 to see. The last time we spoke, we were speaking about, you know, the long-term effect of the January 2017 Tax Reform Act. How do you say that in italics? Tax Reform Act done by President Trump at the time and the Congress at the time, without hearings, without thought, without consideration, in a way to favor the one percent and, you know, and give only temporary elusive benefits to the 99 percent. And my guess is, you know, that succeeded. They got what they wanted and that had an effect on the economy and the 99 percent for sure. And gee, it's been a while, but we were concerned about that and our concern was justified, right? Absolutely. And we see it in the next move by the proponents of that bill trying to say we cannot raise the debt ceiling. So we lower the taxes in 2017 and then we complained that we're spending too much money, which was sort of originally the idea behind Reagan economics, the star of the beast and then they can't spend any money, meaning the beast, meaning the government. But Jay, things have changed dramatically since Reagan proposed that and reduced all the tax rates. And it's one of those statements that has been taken and then taken to its ultimate extreme to where it makes no sense. Yeah. Well, I mean, it's kind of absurd. It's like, I agree, it's upside down. And so aside from the one percent against the 99 percent, you know, you have this tax spend it kind of upside down. And so I noticed that in the, in the debt ceiling agreement, they knocked 10 billion dollars off the budget for the internal revenue service. That does not sound like a good idea for me. I, you know, it means we'll collect less tax. It means the one percent will pay less. That's what I think they think it means. Well, what happens? Go ahead. So as I said, Reagan, when he reduced the tax rates dramatically in a 1986 Tax Act, which at that time was the largest tax bill in the history of the country, most pages and more changes. They even renamed the code from the 1939 code to the 1985 code. And that's what we call it now. And so what he did say clearly was, because we've lowered the rates, people will not be interested in cheating as much. And we're going to give all the money we can to the IRS so we can make sure that people pay their proper tax. Now, since then, the tax rates have continued to be dramatically whittled down. And now you see we're starving the IRS so they can't even collect the lower rates. I don't practice much anymore, Jay. As you know, I retired from the Cade-Shutty law firm in 2016 and continue on as a tax consultant. But I've been working with what's probably known as the best tax boutique law firm in the country in New York City. And I asked them, you can imagine who their clients are. And I asked them if they had been handling any audits lately, and they said no, there aren't enough IRS agents to handle audits. And so, you know, I said, well, it's very illusive. He said, oh, well, that's a good thing. Nobody's getting audited. But that's not what Ronald Reagan would have preferred. He would have preferred, you know, some sort of fair response to the changes in the rates. The fact is, though, that when you tell people that you're not going to be able to audit them, they cheat more. And I think we have cheating by the 1%. That's what we have. Well, we have cheating by everybody. And I started my career in 1967 as an IRS agent auditing small business corporations. And everybody cheats to a certain extent. You know, there are very few people that don't take extra charitable contributions or more on their car than they do for their business. And these are acceptable in the law. If you don't get caught fine, if you do get caught, then you pay the extra tax and a little bit of interest and move on. But now we have a situation where people will push the line so far of what's acceptable. And of course, it's one thing to be dealing with, you know, five, few thousand dollars in charitable contributions. And another thing with hundreds of millions of dollars of unreported income and, you know, misplaced deductions. And it's, I don't know the extent of it, but I do know that we are grossly understaffed at the IRS. And then the misinformation. So whatever was in that IRS bill was going to include a huge number of employees, but they're not all auditing auditors. And not only that, they're not going to go after the little guy. This was put out. Oh, they're going to, why in the world would the government go after a hundred people to collect two thousand dollars or ten thousand dollars instead of one big company to collect five million dollars or 20 million? You know what I'm saying? Sure. When I was at the IRS, it was clear that the mission was to make sure people pay the fair tax. We're not trying to beat anybody up, but there's a lot of gray areas in the law. And so we want to go out and make sure that people are paying their fair tax so that they'll file properly. Just what you said, if they don't think they're going to be audited, then they're not going to file. They're going to cheat. And secondly, to bring in the big numbers that will be significant to the government. So there's a balance there. Now, most of the people that are revenue agents, as I was, examine corporations. Whereas if you're a small guy, they have you come into the office and show them your cancel checks and this kind of thing. And so, okay, we're understaffed there. Fine. But the big money is going to go to these big companies who don't want to be audited. Nobody wants to be audited. Nobody wants to pay any tax. And you're not required to pay any more tax than the law says. But the main thing and the way I started the conversation, Jay, if you believe government is the enemy, government is the problem, as Reagan says. And you believe that the way to cut back on government is just to cut out income so that people don't have to pay and the government doesn't have money. You starve the beast. Then you get to where we are now, where we keep spending money that we don't have. And then people that sounds like don't even want to have a government. We don't need a government or make it all state government. It's really a bad attitude amongst a lot of people who either didn't take civics courses or aren't thinking clearly about what the country was like before we had more government from the top down, which of course did grow a lot. And when I say top down, I mean the federal government, as opposed to state and local governments, a lot of the government was added in the 60s to combat the civil rights movement. But things like the FDA, things like the Federal Trade Commission, the Securities and Exchange Commission, there would be so much rampant fraud in the country that existed before we had these watchdogs. And they're not perfect. The government may be incompetent in many areas, but lots of companies are incompetent and they do the job. And in any event, if we put more money into the government, we'd get better performers. We'd be able to hire better people. So if you want the government, if you complain the government's incompetent and then you say, well, let's not give them any money, you just compound the problem over and over again. And frankly, my view after being with the IRS for five years and being in private practice for almost 50 years, you need to pay your taxes, you need to support the government, and you need to make it fair. And it doesn't make any sense to me to cut back on the budget so the rich won't have to pay tax, which is where the cutback is. It's not on the little guy. It's at the top rates that aren't funded anymore. So it doesn't make sense to not have them pay tax. They can get richer and we can have less capable government complain about it, cut the budget again, and make it make it worse. Jay, when I first started with the Internal Revenue Service in 1967, the top rate and that extrapolates into income over a million dollars at today's income levels, about 200,000 men. Today it's a million. The tax rate, if you were making more than a million a year, was 70%. And there was no lower tax rate on dividends. There was on capital gains, but dividends, which is where people earn so much money from corporations and passive income. Those people pay now 20% as opposed to the top rate, which was then 70%. And it had come down from 90% after World War II, during and after the war. People who live on dividends are the 1% mostly. Exactly. Why do you and I, or let's not even take us, let's take managers of a department store or a grocery store, somebody who's in the middle of their career making 60,000, 80,000 in today's world. Why should they be paying tax at even today's lower rates of 30, 35, 37% when a guy getting a dividend, sitting back getting a dividend on stock he may have inherited from his father at 20%. Why is that more favorable? And your income in addition, the $80,000 guy, he has got to pay social security tax. Now they have a small tax now on dividends that they put in about 10 years ago or so to pay for social security and Medicaid, but it's about 3%. Whereas I want to say the total self-employment tax is more like 14%. And now it's unlimited, doesn't even cap anywhere. So that's another bugaboo of mine. Yeah, the 99% pays more. And social security is so jeopardized politically. But let me raise another tax that we haven't talked about, which is inherent in what you're saying. It's the estate tax, the federal estate and gift tax. The idea I think originally was not only to collect money from rich people and maybe so not so rich people with the estate tax, but also to avoid the concentration of wealth. Because at the end, that becomes a political issue. It becomes a threat to democracy to have the 1% so wealthy that they control all the money. So what happened to the estate tax? It seems to have gone away, Roger. Yeah. Well, the term that used to be stated for what you're saying is an aristocracy of the rich or an oligarchy of the rich, which is clearly what we have today. And it's going to get worse. I was just reading an article that at least most of the billionaires who are around today made their own money. But because there's no estate tax, they're going to pass it all down to their kids. And now we're going to continue with people who just are basically clipping coupons, they inherited from their parents, controlling everything, including the politicians who set the tax rates. So let me give you the history on the estate and gift tax. It was adopted in the 30s during the Depression or maybe Roosevelt when he came in. As part of the way to salvage the problems with the government to give the government enough base. But also because we were getting this aristocracy of the rich from the Rockefellers and the others at the beginning of the industrial age, industrial revolution. So when I came to work again in 1967, the floor for paying estate tax. In other words, you didn't have to pay any estate tax if your estate was under $30,000, which was during my terms a couple of years as a revenue agent, double to $60,000. So if you have more than $60,000, you have to pay an estate tax. Now today, $12.5 million per person. So unless you, the husband and spouse have more than $25 million, they don't have to pay any estate taxes. And on top of that, you get a stepped up basis. So the father to the son can leave $12 million tax-free and there is no incident of tax on untaxed assets, untaxed income that have accumulated to that point. So it leaves an enormous amount of money passing hands from the father to the son and it accumulates into that aristocracy you talked about. Right. And the other thing that goes with the low dividend tax is the low capital gain tax. So for some reason, if you buy a building and you hold it for six months a year and it doubles in value, your tax rate is 20%. If you work that year and you made the same $100,000 or million, your tax rate would be 37%. But in capital assets, the untaxed capital gain is forgiven because the basis is stepped up at death. So if the property was acquired for say $100,000 during the father's lifetime and it was worth a million dollars when he died, that appreciation is not taxable at his death. Right. Exactly. Despite the fact, as you mentioned, there is no estate tax on that amount. So if the million when included with all his other assets is under $25 million for he and his spouse, then there's no estate tax and the son gets to sell the million dollar property with no tax whatsoever, not even the 20%. And I remember when they kept raising this floor for the estate tax and I remember somebody saying they were looking around for ways to increase the taxes because they cut so many different things. And for some reason, nobody thought of the inequity of stepping up your basis for income tax purposes when you don't pay any estate tax because basically the idea was that you weren't supposed to pay an estate tax and an income tax. That's why you got to step up in basis. But when they raise the floor from $30,000 to $12.5 million for each person, now they ignore the idea that why should you get to step up in basis? At least if the son's going to sell the property, he ought to pay the income tax on the gain that the father enjoyed during his life and passes on to the son. It sounds like there's two elements happening politically and socially. The first element is that people who are rich have a stake in these quote, reform acts, which isn't really reform at all. It's give me more. It's take all these draconian steps to increase wealth from generation to generation, not tax the rich and tax the poor instead. So that's one side of it. And there are people, organizations that lobby in Congress and get in Congress over the years to go in that direction. So we have been inextricably moving, as you saw way back when, moving in that direction. But the other side of the equation is that there's actually not enough lobbyists to represent the 99% who don't see this coming. And I don't think they did see it coming in the quote, reform act of January 2017. So what you have is a completely imbalanced situation where the 99% are not being looked after. Now there may be altruistic people out there in organizations that say, wait, wait, wait, reform means reform. But I think their voice is not nearly as effective as the voice of the people lobbying for the 1%. So over the years, over the time of our lives, your practice life, my practice life, what we have seen is the 99% is taking the burden and the 1% is not. Now, so let's assume that for a minute and say, well, what happens? What happens at the end? Sure, aristocracy, but there's something else here where the 99% do not realize that they're being hurt, that their social programs are going away. They join in in this notion of, I don't want to be audited. I don't care about the government. I want the government to leave me alone. And this is really misguided because at the end of the day, it's coming out of their pockets. It's coming out of their lives. And my guess, I like your answer, but my guess is you keep on doing that. And the country is unable to provide social benefits, all those regulatory benefits you talked about, fresh water, clean water, for example, all that, all kinds of health benefits. And they suffer. Sure, they're the tax burden is less on, I guess, everybody, all citizens collectively. But at the end of the day, the country, what happens to the country? Well, some people seem to be in favor of not having a government. And what happens to the country, you become a third world country, you can't take care of your roads, you can't take care, you can't take care of the things that need to be done. All we seem to be in agreement on is to keep spending money on the military, which to me is where we could cut down dramatically if we wanted to keep the government going. But Jay, there is so much disinformation going on. We don't have to talk, we don't have to tell anybody about that. People have been convinced to look at issues which are not, you wouldn't think of them as government issues. I include abortions and prayer in school and what kind of books we're reading. I mean, these are for experts, in my view, to figure out what to do. And I remember when abortions were illegal and people were killing themselves, giving themselves abortions and back alleys and that's going to happen again. But you have to decide that government is important and the combination of what the wealthy, the 1% have been doing, all the things we're talking about, they also tell you to mistrust the government. Everybody's cheating you. Nobody, it's all deep, deep state. I mean, do you know anybody that works for the government? They're just decent people like you and I. They're not committed to cheating anybody because of their politics. But we've gotten to a point where we don't trust anybody. This is very authoritarian kind of ways to live. Now, the United States when you and I were growing up and for many years thereafter was one of the most egalitarian societies in the world. What I mean that is you could come from nothing, have poor parents, live wherever you did with very little capital, get a good job, turn yourself into a professional or a business person, all kinds of things that you were open to. Now, you can't even afford to go to college. You can't, no one can afford to buy a house. I bought a house, my first house one is 26 years old. And I mean, it was just a whole different world. And now the 1% owns so much and the prices of capital have gone up so much that the American dream is now to own your own car, as opposed to your own house. And it costs $500,000 to start a restaurant business. And we've just gotten very out of kilter. So if I asked you, Roger, if I put you in Congress, for example, if I made you Speaker of the House or put you in charge of committees or the Senate, and I asked you to come up with a reform package. And there are political issues, how far this would get. But how would you reform this system substantively if you had the chance? Well, the first thing we need to do is have more money for everything. I've been a tax lawyer all these years. And I guess I see taxes as the classic way to raise funds for the government. And there are plenty of people out there who could pay more. For instance, one of the things that was kicking around a long time ago was the idea of a flat tax. Everybody pays 15%. Now imagine you're making $50,000 a year and you've got to pay $7,500 in income tax. A guy who's making a million dollars a year has to pay $150,000 in income tax. And he's saying, I'm paying 20 times what you have. But the guy with 50,000's only got 42.5 left. He can't even rent a house. He can't do anything. Whereas the other guy has $850,000 to do what he wants with. Now, if you say he's the only factor in him making money, that's one thing. But my personal belief is this country, this government, created a platform and a base for him to make that million dollars. He couldn't have done it in other countries. He would have had to start with it, whatever it is. So it's a lack of appreciation, frankly, for what the country has done for you, even though you want to talk about America first and whatever you want to talk about. America first doesn't pay its debts and let the whole anyway. So that's the first thing. I think you have to go and it's extremely hard to raise taxes. It's easy to cut taxes. Everybody's happy. But if you raise taxes, I told you it was 70%. It went from 35% back to 37.5%. And people screamed and yelled about what are we doing? So the first thing is to have more money. And then you start calling it communism. I'm taking money to give to other people. Why? Well, for the same reason that we have minimum wage laws, that's taking money out. An employer could pay $7 an hour. And you would still work because everybody's doing the same thing. But when you start a minimum wage of $15 an hour, now they got to pay $15. They would have child labor if we didn't have child. In fact, they're talking about eliminating child labor laws. So in my view, we're a community. We're a country. I don't want to step over a guy in the street because we haven't found a system that will give him a shelter, food and clothing. To me, we're responsible in part for that, all of us as a group. And we come together for the pursuit of life, liberty, and happiness. And it requires those that have made a ton of money because of the system. To put back more into the system instead of complaining about crime and people on the streets so that the government is the only entity that can really do that if we give them enough funding. So your first question, I would raise the taxes. Secondly, I would look for the kind of programs that Roosevelt put in in the 30s to end the depression. I'll be called a communist. But there's a big difference between communism where you can't speak up, where you don't have the freedoms to do a lot of things, and a government which takes care of its own people, whether you want to call it socialism, or you don't put a name on it, whether you want to call it mitreia, loving kindness. We go to church in the synagogue and talk about being a good person in every, all the Abrahamic religions, which I'm giving a talk on this on Monday, by the way. Anyway, let me offer a thought. It's kind of a spiral, isn't it? So I make my money because I have a platform and my platform, my advantages are provided by the government, by the society. And so I have security. I have, again, clean water. I have all the things that make my life worth living being provided by the environment of the government. Now, you talk about people on the street. I always wondered about that, and I'll be offering my thought to you about that. So if you have to step over a sleeping person on Market Street in San Francisco and Market Street loaded with people sleeping on the street loaded, it's kind of the canary on Market Street, if you want. In other words, it's got to tell you something that they're homeless in every city in the country. It wasn't always thus. In 1967, it was not thus. It was more egalitarianism than there weren't so many canaries sleeping on the street. When you see that happening, when you see the people sleeping on the street, you have to make a conclusion that the system is not in tune, is not working properly, that the government should be taking care of these people. But if you don't take care of them, there's more people on the street. If you don't take care of them, there's no regulation, there's no clean water, there's no security on the street. All of a sudden, the platform that you had this miraculous benefit to use to make your million dollars isn't there. And you can't do it again as a country around you has deteriorated. And so the next generation has a problem. In fact, you have a problem because you're not secure anymore. So the people who oppose government, oppose taxes, oppose social programs are really shooting themselves in the foot. And the civics courses you talked about really need to cover that. So people understand that we are the government. Didn't Abraham Lincoln say that? We are the government. And the government is us. It's not a foreign entity. It's not us of them. We are all in this together. And it just amazes me that the average person doesn't understand this. Jay, I agree completely. And I would add to some of your statistics that one third of the young teenage girls in our country have considered suicide. The mental health rates are out of sight. Suicide and gun violence is the leading cause of death between people from ages like 15 to 24. And even people who say it's not the guns, it's the mental health problems. Well, let's do something about the mental health problems then. Because I don't like everybody shooting each other. The answer is not to give everybody a gun. So we'll all be safe. We'll all be killed is what's going to happen. So when we look at these things, we get right back to what you say. Are we all in this together? Or is it every person for himself? Keep as much as you can. And just move on. Now, let me give you some encouraging thought. There are a lot of good things going on in the country. In fact, the country's economic health seems to be decent at this point. Okay. But we have a right wing movement that is pushing these ideas that we don't need government that we shouldn't have any social programs. It's not fair to tax people. In the 1960s, we had a huge left wing movement, huge. And it was the biggest transition that we can think of. Maybe there were bigger ones. 1776 was a big one. But in the 60s, which was 60 years ago, we had these huge movement towards left wing liberalism, progressiveness. But then starting in 1971, there was a backlash against that, which crystallized in the form of Ronald Reagan in 1980. And now we've had 40 years the game has been pushed by the right wing. And so now we're seeing the culmination of the excess, the extremism of just what we're talking about. Not enough money to pay for the government. Let's kill the people who are collecting the taxes. Let's cut them off at the knees so we don't even have to pay taxes that we're live before, even though we've reduced the rates dramatically. You may forget when Donald Trump was elected president, he was, there were more protests than there have been since the 60s. It died because Mr. Trump has a wonderful ability to let everything roll off his back and just keep going and going and going. But not everybody is like that. And I think that there's a good chance that this tumultuous period we're in, and it may not be over, we may have to go deeper and deeper. And this brigadier general said we're going to be a war in China in two years. I mean, that's another insanity outside the economics. So I think there's hope that people will begin to see that we've gone too far in one direction. And maybe we'll have another 40 years of progressiveness, which will bring us into a society which will say we're all connected to each other as every religion tells us. And to have a good, satisfying, meaningful life is to be in service to other people. And we're going to have a lot of retirees we already do who are not working anymore, who could come back, do a lot of volunteer or low pay work, take care of so many needs that we have in the country. Because it's not just money as a resource, it's also volunteerism. And if I was running those committees, I would create as many government sponsored volunteer programs as I could think of. And I would even imagine if you went into City Hall to renew your driver's license and didn't have to stand in line for an hour. Because there were 10 people there all working instead of four. And you say, well, but then they know all my information. Well, the workers know all your information. So these people would swear to the same whatever they have to swear to. But we could have people volunteering even in those kind of positions and help ourselves to have a society where your goal is to feel good about being helpful. Yeah. They care for each other. Yeah. But my trade to have living kindness to fellow human being, we seem to have lost that in recent years. And I hope we recapture it, Roger. That's why I'm putting your name up for president, because I believe the president would have a lot to say about that. I hope you do. I will certainly not do anything to follow up with that. But if they elect me in any event, I will serve. Roger Epstein, tax consultant and philosopher. Thank you so much, Roger. It's been wonderful as always. Take care. It's great. And thanks for all the good work you're doing. I hope we can make some momentum with this. The Maitre Institute is working on a lot of good things. And I know there's a lot of other people that would like to see Hawaii fulfill its place as the land of Aloha. From our mouths to God, to the people that are connected to God. God's ears. Aloha, Roger Epstein. Aloha. Follow button on Vimeo. You can also follow us on Facebook, Instagram, and LinkedIn, and donate to us at think.kawaii.com. Mahalo.