into place if we start the process now, maybe that's a more realistic concept. But I do think we've reached the pinnacle of our current society, whether you know, I think it's misplaced capitalism, I don't think it's capitalism. Capitalism was set up so that if the butcher made us some extra money, he could invest in the baker to create a bakery so the community would have two facilities instead of one. But instead, it's become how much money can I make, I'm doing it all myself, how much can I keep, and the heck with everybody else. And it's, I don't mean that in a, I mean, people are generous, people are loving. But there's a limit. And greed has become a really problematic thing. It's, it's, it's every religion tells you not to be greedy. Every, you know, do unto others as you would have. When do we start believing our traditions and really implement them? And, and we don't have to do it in a religious way. Now there's always been a tension in this country back to slavery in the Civil War. On that whole notion of it's mine, including my slaves. And don't take it away from me. And let me, let me control this at the state and, you know, local level so that the federal government doesn't come around and take my things away from me. I don't want to participate in the social safety net. I don't want to help anybody. I just want to hold on to what's mine. Right. That tension has existed. And right now, I think we're on the upswing of that as well as Reaganomics come, come to come modern. But my, my, my concern is, you know, how do you, how do you change that? So if I give you people who appreciate the social safety net realize that if the people on the street are homeless, if there is crime and corruption, that affects the guy in the penthouse, because the quality of his community has deteriorated. And he is at greater risk of unpleasantness because the community has deteriorated. So it's in his interest to have a good, solid, hopeful, happy community right there on the ground. And people, you know, people have homes and they're not in blue tents and they're not starving and their children are healthy and all that. Long as he doesn't have to pay for it. Right. But the question I put to you is this, where do you start in dealing with this cycle of happiness? Do you make people happy first? And because they're happy, they will reform, they will reform fiscal policy, they will reform the tax structure. They will reform, you know, the social safety net. Or do you, do you force it on them? You know, and history has shown both sides of this have emerged at one time or another in American history and European history. Or do you do it by force? Do you, you know, tax relief? Do you do, you know, firm up the social safety net and give everybody comfort that they will have a retirement, they will be, they will have social security and Medicare and Medicaid and all that. And then from that, you get happiness. Which side do you start from, Roger? My clear determination, and I've started, practically, I created something. I used to do this Hawaii Forgiveness Project for 20 years. We've morphed it into the Aloha Happiness Project. And my idea is think globally and start locally. And if we do a survey, we can see where we stand. Are we happy? Are we not happy? And we begin to see that. We begin to come up with models that maybe somebody will implement for happiness and business, the triple bottom line. Instead of just profits, people places in profit. Where's your responsibility? You know, the corporation, if you ever read David Corten stuff, when corporations rule the world, it's a sociopathic concept. And they're the ones that are controlling all our politics, these sociopaths, who get the biggest break of any other business person, they're not personally responsible for liabilities, yet they get treated as human beings for purposes of giving money to politicians and many other things without the responsibility or even the negative look of the community. So I say, let's start looking at where we are right now. We got a million people basically on this island. And everybody knows everybody. You and I, we put ourselves together. We're only two or three people away from everybody on the island. And so we all have this belief in Aloha. And one last thing, Jay, a wonderful friend of mine, Elizabeth Satoris, is a evolution biologist. And if you read her book called Gaia, the Living Earth, what you see is evolution doesn't come just because you wanted to. It comes when the current circumstances get so bad that you can't stand it anymore. When even at the beginning of the world, when some element in the air got bigger and bigger and bigger, all of a sudden it was too big to exist there and it exploded or something. And it formed two elements and then this and that and we got the one-celled animals. But we are in that place, I believe, and I'm not, I remember those cartoons where a guy was carrying a sign that the world is ending. I don't want to be like that. And I'm not. I think things are, we got so many good things now and so many good things, but we're not happy. We haven't created a society that's it's out of balance. It's not fair in many ways and it needs a dramatic change to where people begin to care about each other and take responsibility. And it won't change until it gets bad enough. I thought second George Bush was bad, then you get Trump. We got to have another round of Trumps and what's after that. So hopefully we've done what Joseph Campbell says, in your darkest cave lies your greatest treasure. The dark cave we're in now could, should, would, hopefully, force us to change our underlying approach to things. Not only are we separate people, but we're completely connected to each other. Energetically, as quantum physics says, through Kayakua, Allah, God, as the religion is say, academically it's been studied with and Jungian philosophy and Joseph Campbell, these people, and just your own experience that when you think of your daughter, she calls you on the phone, we are connected to each other. And if I even think a bad thought about you, it hurts me. And when we begin to live from that paradigm or get close to it, then we might treat each other in a different way, feel responsible to pay back to the government to share that you earn that needs to help keep people off the streets, that needs to have people get fed, all these things. I think there's an indication that we could be at a place where we can either jump off a plateau or make some progress on it. And so, again, when you ask, where do we start, I don't think we force anything on anybody. I don't think fire fights fire is a good idea. You just burn everything up. And it's hard to see how you could make people happy by forcing them to be happy. So I'm with you 100%, Roger. And I think the bottom line of this discussion, we started out with tax reform and the need to soak the rich. But, and we do need to do that. But one piece of it, one piece of it, one piece of the rich, it's get the rich back to where they were before, so that we have at least a shot at having enough money to pay for what we got. Right. It's a reimagining of large societal structures. And we have got to all cooperate and collaborate in that reimagining. I think there's one basic element that you would have covered. And that is caring. It's biblical. This is a moral discussion, really, caring about your neighbor, caring about your friend, caring about your brother. And I think we have to come back to that because the way to do a better humanity is to care. And I think the world would be better off. I'm sure you will agree. The other thing I want to add here at the end of our show is that, yes, of course, that's the sine curve of humanity. Before we get better, we'll get a little worse, maybe. But getting worse is painful. It is painful for the individuals involved. And, and as you said in this discussion, we have to be prepared for that pain. We have to be prepared to make sacrifices, sacrifices that will benefit others, perhaps more than they benefit us. Anyway, thank you, Roger, for a great discussion, as always. Thank you, Jay. And, and as Campbell said, in your, in your darkest cave lies your greatest treasure. When you're in that dark cave, it's painful and it's scary as hell. And I want to lead this conversation with the thought about a project that we're doing, the Aloha Happiness Project, getting a lot of people involved, try to make Hawaii a model for living from the caring you're talking about. Because I think in our hearts, most of the people here really believe that. And that it's a possibility and one that we should work towards. Thank you, Roger Epstein, an attorney, a philosopher, a moral man for many, many years of his life. Thank you so much. Thank you, Jay. I really appreciate that. And I appreciate you and think tech. Aloha. Aloha.