 My name is Ray Tuchiyama, another episode of Business in Hawaii, and it's a very hot Thursday afternoon in Honolulu, the capital city of the state of Hawaii. And we have, coming online, our guest from the great state of Nevada, in the city of Las Vegas, Wrenchbaker, and he is right there. And he is, he is, of course, a small business advocate for decades. He started out as a CPA, first and winning in Honolulu. He worked in various areas, including banking, tax preparation company owner, COO of a health insurance firm, worked with airlines, and he has been the host of this show and really did many, many, many shows over nearly three years, I think. And he continues to give his insights about business on a national level from his new location in Vegas. Wrench, how are you doing today? I am doing very well, but I gotta ask the question, Ray. How hot is it in Honolulu? It's probably, today, is above 90 degrees. It's a hot day. It's about 91, 92 degrees. So it was hot just walking across Bishop Street and in Vegas. Well, and you add the humidity to that 90-degree temperature and it can feel a little bit warmer. In Vegas here, it's about 102. So we're starting to get into the triple digits and we'll have to suffer through that for a few months and then we'll go back to normal. Okay. And today we're going to talk about, I guess, the insights on what's happening to the United States economy, society, and it comes out of a trip that you took recently in a car from Vegas all the way to Florida. And tell us about the trip. How long did it take and what areas that really came out to you and said, wow, things are changing in America? You know, I grew up in St. Petersburg and when I was 18 years old, I left and I did not return for probably 25 years. I wanted to go back and visit where I grew up. I went to high school and so we drove, we took a road trip from Las Vegas all the way down to St. Petersburg and the Clearwater and Treasure Island area. That's the west coast of Florida on the Gulf of Mexico. And then we turned around and we drove back, but we spent three weeks on the road visiting a lot of different towns and cities and driving through a number of different states on our road trip to St. Pete and back. And it was amazing. It was exciting to see a lot of economic development and some strong communities with a lot of construction going on. But then we hit the Midwest and we got into the eastern part of Oklahoma and then we got down into Arkansas, Louisiana, Mississippi and saw some massive devastation down there to crops, farmland, machinery, equipment, housing. And that's through the recent spring flooding, am I correct in those areas? It is. And we were there about, I'm going to say, less than a month ago and it was pretty bad. In the last couple weeks it has gotten a lot worse. I've been watching the news and some of the local news stations just to stay focused on those parts of the country. And some of the rivers and some of the areas that we went, they were flooded. You could see the flood and the damage and the water levels, but they're a lot higher now than they were just three weeks ago and the damage continues. And do you think this will have an impact on agriculture and food production in the United States and will lead to higher prices by the fall or late summer? I think we're already seeing some of those higher prices creep into the produce departments of the grocery stores. So the short answer to your question is absolutely. I think it's already begun. And it could be literally years before this damage has been able to correct itself. We're talking not only lost crops, but the land is completely flooded. All the crops have been lost along with all of the farming equipment, a lot of equipment, the tractors and the watering machines and the planters and the picking machines, all of those things have been lost. So there's going to be a big consolidation, I believe, in the small farms that are going on. And that's been going on now for a while, but I think that's going to accelerate. There's a lot of families, a lot of small farmers that are not going to be able to recover from this. Well, that's the agricultural sector, but you've been to some cities where you live before, like Oklahoma City. Tell us your impressions, because we don't really know what's happening out there. It's the middle of the country, and Oklahoma City seems so distant from Hawaii, but you saw great economic growth. What's happening in that area of the country? Well, let me share some contrasts here. Oklahoma City has just exploded. I remember 10, 15 years ago, Halalulu, we used to think that the stark bird was the construction cranes, if we're all over Halalulu. A lot of construction going on, a lot of building, that's happening in Oklahoma City. Dallas, I remember the old Dallas show where you would drive, you'd see the helicopter coming in down the highway, and all of a sudden the down the skyline would pop up. Well, that's gone. That doesn't exist anymore. Dallas is probably four or five times bigger now than when that show was shot. And that highway is now, and I swear, there's multiple levels. There's two level freeway, at least six to eight lanes each level going in to Dallas. And the whole town is just surrounded with a network of multiple level freeways and highways and exits and on ramps. So if you think LA has got a spaghetti bowl type, my freeway system, Dallas is a lot worse than I've been in both. And Oklahoma City is quickly getting to that level. And where does the growth come from? What industries? Is it still the oil and gas industry that's propelling this growth? Is it technology? Is it real estate consumers and malls? Where is it coming from? In Oklahoma City, it's going to be predominantly a lot of military spending. There's a big bank base out there, a very huge Air Force base. And wherever there's a big Air Force base, there's always R&D going on. There's going to be a lot of support and logistic support type of companies there. But oil and gas has always been big in Oklahoma. I think Oklahoma City particularly is benefiting from the explosion that's going on down in Dallas. Dallas, of course, strong oil and gas, but a lot of technology. I think there's a lot of R&D going on down there. Education is huge. You've got some several very large universities. It's also Texas has become a very big destination for retirement. And there's a lot of retirees moving to Texas, particularly in that part of Texas, to enjoy the weather, enjoy the low cost of living, no taxes. And Oklahoma City is benefiting from that. There's places in Oklahoma and in Missouri and the surrounding states where employment is not that strong. And so the mobility of that workforce is, it's very available. People can move very easily to Oklahoma City and to Dallas. And that provides some very low cost labor in order to drive that economic growth. And so it's just amazing to be driving through these places and watch all of this and see all these things going on. And the mobility of the workforce is a huge benefit. And one that places all around the U.S. is getting to really enjoy, but there's a few places that don't have that access to that mobile workforce, for example, like Alaska and another would be Hawaii. They just can't tap in. It's not as easy. That's right. And in fact, it's the reverse with young people, with skills, are livelihood of mainland. Hawaii is experiencing population decline, where you're saying is that most of the thriving centers on the mainland are attracting people and they're really growing economically. And because they can tie in to nearby resources or nearby states that can easily send the people with skills to fill jobs in those locations. That's true. That's exactly right. They go where the opportunity is and it's easy for them to just jump in their car, drive for two or three hours and they can be in the next state where the boom town is and they can make some really good money. And then they can spend their weekends back home again and some of them commute back and forth on a regular basis. So they go where the opportunities lie. And there's a lot of opportunity in places like Oklahoma and Texas. I've seen it in Arizona as well. Arizona is another area that's growing very quickly. So I think a lot of advantages of being close to either where the workforce is available or where the strong economic or the strong economy is and it's easy to bring the two together. Well, we're going to take a break right now and return with even more insights what's happening in the tax world. Hi, Mabuhay. My name is Amy Ortega Anderson, inviting you to join us every Tuesday here on Pinoy Power Hawaii with ThinkTech Hawaii. We come to your home at 12 noon every Tuesday. We invite you to listen, watch, for our mission of empowerment. We aim to enrich, enlighten, educate, entertain, and we hope to empower. Again, maraming, salamat po, Mabuhay, and aloha. Hi, I'm Rusty Komori, host of Beyond the Lines on ThinkTech Hawaii. My show is based on my book, also titled Beyond the Lines, and it's about creating a superior culture of excellence, leadership, and finding greatness. I interview guests who are successful in business, sports, and life, which is sure to inspire you in finding your greatness. Join me every Monday as we go Beyond the Lines at 11 a.m. Aloha. Aloha, Kako. We are back with an interview with our guest, Reg Baker, in the fabulous city of Las Vegas in the state of Nevada. We've been talking to him about economic growth through his recent journey through the Midwest to Florida, and that was a well-deserved vacation after the 2018 tax year preparation. Well, period. And we're going to come back to that now with Reg. And Reg, you survived it, you look okay. And the last time we were talking, I think one of the findings he had was an area revolving withholding, which is a big area. And also that you mentioned states with high taxes were not aligned with the new federal tax changes. So why don't we take the first one, the withholding area, and one of the insights for large expenses, and so forth, that you discovered at the end of the tax period? Well, one comment I want to make, and then we'll get into the withholding issue, is that this past tax season, because of the change in the tax rules and regulations, was historically, and I think by all accounts, from the AICPA to the local CPA organizations, anybody who is involved in taxes would agree that this past tax year was the most challenging tax year that they have ever had in their entire careers. And partly because of reform, but also partly because a lot of the rules had not been in place yet, and they were still finalizing exactly how everything is going to work right in the middle of tax season. And on top of that, to your point, Ray, a lot of the states, there were a number of states that elected not to follow the federal code, which is, they had always done so in the past. It was an annual event that every state would pass legislation saying that they were going to follow the federal rules and regulations. But there were a number of states this past year that elected not to do that. And so they had their own rules and regulations based on the earlier federal code, and they were not current with the new federal code. And so that complicated things even more, not only for the tax preparers, but also for the tax payers. And that meant the state of Hawaii also was not aligned. And there was a disconnect in the forms. The forms were, of course, unavailable for the tax changes because the states were not aligned with the new year. Am I correct? There were some challenges with the forms. And some of the forms were not keeping up with the final rules that the IRS was coming up with. And it wasn't that the IRS was making the rules. They were simply trying to develop the methodology and the forms to be used to comply with what Congress had passed. And it was challenging because sometimes what Congress had passed was not always clear to what the IRS understood or other tax professionals. I saw a picture of what the tax reform bill looked like, which was a couple thousand pages thick that was heavily marked up with red line outs, where they were changing things and whole pages were eliminated and words were eliminated. There was red markings and edits in the margins of the bill. And that 2,000-page document with all of those markings, what was finally passed and the IRS was trying to figure out what they meant. That's unbelievable when you think about it. And plus, as we mentioned, the states with the higher income tax or the states were not aligned also. So that added another layer of complexity. But back to withholding. So what was the takeaway about withholding that you gain as an insight by the end of the tax season? What surprised me in setting aside all of the confusion that was swirling around this whole process, but there was warnings issued multiple times during the year that if you were on a paycheck, if you were getting paid a regular paycheck and you were on payroll, you needed to go back and look at your withholdings and make sure that the withholdings that were being done from your paycheck was going to be enough to cover the taxes. And people ignored that. And it was surprising to me that people were not listening. So do you put that out for people today and start planning for next year? Absolutely. The IRS has already come out, I'd say with a half of the warnings, and they've got a very extensive, very comprehensive payroll deduction calculator on their website. And they'll ask you a variety of information and you plug all that information into the IRS calculator and they'll tell you exactly how much you should be claiming as withholdings on your payroll. So there is a tool, online tool that is available to the taxpayer in the U.S.? Absolutely. And it's been available for well over a year and nobody, very few people let's say, actually used it. And so what happened is that in the regular paychecks that they had during 2018, they all got paid more. If you were used to getting, let's just hypothetically say you were used to getting $1,000 a paycheck. Now the rules are all changed. They dropped the rates down. Now your paycheck is going to be maybe $1,200. You just made $200 paycheck increase. Your paycheck went up by $200, which is great news, except now the withholding, you've got that increase because they're withholding less taxes. Ah, right. So you're now getting $1,200 a paycheck where you were getting $1,000 and everybody's happy and they don't want to let it go. But that's human nature, right? Of course it is. But they were warned that if you do that, you're going to have to pay the fiddler at the end of the year. And you're not going to get that refund you used to get. You might even have to pay a little bit. So they got an extra just say an extra $200 a paycheck, so say $400 a month. So they got a roughly $5,000 increase that year. That's $5,000 in less taxes. Right, right. Now all of a sudden they got to pay $2,000. They're still, they had to pay $2,000 at the end of the year. They're still $3,000 ahead. Right. But what happened is so many people are saying, oh my God, I've never had to pay before. Why am I paying $2,000? This tax reform is terrible. Well, yeah, but you've got $5,000. And they're not connecting the dots and everybody's tumbling and they're saying, well, this isn't working. And the media is doing the same thing. The media doesn't understand it. A lot of people don't understand it. But it all could have been avoided if they just go in and do what the IRS is calling their paycheck checkup. Right. So looking ahead to next year, are there any other hints or tips or takeaways from last year that people could start implementing or start reviewing to really get a handle on the taxes for next year? Well, not to beat a dead horse, but take a look at your withholdings. Go and do the calculator the IRS has and make sure that you're withholding it off. That's number one. Number two, the other big area that was confusing, especially for those that were self-employed or had their own business of some sort. And a lot of people are out there, you all hear about them. They're working two or three jobs. Sometimes happens that they've got a regular job, they're getting a regular paycheck and then they're doing something on the side. Well, the qualified business income deduction that people get for some of that self-employed income is huge. And they need to make sure that they're aware of what that opportunity is and to take advantage of it. If they're making $10,000 a year on the side business, a Schedule C or some other type of self-employment income, that $10,000, they automatically get a 20% qualified business income in the eye, deduction for that. They only get taxed on maybe $8,000, the whole 10. Well, that's really great. And you're in a no income tax state, as we know in Nevada. And will Hawaii, you think, looking ahead, I don't know if anybody can forecast this or project this. Will they become aligned with the new federal changes or will they stick with the old federal tax structure? My best guess, Ray, is that they will stick with the old tax structure for as long as they possibly can. And I'll say that for two reasons. One, this is a huge tax cut. A lot of people saved a lot of money in taxes from this. And Hawaii, unfortunately, cannot afford to lose all that taxing that their residents are paying. And they're struggling right now. They had some surpluses that they have squandered, and they're struggling to try to figure out how to raise taxes to pay for all these things that they're trying to do. This is not a time for them to be cutting taxes. They won't be able to do it. So that's one reason they just can't afford it. But number two, there's a lot of projects that they've got in place. For example, the rail that's going to have to be funded. They're going to have access to some of the taxes that continue to pay for that. So they don't want to give anybody any hope that there's going to be reduced taxes anytime soon, because they just physically cannot afford to do so. And also, during the last session, the Airbnb tax on that was out there. I don't know if the governor will sign it off or allow it to become law. But again, they weren't trying to treat the problem itself. But having more taxes was such a wonderful thing that they passed this law. And as you said, the opportunity to bring more revenues is a focus for the state government. I don't know if you saw the latest survey by Wallet Hub, but they just placed Hawaii's economy as the worst in the country. Right, yes, again. And so what that means is that the economy is struggling and it's dropping. The visitor industry is having some challenges right now, and that's resonating throughout the entire state. And in that type of reduced revenue environment, there's no way they're going to ever be able to cut taxes. Yes, you're correct that the state and society is going through a kind of a review stage right now that there are so many visitors coming to Hawaii, but the same amount of money income like 30 years ago. And it affects the environment, affects services, affects beaches, affects all kinds of things in the state. But it's like a paradox. You're not getting more money. And what do you do? Do you grow the pie even larger? And the amount of income does not increase. But we're coming to the end of the show. I hate to be pessimistic as we end the show, Reg, but you're looking great out in Vegas, and you should tell others about your secret to good health because you're looking wonderful. And this is another episode of Business in Hawaii. And again, we will see you next time.