 Okay, we're back with the closing show of the day, but in some ways, the most important show of the day, because this is a how to do it show. I'm Jay Fidel. This is Think Tech Tech Talks, and we're talking about, I suppose, the tech and technology involved in paying your taxes as Rich Baker. Or maybe the very low-tech way of how it works. Yeah, how it works. We're going to try to examine what happened in the Tech for Form Act of 2017. I guess it was passed in 2017. It was. And we're going to try to have people appreciate how it affects them, because the IRS affects everybody. No question about that. And full disclosure, I don't like Trump. I don't like the Republican Congress. But I think my friend over here does like them, despite the fact that the vote for this, for Schlug and a Bill, which is the last week in the year, you know, it's a special gift to Trump, passed by 58, make that 52 to 48 in the Senate and 224 to 221 in the House. What I mean is it's slid by on its fingernails, but it got passed. It's kind of like the presidential election. It just kind of slipped by. Same thing, Rich. The other, and I'd like to start out with asking you reform. What kind of, what is this reform? Did we need reform? What are we reforming here? You know, I'm not sure what we reformed, but I can tell you that they have been talking about reform since I was taking tax classes in college. All right, this goes back 30 years. Well, remember, they reformed in 1986. There was a big sweeping tax reform act in 1986. Some people say that they did. You were in college before in 1986, I know this. I was, and they, I guess that was during the Reagan era. They reduced taxes, but they didn't reform them. And I'm not sure what the definition or the difference is there. But they said that, and what they're claiming is that this is the first reform that they've had in over 30 years, and it's got significant impact. Yeah, well, it does have significant impact when we talk about that. But I'd like to, you know, sort of talk about the landscape for a minute. No hearings. Let me put it this way, zippity-doo on the hearings. Nobody came to testify. Nobody from business, nobody from government even. Nobody from the community came and testified to say, I like this or I don't like this or let me give you some advice. That's kind of extraordinary, not a single hearing. This is all back room legislation, right? It sounds like it kind of like the Affordable Care Act. Yes, exactly. This is what we got in Congress now. And it's dysfunctional. Things need to get better. And so regardless of which party is in charge, Affordable Care Act or tax reform, we've got issues that need to be fixed. What? We did? Did we? I mean, reform what? You know, I'm really not sure about that. Let's leave that open. The other thing is that the press said in the ramp up, which was probably a month or so before it was actually passed, was that this is going to favor the wealthy. It was going to favor the big corporations, the multinationals, and it was going to dump on the poor. And that's consistent with Trump and it's consistent with the extremists in the Republican Party right now. So what's your comment on that? I mean, does it achieve that? Should we be happy about that? Isn't that the real purpose of this legislation, this reform act? To answer the question best I can, yes, there's going to be some benefit to the wealthy, but there's also going to be a lot of benefit to the non-wealthy. I think there's enough benefit flowing through the reform to benefit a lot of good cross-section of all the taxpayers in the country. We'll have some breaks, undoubtedly. And some small businesses too will have some breaks, although we're going to talk about how the rates start and the rates, you know, some of them end. But, you know, the other thing that strikes me is what happened like two days after, two days after the President Trump signed this bill, Paul Ryan gets up to the press and he says, oh gee whiz, looks like we're not going to have enough money now that we did all this, you know, tax reduction in the reform act. We're not going to have enough money to do the social safety net. So our big mission in 2018 is to take a look at cut social security, cut Medicare, cut Medicaid. Do you think he just had that idea, you know, after the bill was passed, do you think he might have entertained that before? Isn't this what they refer to in the tax practice as a step transaction, step one, step two? We knew about step two before we did step one. You're saying it was a strategic move on their part to set this up? I think it was an extraordinary deception. And that's not the subject of our show today, it's just laying the framework, the foundation for this really, really special legislation which all of us will have to live with. Well, at least for the next seven years, because a lot of it, if most of it, will sunset on December 1st, 2026. In that period of time, we're not going to have a lot of money for building infrastructure, even walls. You know, in that period of time, you know, we're not going to have money to pay Social Security, Medicare, Medicaid. And I think step two is going to be painful. Let me just share with you that a lot of money that people are all talking about is actually starting to come back into the country. Exxon today just announced $50 billion are pulling back into the country. They're not the only one, there are others too. Apple, 100 billion, Microsoft, 80 billion. There's a lot of companies out there that have offshore cash that they're bringing back into the country that's going to be taxed. Why, okay, they're bringing it back. This is really an important point. It's been in the newspapers and there's virtually hundreds of billions of dollars are being repatriated. So the first question is, you know, what mechanism in the Tax Reform Act causes these companies to say, oh, okay, we're going to repatriate right away in a matter of days and how do they benefit by this? How does the country benefit by this? Well, let me try to answer that with two, part A and part B. But let me also say that Roger Epstein is probably a better person to answer that because he's got more experience in that international area. But over the years, companies have set up operations offshore. And I can show you graphs where the US tax rate was like here. Similar to all the international tax rates. International tax rates started to drop and they came way down. US didn't change. It stayed pretty much constant. So of course, people are going to be going offshore to take advantage of lower tax rates. What happened with this reform is that now at 21%, the US rates are down below all the international rates. 39 to 21, that's a chop of half right off. So right now all of a sudden the whole dynamics of that has flip flopped. Now all of a sudden the international income tax rates are higher than the US tax rates. That's number one. So everybody's reevaluating their operations right now thinking that it might make sense to move back. Now, as you probably know, a lot of countries have treaties, tax treaties with the US. And there's, in the details of the returns, you get credits to apply it against foreign taxes paid to offset domestic taxes. So it usually a one-for-one credit for those countries that have treaties. Now, if there are countries out there that don't have that treaty, or if for example, Ireland, they say set up operations over here, you don't have to pay taxes for 15 years. Well those taxes, though that income is gonna accumulate and not be taxed. And they don't wanna bring it back because there's no tax treaty offset to, you know, the taxes paid, there's nothing there to offset the taxes that are due. So they just leave it offshore. Now all of a sudden, they're saying any cash or cash equivalents you've got offshore that you have not brought back, now we want you to pay just 15% on that. Not 21. Special one-time rate, 15%. Amnesty. And so that's where all these, literally hundreds of billions of dollars are gonna start coming back into the US, taking advantage of that special low rate to do so. And in fact, Ireland is suffering. American investment in Ireland is shrinking while you watch their concern. Well, the whole dynamics of international, at least from an American perspective and even from foreign perspective, I mean, they might find it more tax efficient to have operations over here, you know, and take advantage of the 21% tax rate here opposed to the higher rates that they might have offshore. So everything is being reevaluated and rebalanced. Help me with the mechanics of it. So I'm a multinational and I have $100 billion over there somewhere, Ireland or elsewhere. And I see the Trump Reform Act and I say, well, I'm gonna move it back. I'm gonna move it back. I'm gonna get them to cable me $100 billion and I'll put it in the bank in Manhattan. I'm gonna do that. And now, why is that a benefit to me? Why is that gonna help me to simply move the money back to my bank in America? So you can put it to use in the U.S. To invest it. Build factories, hire people. I mean, look at what's happening with all the bonuses that are going out, all the raises that are happening. A lot of company, very early, a lot of companies were automatically taking advantage of that. Now, we're only a month into this sort of. And there's a lot of research. There's a lot of mechanics that have to be figured out. The logistics on this still, they're still trying to figure out how all of this is gonna work. So to get real specific is gonna be difficult because there are no rules or regulations written yet. Some of this is pie in the sky. I mean, for example, the market today, and I think there's gotta be a connection between the fact that the market went down 400 points and Trump is giving a speech. Even as we speak, he's speaking. Oh, I'm so interested. Maybe we'll take a break in the middle of the show and listen to the speech. But anyway, so I'd like to just catch this one thing. So I moved my $100 billion back. And presumably now as a multinational, I would invest that into new business enterprises here in the United States. And hopefully I would earn a profit on that, on those new business enterprises. Is that what it is? I bring my investment because just bringing the money back doesn't do anything. You're right. If it just sits there and they don't do anything with it, then it's really a non-event. They might use it to pay down some debt or they might use it to maybe refurbish some factories. But the point is that they should be using this money and I believe the intent is that they're gonna be using this money to make investments in this country, to hire more people, to bring some of the manufacturing that was pushed offshore in the past, now they're gonna bring it back. So it requires two steps. One is you gotta bring it back. Two is you gotta put it in new business ventures and earn a profit. And that's when you get the benefit, yeah? It's the same thing with the banks, like I saw the race to give bonuses in the local banks, everybody gets $1,000 or- Bizarre how quickly that just spreads. Yeah, that was amazing. And they'll follow each other. So that itself, giving that bonus, I guess it gives them a deduction, but that's not the important thing. The important thing is, I guess, what they're saying is we are going to have extra cash because we're not gonna pay so much taxes under this new tax reform bill. And therefore we're flush. It's not as innocent as that. There's another piece to it. Taking, paying bonuses in 2017 is better than paying bonuses in 2018. You should get the deduction right away. The deduction's also bigger, right? Corporate rates are 35- Because it's under the rate, the 39% rate. So if you pay a $100,000 bonus, you get to save $35,000 in taxes. If you did it on January 1st, $100,000 bonus, you saved $21,000. Thank you. So there's other motivation to do this. You mean it's not just charity and generosity to the employees, eh? Much to my surprise, I guess businesses just don't do that all the time. But that's a good segue for us to start discussing the exact provisions that we are looking at and seeing what's gonna happen and how they're gonna affect us. So let me ask you about a couple of them. Let's see. Okay, standard deduction, serious change. How does that work? How does it affect the average taxpayer? First of all, I think we need to remember that 70% of all people in this country use the standard deduction, only 30% itemize. So 70% of the people who file tax returns just had their standard deduction doubled. That's huge. For an individual that's single, that's about, you know, what, 6,000? What does the bill say? How does that work, doubled? Well, I was just gonna say it. I think right now in 2017, a single will get about 6,500. Next year, 2018 is 13,000. Doubled. And the same thing with the married filing joint. It went from about 12,000 to 24,000. So that's the case. I don't need, most people don't need individual itemized deductions. Exactly, they won't need it. They didn't take it before. They're certainly not gonna take it now. Now they're in great shape. Right, so that's huge. And that's where they're coming up and saying that, you know, the projections are that's gonna save an average family a couple thousand dollars a year in taxes. And indeed. Well, the average savings around the country, I think it's 800 dollars. Per person. Okay, well, that's big savings. But that doesn't last forever. That we talked before. That lasted 2015, which is the, what the end of, what is the significance of 2015? Well, it's 2025. I'm sorry, 25. 10 years behind. 2025. Thank you for your kindness, Rick. 2025, it all reverts back. January 1st, 2026, everything resets. Yeah. Back to where it was in 2017. Unless things change between now and then. And I can guarantee. Further acts of Congress. And we know that they're gonna be putting their fingers in there. They're gonna be doing things. Change will come. But until that happens, everything resets. January 1st, 2014. Resets goes back to the way it was. So all this is a kind of patina, a gloss on what happened before and it disappears 2025. But that's not so for the corporate reduction from 39% on what, a net profit, I guess, to 21% to 21% huge cut in half. That is permanent, right? Permanent as of today. As of today. But as of today, it's permanent. The other one is temporary as of today. So my question for you, and I know you have no answer, I'm gonna ask my question. Then I'll do the best I can to not answer. Why, why is the corporate reduction permanent while the individual, human person, not permanent? What's the justification? Well, my non-answer to that is I don't know. It's a political, you know how sausage is made. You've seen the process. Everything is negotiated. This bill had 500 pages and it's filled with red marginal notations and strikeouts. Everything was negotiated in the last week before that bill passed. Why things happened, I don't think anybody knows. They should have had hearings. They should have done it in a more orderly fashion. But they were in a big hurry. I think they were afraid they wouldn't be able to do it anymore if they waited. So, you know, I think this is gonna be a kind of a retirement fund for accountants. And it's gonna be, and maybe tax lawyers too. And it's gonna be a major problem for the Internal Revenue Service. Can you, do you agree with that? I do, if it doesn't kill the accountants and the tax attorneys. The stress that this has created has been somewhat significant. Now I don't wanna hear a lot of violins and teardrops, but on top of what is normally a very busy time of the year, we're also having to deal with tax reform, which is confusing a lot of people. What applies, what doesn't apply? Can I prepay this and not prepay that? We saw that with the, say, tax returns, the property tax issue at the end of the year. And on top of this, the first estimated tax payment is due April 15th. So in addition to 2017 taxes, we have to try to figure out everything that's going on with 2018 so we can make fairly accurate estimated tax payments in April 15th. Yeah, the Internal Revenue Service has to revise its schedules, its forms. The first one of which is due to the monthly withholding tax form. That's due in a couple of days, no? Actually, yeah, they've just issued the new payroll tax tables. It incorporates some of these things, like the new standard deduction. And one thing we didn't talk about, the exemptions. Yeah, let's talk about exemptions. Yeah. They're gone. They're gone. Wait a minute, what about kids and people living with you and all that? That's been in the law since 1954. Gone. Gone. My goodness. Yeah. Well, if you have the big standard deduction, I guess it offsets that. There's a lot of trade-offs in this kind of thing. For example, we talked before about the 20% reduction in the small business, what gross income. Can you talk about how that works? QBI, Qualified Business Income. That's section 199. You're gonna hear a lot about QBI. 199A, wasn't it? Yes. Thank you. Excuse me. 199A. There is no B. Funny. But just as an example, and there's flow charts that are pretty sophisticated in how this all works. There's maybe 10 or 15 boxes on these flow charts with the S and O decision points. But in very simplistic terms, if you've got $100,000 income in a flow through entity, 20% of it, you can deduct off of that 100,000. So the 100,000, less 20%, you get a $20,000 deduction, you pay taxes on 80,000. That very simplistically is how it's supposed to work. What, why, all of a sudden why? This never existed in the law before, why now? There is official and unofficial reasons. I think the official reason is an attempt to try to bring parity back to some of the flow through business entities with the corporate structure. Because some of the things that the corporations can deduct and take advantage of are not allowed at a flow through entity level. For example, owner, medical insurance, certain expenses related to FICA taxes, employment taxes, you can only deduct half of it, whereas a corporation deducts the whole thing. So there's an attempt to try to bring some parity between the different entities. Parity. But in fact, what you get at the core of this is that although corporate rates on a C corporation or a formal corporation are being reduced by half, there is no such rate reduction for others. And this is a way, right? This is a way to achieve parity, I guess. The fact that there's no rate reduction for others. Now there are, there are two, those flow throughs go to the individual return, right? Page one, schedule C or schedule E wherever it ends up and then gets taxed in the 1040, the regular tax return. Now, the tax tables have all changed. Tax rates have come down. And the- For individual people? Yes. Ah. And within- But not as much as half though. Not as much. But there's two ways that they're saving money. Number one, the rates have come down a lot. So if you've seen the tables, you know, there's a 39% for this much and then a 37% for this much and so forth all the way down to zero. The brackets have expanded and the rates have dropped. So what's happening is for the 200, let's just say for people making less than 200,000, the rates have dropped by about 10 or 15%. Plus the brackets have really widened. So you can make a whole lot more money before you jump to the next, what they call marginal tax rate. And so it's a combination of those two things that's going to save the individual's taxes. How much? You know, we gotta figure that out when we do the tax return. Yeah, yeah. And that's all temporary too until 2025, yeah. Boy, this is gonna be an interesting ramp up into it and then a ramp up out of it and maybe changes in the middle too. My guess is that there will be changes in the middle. My guess also is that some of this will become permanent. Which ones? How much? I guess depends on the political in November elections. So I mean, there's the November elections, there's the next presidential election. There's a lot that can happen in the next seven years that will have an impact on this one way or another. That's the trouble. Everything is in play. The only thing that's really certain is that it went from 39 to 21% for the big corporations. That's certain. The rest of it, you really can't figure out what's gonna be accepted. It's gonna be more complicated, not less complicated. And when I hear the word tax reform, I hear simplification, but it's not simplification at all. It's complexifying, isn't it? Well, I'm not sure what that word is, but it is more complicated. Thank you. But another anomaly in this that I find fascinating and I think unfair to a lot of people is the estate tax exemptions that have doubled. They were roughly 5.2 million. Now all of a sudden they're up or 5.6 million. Now all of a sudden they're 11.2 million. Which means anybody who has an estate that passes away this year, 2018, will have an exemption of the $11.2 million that there's no tax on. And that means between husband and wife? Each. Each. So it's 22 million for husband and wife. If they do it right. Now what's interesting, and this is where strategy comes in in estate planning, and that's not what we're gonna really talk about here today, but for example, my wife and I, if I had 10 million, she had 10 million, I can pass mine on to her, no problem. But then when she passes, she's only got that $11 million to play with. Or I can take my 10 million, give it to my kids. And she can do the same. And that means 22 million is exempt. So you gotta think ahead on how best to do this. It's not always the most efficient way to just give everything to the surviving spouse. Yeah, okay, but I mean, short of a little planning, this sounds like it favors the wealthy. And it means that they get a break that's roughly twice what it was before. And it's consistent with the claim that has been made over the past few months that this bill favors the wealthy. It puts more money in their hands. It lets them accumulate wealth. Let's just say that that one part of it does. I don't think we can paint the entire Reform Act with one brush. I can, I can. You don't have to. And you usually do. You're an accountant, but I can. But I think there are parts that, yes, favor one group over another, but not uniformly. I mean, there are benefits in there. I mean, let's face it, 67% of all taxes are paid by the top 10%. So when you have tax reform and you have tax savings, yeah, the people, the 10% of the population that pays 60-something percent of all the taxes are going to get a little bit more benefit in the bottom. There's an enormous reduction in the amount of taxes that are going to be paid under this Reform Act. And one problem that Roger Epstein mentioned when we spoke more than once was that this is a formula for inflation. If you have more money fed into the economy, like all those bonuses, all of a sudden, you go see the amount of available cash, disposable cash, and you have the risk of inflation. And what's the solution to that is you increase the interest rates, which is what the fed's been doing. So in anticipation of some of that, they've been clicking up that interest rate and they just have continued to announce that they're going to continue to do that. Yeah, well, they should. I mean, really, it's been embarrassingly low for a long time. And you wonder how business can go if they can't show it. But speaking of interest, what about the deductibility of interest? Is it relevant anymore now that we have a doubling of the standard deduction? For a lot of people, no. Some people, yes. For those states that have high property values, for people who have mortgages in excess of $750,000, a lot of people do. It becomes relevant. Not as many as you think. Not that many people know why you know. The value of their home may be high, but not the mortgage, because the banks wouldn't give them that much. Correct. And I remember reading somewhere, and I can't quote where, but it's only like 6%, 7% of new mortgages as past year was in excess of $750,000. It's not that big a part of the- So is it deductible anymore? What's the change? It's deductible. The interest on $750,000 is deductible. Up past that, it's not deductible. So if you've got an $800,000 mortgage, the interest piece on that $50,000, you can't deduct. Okay. And you would only do that if it exceeded the standard deduction, which has been increased to $13,000 and changed. Okay, that's interesting. What about charitable deductions? How are they doing? You know, the charities are making a lot of noise. They feel that because the standard deduction has shot way up, there's gonna be a lot of people that are not going to be making their contributions like they have before because there's no tax advantage to do that. Now, what's happening is you're gonna see a lot of new ways of making these contributions where they call it donor-advised funds and different ways that people can bunch up their contributions. So every other year, for example, let's just say one year they take the standard deduction, the next year they bunch all their other deductions up and take it all in one year, so then they'll take the deduction next year might be higher than that standard. So they're trying to figure out ways to continue making the charitable contributions. And it is deductible in full still, but only if you are exceeding, you're not electing the standard deduction. If I was making, if I had mortgage interest and property taxes and charitable contributions and if all of that stuff added up to less than $24,000, I'd take the $24,000. Doesn't mean I can't be making those payments. I can still make those payments. But instead of deducting them individually, I'm getting the $24,000. That simplifies it. So I think there is some concern, but I think only time will tell how big a concern that tends to be. Yeah, and I agree with you that there'll have to be changes in the meantime because to go back to the way it was after having the simplicity, if you will, of a larger standard deduction going to be hard to do that. Okay, one great big one. Oh yeah, the Johnson Amendment. I don't know if you're familiar with the Johnson Amendment. The Johnson Amendment was part of the 54 code. The Johnson Amendment said- I wasn't around that long. You were busy. The Johnson Amendment said that a charity to retain its exemption as a nonprofit could not give money to political candidates or campaigns. Okay, and your president, Donald Trump has been trying to- Our president. Okay, whatever. You heard it here. Has been trying to pull the Johnson Amendment and make it possible for charitable deductions to give money to campaigns and candidates. This is sort of like Citizens United for non-profits, and the problem with that is it's blind. So I give money, deductible money to a charity, and then the charity decides it wants to support a given Republican candidate. For example, well, I don't have control on the contributor, but I have no control. And the result is that these large mega charities, mega churches, especially in the South, can give you enormous amounts of money and again, you know, pervert the political process. Did he get that through? Is that part of the tax reform act? No, not that I'm aware of, but it is 500 pages. There could be something in there on there, but I kind of see it as a non-event because people could always go to Canada and set these things up just like the Clintons did. They got the Clinton Foundation up there that's doing all of this on a worldwide basis, including the U.S., and it's outside the purview of the U.S. rules and regulations. So, you know, Canada is pretty friendly to that. Now, what's the question is whether I get a deduction, assuming I'm outside the standard deduction, whether I get the deduction for giving to a charity that's going to be, you know, passing my money to a political campaign. Usually from my understanding of the non-profit charitable process is that if anybody's involved in lobbying efforts, they lose that charitable classification, and anything that you contribute to them is not deductible. Now, a couple other interesting things that's related is number one, lobbying expenses are no longer deductible by anybody. Entertainment expenses are no longer deductible by anybody, and you know, those miscellaneous deductions that you have on your schedule, A, the 2%, you know, safety deposit box, investment, that kind of stuff, employee expenses, all gone. Interesting. Boy, that's a bath of cold water, isn't it? It is, that's kind of disappointing because there are individuals that form 2106, if you're familiar with that, is an employee, a non-reimbursable employee expense. And there are a lot of companies out there that require you to drive your car to different places, have meetings with different people. You used to be able to deduct that, and now that's all gone. What are you going to do in the past two o'clock in the morning in tax season? You have to fill out that form and advise this taxpayer about what lunch he could take and what lunch he couldn't take. You don't have nothing to do anymore, Reg. You know, it's going to be an interesting process educating the taxpayer on all of these changes because, you know, and as you pointed out, there was an awful lot of noise leading up to this and a lot of negotiation, a lot of twists and turns. Within Congress, not with the public, but within Congress. Well, but that was getting out and people were talking about it, and now all of a sudden they got the final bill and now what we've got to do is make sure that we understand this is the final bill and all this noise that you heard before. You're right about that. You know, it's just noise. One last provision we ought to talk about is the deductibility of state taxes for federal purposes. And that would include income taxes we pay to the state of Hawaii, which are 11% right now at a max, and also real property taxes. So until this point, we could deduct that for the Fed. And that's not the case anymore. There's a limitation now, right? $10,000. And I have not seen any studies that indicate how much or how many taxpayers in Hawaii exceed the $10,000. For example, I've seen a lot of people deduct $4,000 or $5,000 in property taxes, and I've seen people deduct another $4,000 or $5,000 or less in income taxes or sales tax, they get that option, all right? So these numbers have to, if as long as they're under $10,000, the impact is zip, nothing. Fact is the state is in fiscal trouble. We don't have the money to pay for unliquidated liabilities and liquidated liabilities. Some people think we're $40 billion in the hole. Certainly we haven't paid for the employee's retirement system contribution. And that's before the rail. Right, and the rail, may I add, the rail. So what that means to me is we are, and so many other things too, climate change things, we are going to have to spend much more money at the state and county level in order to keep up with things. It's gonna have to happen now. However unpleasant that may be to people running for office. The result then is that it's likely that our taxes, both income taxes and county real property taxes, gonna go up and exceeding the $10,000. We're gonna be heard, aren't we? It's possible, yes. It's a double webbing. We pay more, but we can't deduct it. Well, the other piece of this, and again we have to wait and see how it all flows through, but our tax program or how we tax our income here in Hawaii is all based off the adjusted gross income of the federal return. So if the federal return adjusted gross income goes down because of standard deductions and some other things that might be flowing through, then that's gonna help lower our taxable income here too. So, again, we gotta wait and see how all of this flows through the system. There's a lot of, it's a matrix, a lot of different decision points have to be made. It's hard to project exactly what the impact's gonna be, but can I make one comment? Sure, sure, I'm gonna face camera one. My comment is that if we are constantly spending more and more and more, and we're exceeding the revenues that we're able to generate within the state, at some point we gotta take a look and see if there's a place that maybe we can tighten the belt just a little bit. If I was constantly overspending my income, I'd have to cut back somewhere. Most businesses will do the same thing. I know the state government is not a business, but they need to at least consider cutting back in some areas that may have some excess. We should all vote accordingly on that issue. I think I agree with you, it's very important. But one last point, and that is in the state legislature as every year, there's a conformity bill because there are little changes in the IR internal revenue code every year and this is a whole bunch of big changes. So, the same bill, it's two pages long, it's been submitted to conform the state, the state tax code with the changes in the federal code and it will undoubtedly pass. It does every year. It does every year, there's no reason it wouldn't this year, it's just a softer, easier approach for them instead of getting into the detail. So, I'm not sure how this works, but I would ask you this question. So, assuming we pay more in taxes here, and maybe the rates will go up too, okay, in taxes here, we're going to wind up having a greater state and county tax bill, but we won't be able to deduct more than the $10,000. How does that work when you feed them together, when you conform and then you know, you know what I mean? Yeah, and again, there's going to be a lot of confusion about how all this is going to work. The instructions aren't written yet. You know, the flow through to the state, there may be a cap on how much can be deducted at the federal level, but that doesn't necessarily impact what can be deducted here at the state level. Right. You know, so there can be exceptions. For example, one of the exceptions that is not part of the conformity bill every year is the section 179 deduction, which is a special deduction that you can write assets off immediately instead of over a period of years. Accelerate depreciation. Yes, that's not part of the conformity bill. That's always been an exemption. They can do the same thing with other areas. So there could be changes made at the state level that would help the local residents here and not have them maybe get slammed as much. I think what's happening is that the federal tax bill will probably drop for most residents. The state tax bill might go up, but they can be fixed locally. Yeah, right. Okay, but the state tax bill will go up and we can't deduct it for the federal. So, I mean... But the offset to the federal might be higher than the increase of the state, if that makes sense. I mean, if we're saving, say, $5,000 family of three or saving five or $6,000 at the federal level, but the state tax bill goes up by 1,000 or two, you're still coming out ahead. Yeah, well, that may be so, but if social security is reduced or Medicare or Medicaid is reduced, it's gonna look small potatoes to the elder people who are losing their livelihoods as it were. I don't think that'll ever happen. And if it ever does, I'm sure there's gonna be a grandfathering of process that this takes place. I mean, everything that I have seen that would indicate any possibility of passage is gonna be extending the retirement date and increasing the brackets where the social security tax and Medicare tax have to be paid. So, just like they took away the cap on Medicare, they'll probably take away the cap on social security at some point, they're gonna say you can't retire until you're 68 or 69, you know. It's already on the way. Those two things will write the ship as far as social security is concerned. They don't have to cut the benefits to do that. You're a terrific optimist. All things will be right. Well, but it's also... And Congress is wiser than we think. Do you think it's politically possible for any group to go through and cut social security tax? You know, I would have, you know, a year or two years ago, I would have said no, not possible. Now, open season. I mean, anything could happen. Maybe boomers are getting old or they're getting into that group. That block is getting bigger and bigger. Which I wanted to ask you one other thing about healthcare. Buried in that bill somewhere is the end of the, what do you call it, the individual mandate. The mandate. That was tricky. That was, you know, that really didn't have a whole lot to do with tax. It was healthcare was what he wanted. And he slipped it in and slipped it to the American public who, the young people who don't wanna get health insurance, who are going to get sick and that's gonna wind up being a burden on the rest of us. Is that a good idea, Ridge? I'm not gonna answer whether it's a good idea or not, but let me just illustrate one point. That mandate, where the penalty might be say, let's hit round number, $695. If you don't have insurance, you gotta pay $695, all right? Now, if I was a young person and I don't get sick, I mean, how many times in your 20s did you really ever have to go to the doctors about anything, rarely? So would I wanna spend $600 a month all year long, $7,200 a year for medical insurance? Or would I rather just pay that penalty of $600 or $700? And if you get sick, when you go to the hospital and they send you a bill for $100,000 and then you call mom. Or you just go to the emergency room like all the homeless do and they get it for free. And we wind up paying for it, okay? Ridge has been wonderful to have this discussion. It's long in coming this discussion and it's so nice to be able to talk to somebody with whom I agree on so little. That's why we get along so well, James. Thank you, Rich Baker. Rich Baker, accountant for excellence. We'll do it again. All right, looking forward to it. Thanks.