 All right, talking tax here at 5 p.m. on a given Wednesday. I'm Jay Fidel, and that's Roger Epstein. Do you ever see a tax attorney in a flesh? How many of you out there have met a tax attorney? Raise your hands. Good work. Here's one, Roger Epstein. Hi, Roger. Hi, Jay. How nice to see you. It's always a pleasure to be with you. We framed this show as should the little people be paying the tax. And it actually tracks on a number of discussions you and I have had since what, early 2017, about the tax reform. And I put that in quotes under the Trump administration, because it never really was about relieving the little people. It was always about taxing them, relatively speaking, more than anyone else. Isn't that nice? And those are the guys in his base. Isn't that nice? But where are we now? We have issues in front of Republican Party and Congress around tax in order to pay for infrastructure and other government benefits that are part of Joe Biden's program going forward. And it raises similar questions. Who pays the freight? And what is going on, Roger? And is it bode well or not? Well, I think the bill that Biden has is designed not to tax the lower people, the little people. If it gets passed, the bill is designed to tax anybody over $400,000, which is a pretty high level of income in a year. And that's taxable income. So I think they're trying to do that. One of the things that you asked me to look at for this conversation was a New York Times article that talked about Republicans not only not wanting to raise taxes, but not wanting to give the IRS enough money to collect the $500 billion of tax gap, they call it, which means uncollected taxes. And the vast majority of that is from wealthy people who can get good tax advice and maybe go over the side, over the edge, or even just not being criminal, but just going a little farther than the line. I used to think of Richard Nixon that way. His plan for the law was you go right to the borderline of what's right or wrong under some provision. And then you just go a little farther into what's wrong. And that was kind of the idea of following the law. So I think we're at an unusual phase here where Republicans not only don't want rich people to pay taxes, they don't even want to collect what the rich people owe. And it's really a function of what I used to say. In China, the government controls the business. And in the United States, the business controls the government. And it really, I don't want to get too deep into it, but it gets back to the fact that what was that scandal years ago, the savings and loan scandal, where Keating said, did you give all that money to those congressmen so they would do what you wanted? And of course, that's why I gave them the money. What the hell do you think I gave it to them for? So it kind of gets to that. But we're in such an incredibly incomprehensible word I can think about, where the vast majority of Republicans are little people who are not so wealthy. And of course, the driving force remains 1% or whatever percent who really don't want to pay taxes, no matter how much money they make. And nobody really wants to pay taxes. But the question is, how do you run the government? And so we've gotten ourselves into this place where incredibly rich manipulate not only the Congress people, but their own constituents. And so how we get out of it, I'm not sure. As I've told you many times, when I first started with the IRS in 1967, the top tax rate had just come down from 90% to 70%. So not that everybody was paying that rate, but they were paying it on income over $1 million a year in today's dollars. And so now, over a million, you're paying 35%, 37.5%. And they're all pissed. Why do I have to pay so much taxes? So we almost get into a question. It's hard to do this in my mind without the philosophy behind it. What's the purpose of government? Are we supposed to have a society where we keep people falling from falling through the cracks and or is government so odious as it seems the Republicans think that we shouldn't give it any money? Let's not feed the beast. Wasn't that the plan some years back? If we don't raise enough money, we can't have all this welfare. We can't have all these provisions because there's enough money for it. So somehow that got sidetracked to, well, let's not collect any money, or taxation is a punishment as opposed to a civic duty. Well, yeah, there's a couple of points you raised that are worthy of unpacking. One is just in order of the way you raised them. One is what happens if people don't want to pay taxes? If Congress doesn't want to, if people don't want to pay taxes and Congress doesn't want to collect taxes, that's pretty serious because the government has no money. People don't pay. The government cannot function. And then you get effectively, you know what it is? It's kind of this thing about anti-government. It's kind of a revolution against government. Let's take government apart. It's just another angle. It's not dissimilar from the insurrection of January 6th. We stop government from functioning by the power of the purse. If they have no money, it won't be a government, and that's what we want. This is ill-advised, of course. But it really comes from the same place. And I agree with you. The second point is I agree with you that there's an ideology involved, and that is we don't want to be our brother's keeper. If somebody down the road is starving, that's his problem. And if he could make a buck and be rich, good for him, if he can't, bad for him, but it's not our problem. And this is, I think, Trump's view of it, and this has been a Republican mantra for a long time, actually, it didn't begin right away. In fact, it goes way back into the 19th century, where it's not my problem. If he wants to be rich, let him be rich. It sounds like Marie Antoinette, you know? Let them eat cake, and the problem about eating cake is that after a while, it's not sustainable, and they rise up with pitchforks. So where does it all go, Roger? If you don't tax and you don't collect tax, then you don't take care of the people who do pay the tax, what happens? Well, you have the kind of society that the Republicans want, trickle down economics, which has trickled down so slowly that 75% of people in Hawaii are living paycheck to paycheck. And it's not much better, or throughout the country, even though I don't have statistics, there's so many people working two jobs. And so this is actually good for business when you think about it, okay? Because if you're hungry, you'll do anything to work. And so if you want laborers, if you want shopkeepers or clerks in your stores, if you want people to be answering phone calls, if you wanna do a lot of kinds of work that don't require sophisticated knowledge or expertise, then you'd like having everybody starving, basically, because they'll take whatever they can get and they'll work two jobs and they have no options. So is it an exacerbated disparity then? The wealth gap? Absolutely, absolutely. Look, when you and I graduated from college, where I paid $200 a year in the same school now as $12,000 a year, the same state college, I was making $10,000 a year and I could buy a house for $15,000, one and a half times my annual pay. If I make $35,000 coming out of college, what can I buy for $50,000, one and a half times my annual salary? What can I buy for $300,000? The price of houses here now is almost a million dollars. And even in the cheap places around the country, it's $200,000 or $300,000, which means if you're making $20,000, $25,000 a year, it's 10 times or more what you're making annually. So yes, the wealth gap has been great, not wanting to sound like a communist, which I certainly hate the concept of top-down communism, but the relative value of labor and capital is out of sync. It's gotten deliberately skewed, I mentioned to you when we started the talk about Louis Powell's memorandum, the former lawyer for the tobacco industry come Supreme Court Justice under Reagan, who wrote a memo in 71 saying the sixties is insane, that these liberals are taking us to communism, we've got to fight back and they took it where he planned. They took it to their own colleges, so we didn't have just liberal professors. They got all the judges enacted, they got all the local politicians enacted. And in 64, they took advantage of the quote Southern strategy. As you know, the solid South was all democratic from the time that the first Republican president, Abraham Lincoln freed the slaves until 1965, when the civil rights laws were passed, and the South against solid Republican, just like that overnight. And even though Lyndon Johnson said, we lost the South for a generation, he was wrong. We lost the South forever, at least the last 60 years, 55 years. So we have a situation where the very wealthy understand that they're in the minority. They want what they want, but they're in the minority, and the way to get there, they have to manipulate some people. And the way they did it was through the race card, and it's been very effective. And they admitted it. They admitted it in the seventies and the eighties. You just have to follow the path and look at some YouTubes and other kinds of material that's right out there. This is, it's not a conspiracy, it's they're American citizens, they can do what they want, but this was their strategy, the strategy work, and we've ended up with this wealth gap that's incomprehensible. And I'm really a deadly to find out that it's an intentional wealth gap. It's an intentional effort to put some people down and put them in this kind of servitude, use that term, experience where they're in a rat race. I'm reminded of a book written by a New York Times reporter was called dollars and cents, I think it was. And she went into the South. She divested herself from all assets. She had nothing in her pocket and she tried to live the life of somebody who was in the put down class in the South. And she got a job at Kmart or Walmart or something like that. No insurance all part time. And they paid her minimum, minimum. And it was impossible, she couldn't. And she looked around her and found that the whole community was like that. They're all living hand to mouth. They had no savings, no prospects, no education, no nothing. And it was remarkable that she found herself in a situation where everyone around her was under the thumb. And this is now almost 20 years ago, she wrote that book. Rosen Swag, I think was her name. Bottom line is, it was intentional. They were able to do it through a number of devices. You could find, I agree with you, you could find writings. You could find professors in some of the Southern schools that actually taught this as a matter of economics. So here we have it and it's being extended now. It hasn't stopped. It hasn't come to rest. It's getting worse, am I right? It is, it is. And I think we're in a civil war, we're in a battle and everything going on now is economics anyway. All the international stuff. It doesn't, they talk about enemies and things but it's really about economics. Nobody realistically thinks we're gonna drop a nuclear bomb on China or they're gonna drop one on us. And it's a whole different world but we're fighting desperately for economics which really, who are our warriors? Is everybody's a global manufacturer. Everybody's a global sales person. So it's wrong and it doesn't make sense, Jay. It doesn't make sense for the reasons you've said and can we change it? My experience has been when things don't make sense they eventually collapse. But we've waited it so heavily ever since Reagan. Reagan really, so you take this Lewis Powell memo and oh, I'm sorry, I gotta think of the name. There's a book that just came out this year that talks completely about this. Explains the whole thing. It's very, very powerful and very clear. And so the idea is the elite, the economic elite deserve what they have. They've worked harder, they've got it. And if they do well, a rising tide lifts all ships. But the problem is they've held on so tightly to the profits competing internationally. So one big jump on this was when the Arabs took over the oil in 74, you had these very wealthy Arab people who were nowhere near as sophisticated and capable as the seans of business in the United States who've been running the world economically for 20 to 30 years since the war. All of a sudden these guys were making more money than them. So they had to ratchet up the senior salaries. And so the guy on the shop floor was making 30 or 40 times less, the CEO was making 30 or 40 times with the guy on the shop floor is making, now the guy on the CEO is making 400 times what the guy on the shop floor is making because they had to play up to that level. And then you had the Japanese takeover of industry and cars and stereos and all this in the late 70s and 80s. And so they had to keep up with that. And so it's like you're at the top of the list and you're still looking up. You're not looking down to see how they're doing, you're looking up to see how you and your contemporaries are doing. And it has to stop or we're gonna go into third world stuff. How much worse could it be than she explained in her book and now it's 20 years later, how much worse do you think it is, Jay? Oh, I think it's a lot worse. And it's getting, it accelerated during the Trump time. By the way, the name of the book is Nicolled and Dime. Nicolled and Dime, if anybody wants to look at that. And it's the same story we're talking about how there are oppressed people all around this country. And what's really ironic is that they're in the red states. These oppressed people who don't know which way is up are suffering more. And so it's hard to accept this. But one thing- Well, let me say, I thought the name of the book. The name of the book is called Evil Geniuses. Uh-huh, good. It's written by a journalist, Evil Geniuses, and outlines all this. And yeah, well, how are we gonna change? Well, not to say that this is the solution, but back again in the 19th century, there was this French concept, there was a French term in Europe. And it's, if you were very wealthy, you felt that you had to help people. The people who you were exploiting, you had to help them and you gave them money. No bless, no bleed. No bless, no bleed. Thank you. Trying to think of that term, that's exactly right. That's gonna be a final exam, Roger. No bless, no bleed. Thank you, hope I pass. So you got very wealthy, and then it was kind of euphemistic because you know that these guys, Vanderbilt and Rockefeller and Andrew Carnegie, they weren't giving a whole lot of money away. When they died, maybe they left it for tax purposes to a foundation. But during their lives, they didn't give a whole lot of money. But the notion that they were selling was, we're helping you, we know we've exploited you, you're gonna get some money from us. And today, as you say, the disparity between the guy on the factory floor and Bill Gates or Jeff Bezos, who spends his money going into space, I find that very ironic. Those guys have so much money, even if they gave billions away for charity, it would be nothing compared to the size of their estates. So what you have is a complete lack of no-bless oblige. It's no-bless oblige in reverse. As we said, I'm keeping mine, and you can struggle. And if you can't be a billionaire like me, it's your problem. And we call that freedom, call that freedom. Everybody has the freedom to do what they want, they want, except we have all the money and we control all the rules. And, but it's all freedom. And, you know, I look back to Franklin Roosevelt in the, at the end of the depression or in the middle, and he was considered a traitor to his class. But his belief in part was if they didn't do something, forget no-bless oblige, if they didn't do something, they're gonna have a revolution because everybody was living in the streets. And it was, you know, much worse than it is today, but we could get there, Jay. Yes, I agree. Every time you turn, more people sleeping in the streets. And why do we need to do that? Why is that okay? Is that the American way of life? When you say government of the people, by the people, for the people, does that mean everybody for himself? I just don't, okay, I gotta get into this philosophical because I'm reading a wonderful book from my dear friend, Elizabeth Satoris, who's an 85 year old evolution biologist who wrote a book called Earth Dance, which says the earth is really alive and everything started with the fire of the earth and then the atmosphere cooled it off and then we had a crust and the crust made rocks and the rocks made minerals and the minerals made one celled animals. And she shows a pattern of how everything goes through unity to chaos, chaos to competition, competition to collaboration and back to unity. And then eventually something throws it back into chaos. But we're in this period now of heavy competition between humans. And the next phase, whether we get there because we have a revolution or it gets so bad that even a people in the South wake up they're being hoodwinked, we've got to change to a recognition that we're all really connected to each other in many meaningful ways, not just no bless oblige, but through quantum physics, we know we're energetically connected to each other. And so if I hurt you, it hurts me. And that's the reality that we now know since Einstein and with Elizabeth's idea, these patterns of how everything evolved in nature, we've just been too competitive, too many thousands of years of murders and wars and killing people and holding down the feminine principles. It seems to me that it's all coming together for a good change. And what that- Well, we're a bad one, Roger. And just as easily it could be a really bad change. The bad one, yes, it could go on, but at some point, as she shows, chaos forces itself to come to, it gets so horrible. If Trump wasn't it, I know it was, but at some point it gets so horrible that you have to react and you're desperate to change things. Okay, but let me say that when you reach that point, you know, the state of the species, if you will, when you reach that point and you recognizes out of the stories of Helm in the Bible, when you reach that point, it may be too late. You can't go back. Some things you can't fix. You know, you didn't realize it was going south. That's not exactly the best expression. You didn't realize it was going south, but it went south. And by the time you realize that you can't do anything and then you're really in the soup. And so going back to your question, what can we do economically in terms of tax policy, in terms of what Joe Biden should be doing and what this is a long one and what Congress should be doing in order to level the field again to get us back to balance. Yeah. Well, I think it's obvious that as a tax lawyer and no matter what the Republicans have said, cutting the tax rate in half and 70% to 35% has had a huge impact on the ability of the government to take care of needs of people and the pollution and all the things that are going on. We really have to do something about that. And there's different ways to do it. You can ratchet it up gradually or you can do something fairly draconian. Put it back to even 50% as a top tax rate or 70%. And had Biden recognized that even people making a couple of $100,000 a year are not living high on the hog. That's why he put it at 400,000. But he only pushed the rate up to what, 39%. So it's gotta go a lot higher than that in my mind. And the second thing is, so number one, you do it at a federal level or what do we do in Hawaii? We have an opportunity in Hawaii like nobody else does in the country. We're a very multicultural society with very few relatively incredibly wealthy working people. We got a lot of retirees. And so we're, could be of a single mind to help everybody have food, clothing and shelter. And so the government knocked down the tax rate. Why don't we kick ours up and take some more money? Why don't we tax the hotels? Here's a, I could make enough enemies for myself for the rest of my life, but really tourism, if you tax the hotel, this is something I've thought about for a long time. If you tax the hotels on their value, then they would either raise rates, which, okay, if people out of state wanna pay that or whatever, or they couldn't raise rates because they're already too high when they used to be quite reasonable relatively. Or you would have to take lower profits. Lower profits would reduce the value of the hotel because the value is a multiple of how much you make. And so the price of things would start coming down. And so is that fair when the price has gone up 10, 20 times more than the price of labor? And so I'm not, I mean, obviously, if you start your own business, if you put your capital into a business, you need to recover. You need to be treated fairly. But like the CEOs, do you make 40 times as much or do you make 400 times as much? And when you make 400 times as much, you really throw everything off the wall. There's another interesting book. Have you ever heard of Donut Economics? Oh, tell me. Donut Economics is a creation of, I think it's about 15 years old now. They're trying it in Europe. Okay. So in the center of the donut, the donut hole is people who have fallen through the crack and don't have enough to live on in your society. The fleshy part of the donut is where you want everybody to be living. And obviously the wealthier people are at the top of, the outside part of the donut or the top of the outer edges of the top and less wealthy people are closer to the hole. But the outside of the donut is when you're screwing up the whole environment. And when you've made everything so bad that you can't go on anymore. So that's the control. We don't want to ruin the planet. We don't want to ruin all the systems. And we don't want to let people fall through the hole in the donut. And so taxes is a major part of that, Jay. And it's not, it has never been effective to set values on things, but it's always been acceptable. In fact, we passed an amendment to have an income tax in 1913, over a hundred years ago. So there's nothing improper about it. And in my mind, there's nothing improper about paying more if you've gotten more out of society because you've done better. And here's something that I would love people to understand because so many people on both sides of the spectrum should say we should have just a flat income tax rate. That is so preposterous and so anti-democratic because, okay, I'm making a million dollars a year and you're making 50,000, say 100,000 either. And we pay 15%, right? I pay 150,000 and you pay 7,500 if you're making 50,000. I've paid 20 times the taxes you have, but you know what? With my 42,500, I can't even afford to rent a decent house, but you still got 850,000 left and you can't spend more than two or 300,000. And so you've got discretionary income of another four or $500,000. Now, God bless you, I'm glad you did it. But on the other hand, we're in the same society. You've benefited enormously more than me and you can't let all these people fall through the donut hole, not if you wanna have a society where people are living decently. And it doesn't help anybody to be in a society. It doesn't make you happy to walk down the street and step over people asking you for money. It doesn't make you happy to see people living in horrible conditions. You may be able to put it out of your mind, but most of us can't. And the collective consciousness that Jung talked about is real. We feel it. We're all feeling bad that so many of our fellow citizens are in such a sense. Well, I mean, there's a real practical aspect to that too. Remember Marie Antoinette let them eat cake? She lost her head over that. And so I mean, I think that in the cards, if you have enough people who are beyond the tipping point who have nothing to lose because they're so poor and miserable, they will rise up and the rich guys will be at the wrong end of that. Yeah, and you see in the middle and that's what I was saying about Franklin Roosevelt. He understood that. And he said, we've gotta give some back. We rich people have to give some back to society. Look, if you pollute all the rivers and you leave it on the community to fix it and then everybody gets sick. How can you say, well, I made all this money. I shouldn't have to clean that up. I shouldn't have to pay taxes. And there's so many things that have just gotten not that they're wrong so much as they've just gotten skewed. They've gotten out of alignment. As I said, the relative value of what I can get for my labor doesn't allow me to buy any capital anymore because the prices are so high. And so the only way to get back is to raise the wages and lower the capital value. Well, I wanted to ask you that last question. It's political. How do you fix this? First of all, the article I sent you about the $500 billion, that's low hanging fruit. You wouldn't have to give the Internal Revenue Service very much money. And all of a sudden that would start pouring into the tail because A, because they would go hustle and get it. And B is because people would see they won't be able to get away with not paying it. And that's the key, Jay. That's the key to our system. I worked for the IRS for five years. The key to the system is people believing they'll get caught if they do wrong. And everybody knows you won't because there's not enough personnel around to catch anybody. They only audited 1% 50 years ago. I can't imagine what that number is now. It's probably a tenth of a percent. And certainly the rich people understand that. And so you've got to go after them because they'll take a chance that they're just a little over the line like I was talking about Nixon. Sure. And then that line has a $500 billion. But the other part of that, Roger, and it's another change in our society is that people are more inclined to try to get away with it. Your Richard Nixon example, they get to the line a little bit over the line. To play with the line. And the problem is, we shouldn't be thinking of it that way. We're in this together. We have to find the social compact again. We have to be happy to pay taxes in order to have a good country. Nobody wants that anymore. We've lost that. Wait a minute, doctor. Wait a minute, doctor. I have fallen out of the belief that anybody is gonna do anything really against their own interests. I read somewhere that people worry what people think about them after they have a little, not a confrontation, just meeting. You know, you walk away, you think, oh, gee, that didn't go too well. The other person must think badly of me. And it says, no, 95% of the time we're thinking about ourselves. And so it really doesn't matter. He's gonna lose whatever he thought of you very quickly. But we have to, I really believe, Jay, we have to understand not that we're good people Jesus hasn't been able to convince anybody to do it that way for 2,000 years. The way it's gonna happen is through Einstein's exposure, Einstein's understanding that has to come into common knowledge that we are all connected to each other. That anytime I do something bad to you, karma is a real thing. Coming back, my bad deeds come back. We're not gonna get it until we see it in our own self-interest, not to hurt you. Our own self-interest, not to throw you into the donut hole. Okay, that takes me to my last question, because we're really out of time here. My last question is, okay, it would be nice if Congress would, you know, appropriate some money to reinvigorate the Internal Revenue Service. That's a big question, whether they'll ever do that. But the other is, you know, you and I were talking about, just as we were talking about the flip side of what Trump did in January of 2017, we were talking about tax reform, real tax reform. That's the key to all of this. If you shake and bake this whole discussion, the key to all of it is tax reform, fair-minded tax reform, reform we should have had years ago. But we have a Congress that's dysfunctional. We can't do this by proclamation. We can't do it by wishful thinking. Even the Internal Revenue Service has to follow whatever the rules are. So query in this country, and we're running out of time, I think, how do we do that? How do we get real tax reform through a statute that's what we need? Yeah, I think Biden's on the right track. You keep pushing. Hopefully, even if it's a slim majority, that will continue on. And when you have a majority, when you can get things passed in both houses, you do it. And whether they got to get rid of the filibuster or what they have to do, go through it to take some months, you know, we'll just filibuster every day. I don't know what you do to, but I'm saying, let's not assume everybody's gonna change to the common sense we believe you and I are speaking. Let's work with our slim majority. Let's keep putting forward bills that make sense that will undo the damage we've done to ourselves over the last 40 or 50 years. And little by little, maybe we'll come back to some balance and then people will begin to see the truth of what's going on is things are better with sensible rules and sensible laws that act on people fairly. Well, I think, Roger, I think I hear your phone ringing and I think it's the White House calling. Hey, White House, oh yeah. That's a line one. Mr. Trump? Mr. Trump? Oh, no, oh, I'm sorry. Oh, no, I got it wrong. Thank you, Roger. We have to continue this discussion. So much more to discuss. Yeah, I know, Jay, it's great to talk to you and I still think we could do it in Hawaii. We don't have the legislature that we would like to have people with open minds and clear thoughts. But we could get there. We could do it in Hawaii. We could start in a lot of ways and we could become the place to model for how to live not only with Aloha, but with a little money in our pockets too. Wouldn't that be nice? Roger Epstein, a fellow who's gonna come back and drill down with me on so many issues that have been raised in this show. Roger Epstein, tax attorney, power excellence. Thank you so much. Thank you, Jay. Aloha.