 This is Think Tech Hawaii. Community matters here. You know it's time for a major change in this country and in this state, but Roger Epstein and me wear a kupuna. And we need the younger generation, even the Z generation to step up. We need them to think about these things and take action about these things and be intellectuals about politics and government and learn perhaps what they didn't learn in school. So that's why we're here today. Originally we styled this income tax for the Trump family because of the articles, especially the New York Times, two weeks ago about what a team of reporters found out about Trump, that he and his family hadn't paid taxes in years. Maybe that's why he doesn't want to release his tax returns. Nevertheless, they found out and they wrote it up. It was a big flurry of activity for about three days. And now, Roger, we're in the doldrums again. That's why we're going to keep this conversation alive. That's why we scheduled this show, talking about the income tax side of things. So last week we talked about the Trump family estate tax and how they were able to transfer a billion dollars worth of value for about five million dollars in tax, but if you looked at the actual rates, it should have been 500 million dollars, maybe 550 in taxes. How did they do that? Well, they used a combination of existing methodologies that are accepted by the IRS. They squeezed those for all they were worth and then they did a little finagling on their own outside of what was really permitted. So they were on the line and then over the line. Yeah. So what they did was they had extremely low valuations of the property. There's an old thing I hate to denigrate appraisers, but your national institute is MAI, which they say is made as instructed. So they got a guy in New York who's known for taking a low ball valuation beyond anything anyone else would ever consider reasonable. Then they took huge discounts claiming that they were transferring a minority interest in these companies that owned all their properties. Well they owned 100 percent and they gave it all to their kids. So how do you do that? Well, they worked it out so that senior Fred, they gave away a very small percentage so he was down to 99 percent. He gave 49 and a half to his wife. Now both of them are below 50 percent. You get a big minority discount. That sounds like bull to me as a matter of fact. But this is in the area of acceptable planning techniques that they extended way beyond what a legitimate tax lawyer like myself or anybody else in the country would have permitted them to do. By the way, Roger Epstein is a tax lawyer and been a tax lawyer for almost as long as I've been alive. You're only 50. 50 years. Yeah, yeah, yeah. And he's also a founder of the Asia Pacific Group which does business deals between here and China, right? Right. The last thing that they talked about in that article was how they siphoned off income to the children by using a dummy company. And that goes beyond what you would expect, what would be legitimate. What they did essentially was the companies that Trump had which were worth a billion dollars. So you can imagine how many expenses they had. So all those expenses reduced the value of the company, whatever expenses. So the way you value a company is you take the income. Let's say the company earns five dollars, Jesus. Five dollars is their income. Jay, you're always talking to me about my bad writing. So this is worse than I've ever done. But we're using your new equipment here. Quite small, Roger. Okay. So five dollars of income. The way you value a building that makes five dollars of income is let's say you multiply it by a number. Let's just say 10. We want to get a 10% return on our money. We multiply it by 10. So a building with five dollars of income is worth 50 dollars, okay? If you want to reduce the value of the building, you increase its expenses so that its net income is less than 50 dollars, okay? So if we put it down to 10 dollars of net income, now the value of the building is only 10 dollars instead of 50. Okay. So let's get rid of that. Okay, we're going to get rid of that. So anyway, the main idea is the more expenses you have, the lower the values you're building. So after you get that, then you can take these discounts. You can low ball the numbers, all kinds of things. All different ways. Layers of reduction of value. But here's what they did that the commentators are saying was fraudulent. They had the kids, Donald and his three, four siblings, they created a company which was a management company, quote, okay. The management company did absolutely nothing except re-invoiced costs. So Fred Trump's company has a $100 bill, an item that they had to pay for. They bought something or services. Instead of sending the $100 bill to the service company, they sent it to the management company. The management company then rewrote the bill for $150. And did nothing else. And did nothing else. And then the cost to the Trump company was $150. The service provider gave them a bill for $100, they padded it for three. Your expense, smaller value. Right. Not only that, it also allowed them to raise all their rents because the rents were capped. But if your expenses go up, then you can charge more to your tenants. So they deceived all the tenants too. But that was a, I would say this goes beyond the pale of legitimacy because there were no services provided. And this is what the New York Times, I'm relying on what they say. Okay. That was basically how they got their values down from $1 billion to $41 million. That's a long way, Roger. That's a long way. What does that mean? 4%. Yeah. And 96% down. Yeah. Just make it $1,000 and $41. Yeah. And then you can see what we're talking about. Yeah. Okay. Wow. That's extraordinary. Extraordinary. So would they audit it? Anybody know? They were audited. The IRS didn't call them on it. It's not been my experience in 40, 50 years with the IRS and in private practice. I found the IRS takes a very tough position on these kind of audits. And I've done many audits with the IRS. So I'm very surprised, but they got away with it. They got away with it. And this is one of the lessons we're going to talk about today. This is a mentality that you take it to the limit and then you fight about it if you get caught. And if you don't get caught, God bless you. That's the mentality. That's what he's doing in the president's. That's what he's doing in the president's. We'll talk some more about that. Okay. So what did he do in the income taxes? That was his father's deal in the income taxes. And Trump, of course, this is a big part of the article. It says that Trump got so much money from his father, and that's how he made all his money, even though he says he only got $1 million from his father as a loan. He paid it back. He did it all on his own. Okay. He was in debt to his father, $15 million. This is way, it goes through all the things his father did for him. But he couldn't pay it back. And he had a number of companies that were failing. So the father took his, the notes, the father took his $15 million that Donald Odom put it into his failing company. That essentially eliminated the obligation of Donald to have to pay back the money. He forgave it. He didn't forgive it. If he had forgiven it, either it would have been a gift that he would have to pay gift taxes on $15 million at 55%, so $8 million. Or Donald would have had $15 million of debt forgiveness of indebtedness income. Instead, he put the money into the company. And then some period later, he sold the stock, became worthless because a company was worthless. So the debt was essentially canceled without any tax. And then he sold the debt, he sold the stock back to Donald, the portion of the stock he got and took a loss on it. Low price. Yeah, he sold it for nothing, $100, took a whole loss on everything. And didn't disclose that he sold it for Donald, which according to the New York Times article, was false. I'm not 100% clear on that, but I believe what they say that he wasn't entitled to take the loss, but he took it anyway. So you throw it on the wall and see if it sticks. You throw it on the wall and you see if it sticks. So this is what I'd like us to move on to discuss today. This is a symptom of the mentality of the rich people in our country. Not all of them, of course. And they pay a lot of taxes. But they, I mean, Fred Trump paid $5 million. But he was supposed to pay $550 million. Yeah, well, that's, first of all, a total greed. Second of all, that reflects a state of mind to cheat the government and cheat the system. And when Trump walks around and says, I didn't pay any taxes at all, he's not the only one, by the way. A lot of people say, I didn't pay any taxes at all, even though they made a lot of money. What troubles me is I believe, and maybe it's just me, there's a we are the government, the government is us. We participate in the government, the government pays back. The government is a collective of all its citizens. And when you say you don't want to pay taxes or you go to these lengths not to pay one penny or some very small amount of taxes, you're really saying is, I don't want to contribute to the country. I don't want to contribute to the cost of doing government. And I think we want to look at that as a philosophy of Donald Trump and the Republicans. And I say that very clearly. So Trump said, when he had a debate with Hillary Clinton, he was in the back saying, I didn't pay any taxes because I'm too smart. What does that say for the country? Exactly the opposite of what you're saying. I'm too smart to pay taxes, smart people and rich people don't pay taxes, why should you? That's a goal. If you were smart, you wouldn't pay taxes either. That's the implication isn't, all right. Ronald Reagan changed this principle in our country. If you want to look at it from that period, and it goes back much farther. But in our modern day, Reagan said, government is not the answer. It's the problem. This is not what you said, Jay. You said government of the people by the people for the people is supposed to be a government. We want a government that helps us all to function. And in fact, if we didn't have the kind of government we have today, nobody would be making these kinds of hundreds of millions of dollars. Because the system wouldn't work. It would be a socialist system or our authoritarian system. Well, if we were all so smart, we didn't have to pay taxes. We'd be living in a state of nature. And you wouldn't be able to walk out of your house, assuming it was your house. So the Republicans have said to us since Reagan, government's purpose is to defend the country and fix the roads. It's not to make sure people have a place to stay or to live or get enough food. All these things are for charities. They're not for the government. They shouldn't be doing any of this kind of stuff. And with that mentality, they came across a plan for years now which Donald Trump implemented. And that is, if we can't cut back on all these social services, what we should do is dramatically cut taxes. And then we'll quote, starve the bear. And so you see right after the tax cut, which had so dramatically favored the rich and the owners, the people that have the capital. So dramatically favored. The next thing happened, he's not going to pay the already agreed, already voted on, raised to government people. And what did you say the other day? You said to me, there's a 5% cut across the board that it wasn't. Yeah, he's trying to do a 5% cut across the board of all federal salaries. In fact, all federal budget. Every department is supposed to cut its budget 5%. So there's two things that that does. Number one, it can reduce the salaries of the employees in the government. Or number two, it can cut back on the people who are regulating other people. So this is the other idea that there shouldn't be regulations. He's killing the EPA. So many other departments that are watchdogs are now, the Fox is in the henhouse. And so, but I want you to see that not as a conspiracy. I want to talk about it as a philosophy. It's a philosophy that I think we have to recognize. There's a lot of people that believe that, that government shouldn't do that. That if you make money, you made it on your own, you should be able to keep it. Why should I give the government anything? And the opposite of that is what you said, Jay. You should put in money into the hopper because that's what we need to live on. That's what the government needs to, and what is the purpose of government? Is it to provide for citizens for the welfare of citizens? Or is it to protect people so that they can make money so that they're not, no foreign powers come in. And so that our streets and roads are taken care of. These kind of things, and even our streets and roads are struggling now. So years ago, when the Republicans cut these taxes back at the end of last year, people don't understand, I don't think, the significance, the devastation of the funds they were cutting back. It's $1.5 trillion, $150 billion a year for 10 years. I've heard talks of, the Republicans have been talking about a 15% tax rate across the board. A 15% corporate rate, they cut it to 21%. That's all they could manage under certain rules. It was half of what it was. It was 35%. And so if you cut it to 15%, the Treasury departments own people said, well, you have to impose a value-added tax to keep the budget. So the value-added is a national sales tax. So the Republicans say, look, the corporate tax rate in all these other countries is lower than ours. Of course, they have a national sales tax. We don't. So if we want to cut it to their rates, and now it's lower than many of them, then we're going to have to have a national sales tax. Isn't that regressive? Of course it is. Or we're going to have to cut all our services. So one or the other. So what's playing out now is what the Republicans have been saying is their game plan and is the way the country should live for a long time. And now Trump, who has no shame and an incredibly thick back, he says, I'll just do it. I don't care what anybody says. He's doing it. I'll do it. I'll lie about it. I'll convince other people that it doesn't. Well, isn't it in the interest of a coal miner, for example, or somebody at the Walmart end of things working in Walmart? Economically, it is absolutely. Couldn't it be anything farther from his best interest? I'll give you an example. In the tax bill, they had cut for corporations to 21%. So some businesses aren't incorporated. So that cut helps all the owners of businesses. Doesn't do anything for the worker. It does everything for the owner. Now, if you're not incorporated, they said, hey, you're not getting a lower tax rate. So they arbitrarily said, you get a 20% tax deduction off the top from what you make. So your business generates $1 million a year. You should be paying. Before the tax cut, you'd pay tax on $1 million. Now they say, no, forget that. Just pay tax on $800,000. Take $200,000 and throw it away so that the individuals, the partnerships, and the sole proprietorships, the owners of those companies will be at the same right as corporations. Now, for an individual, here's what they did. They said, you're moving allowance. If your company makes you move from Washington to Minnesota, you used to be able to deduct the cost because it's out of your pocket. Cut that out. The whole focus, and this is part of the mentality, the whole focus is on people with capital create all the jobs. And because they create all the jobs, we should really give them a break in taxes. And the people that get the jobs ought to be damn thankful. And this is part of trickle-down economics. This is the way you're steering. And they don't get the same government services, social services they got before. So the big question I put to you about this, extend it out to the people in the coal mines and the people who work at Walmart, and everybody sort of below the line on this, near poverty, who can't really afford to get out of whatever their status is, who are never going to be rich. I mean, the Republicans say, well, if you only worked harder, you'd be just like me. And you wouldn't have to pay taxes either. You'd be rich. But that's not likely to happen for most people in this country. So my question to you is, on a macro level, what happens to the country? We've never really been faced with a premeditated ideological change like this that is actually being implemented while you watch. We can listen to the hot news about this, that, and Kavanaugh, whatnot. But at the end of the day, our wings are being pulled. Our economic futures are being mangled. What is going to happen to us, Roger? Look at this. We had this kind of system earlier. We had a system back when the Industrial Revolution started, 1880s, 1890s, 1900. We had child labor paying nothing. We had people practically working for slave wages. They couldn't do anything. And if you were rich, you were rich. And if you were poor, you were poor. OK, when Roosevelt came in during the war, he changed a lot of stuff. We implemented regulations. We cut out child labor. We have tremendous regular that keep the richest people, the capitalists, I don't want to say capitalists, like we're talking, capitalist people that put in capital. This is who is running the Republican Party. These are the Trumpians. No, actually, a lot of the Trumpians don't know A from B. OK. They're the coal miners. They support him for reasons that are not clear to me. So look at this. What's happened since 1970s is the relative value of labor and capital has changed dramatically. So when I graduated, when you and I graduated from college, we were making $10,000 a year. We could buy a house for $15,000 or $20,000. One and a half to two times our salary, our annual salary. Today, if you graduate $35,000 a year, you're making from college, maybe. What can you buy a house for, $350,000, $10,000? Plus, you've got to pay your college loan back. The college, we went to school for $100 a semester at state schools. Today, that school's $4,500, and you've got to borrow all the money. It's outrageous. So when I went to school, it was $200 a year. Today, it's $9,000. That's 90 times greater, where salaries have gone up from $10,000 to maybe $35,000 three and a half times. Not enough. So it's this skew between the value, the relative value of capital and labor that's killing us. And it's not bad for the big guys. They're happy to keep wages low. In fact, that generates an enormous amount of money to them. And not only that, but it doesn't give you any options. You're not making enough money to buy your own house or even start your own business. You've got to go out and get other people to help you just to start your own business. Where does it go? I mean, extend this five or 10 years, because I think it's going to continue for five or 10 years. There's a lot of worries about that. So if it continues, and already, not just the coal miners, but in Hawaii, 50% to 70% of the people are living paycheck to paycheck. A lot of poverty. What happens? Well, you have either one of two things. You have either a revolution of some sort, whether it's violent or it's what was the movement on Wall Street? Yeah, yeah, yeah. Wall Street today, or where everybody camped out down there and complained. So you either topple the system and make them re-implement these. Make them put in some better wage laws and fairer situations like that. Or you have an autocratic system with a dictator, which Trump says he'd like to be. He wants to do away with the two. He thinks he's going to get re-elected, and he'd like to go 16 years or forever. He admires Putin and all these. Or you have that kind of dictatorial system where people just suffer along and do whatever they have to do. Now, we already, in the 70s, put our spouses to work. So up until then, a man went to work, and that was it. The wife stayed home, took care of the kids, but it only took one salary to keep the family going. Women went to work in the 70s, and then in the 80s, and then all this movement, which is great for women, and it gives them more opportunity. But now you've got to have two salaries to make ends meet. And now, today, maybe one or both of them have to have two jobs. So now you've got three, maybe four salaries. What happens after that? Well, we're going to begin to have multi-families coming together. The other big thing that's happening to us, Jay, in addition to the debt you mentioned, the other big thing is pensions. We gave up what's called defined-benefit pension plans because General Motors was going broke. They couldn't afford it. Interest rates went way down, and their investments didn't grow. And before, you would get 30% of your five years last pay for the rest of your life. That was a defined benefit. You had a benefit from this pension. Now we've got defined contributions, 401k plans. There's no more pension. Whatever you put in there, and if your employer puts in a little bit, that's what you got for retirement. People don't have $50,000, $75,000. They're going to retire at $65,000 and live 30 years. They don't have the money. They don't have the money. That's just beginning to kick in. People without pensions are beginning to kick in. So we've got all the elders who are going to come out with nothing to live on. So we're going to all move in together. We're going to have to have smaller places to live. We've got more people. There's twice as many people, or maybe three times the number of people there were in the 50s and 60s when we were growing up. So we're going to move into smaller quarters. The Japanese have done that for years. And it's a kind of serf them we're heading for. Yes. Let me add one thing. I saw this movie, a very disturbing movie. The other part is, can you change it? Can you overthrow it? Does our democratic system work? Do you believe it's a government of the people by the people? Well, we'll get our first test of it. We'll get our first see what people really want. If we can't change it. Well, before they know what they want, do they know anything? Do they know that he's doing this to them? This is what's going on. They know that the Republicans have a plan here to make us all into feudal serfs. No, because he lies constantly. The President of the United States tells his constituents in Arkansas and Alabama, he's going to do away with the Obama health care. And he's going to give them better health care at a cheaper price. That's a lie. It's a total lie. Not only was it always a lie, but now his Congress, his Republican Congress, is doing the exact opposite. And they're trying to make health care more expensive to prove Obamacare doesn't work. And they're cutting back 5% of the government spending. That's going to trickle down to, that's what trickle down is. You don't get these, what they call, benefits. When I was working practice in law, I was paying $30,000 a year for social security and medical. Then when I turn around and get it, it's an entitlement to me. What the hell did it, I mean, they catch you both ways. Well, I think if you try to distill this, shake it, and bake it, what you get is that him and his friends are trying to get richer by hook or crook, throw it on the wall, see if it sticks. And they're dumping on everyone else who is not rich. This is not the American dream. This is not where we were going. You know, remember, Kennedy had his inauguration. You know, this is not what we aspire to. And I mean, there's got to be a break on this. Either we've got to change it at November time, which I'm not optimistic about, or there'll be violence. There'll be revolution. Because right now it's not acceptable. You know, one thing I just want to mention before, for your reaction, there's a movie out on Netflix called Repealing Roe. Repealing Roe. And it's about the attempt of the very same Republican crowd with the aid of the evangelistic Christian community to repeal Roe since 1973, when Roe was first adopted. And Roe has been, certainly we all know, has been very weakened. But if Roe, with the help of Kavanaugh, gets repealed now, either, you know, by a Supreme Court decision, or little by little by 1,000 cuts in all states, and we don't have Roe, what's the effect of that? And how does that comport with what you've been talking about for the last 20 minutes? I mean, to me, it sounds like the poor people get dumped on. They can't get an abortion. They wind up having kids, lots and lots of kids, who they can't afford, who the government isn't going to support. And now you get an accentuation of the same process. Absolutely. And people don't remember anymore when poor people had to go to back alleys and use coat hangers. It's coming back to get abortions. See this movie. Yeah. And the other part is, and I'm not saying, again, it's not so much a conspiracy, but just a mentality. If people are struggling, if people are poor, they're forced to work at whatever wages they can get. If you stop regulation, then they're forced to work for you. So it's consistent with the idea that we create the jobs. We should be able to decide how much we pay people. We should make as much money as we want because we're the good guys. And it's a mentality. And so the question is, is that what the people in the United States want? And if so, can we show it through the democratic system of voting people out? Can we show it through the democratic system of going out in the streets and petitioning? There's been more of that happening since Trump came then since the 60s. You remember what it was like in those days. This is almost maybe more in some way. But Trump's plan is to beat you down. He does so many things that it wears you out. And then you give up. There's not as many people picketing anymore. You get distracted. You get distracted. You got to go to work. You got all kinds of things. You can't work on it. And what Trump has practiced his whole life is how to do this. He's been sued 4,000 times. He cheats people. He does nasty things. He blames them for it. When they sue him, he's got all the money to fight him. And that's the problem. So bully, it's dishonest. And it's part of this whole mission of putting a little guy down. How long can we tolerate that? So, Roger, we've got to talk about this and more. We've got to try to make people aware of the stakes here, which are huge, which are our national future. You're right. I couldn't agree more. This is our future. And two more movies that people should see. And Michael Moore shouldn't have named his movie Fahrenheit 11.9, because people think it's all the same. It's not. It's much different. It's much better. It shows what's going on in this country and what we have to do to stop this kind of thing. And a movie, a front line movie, called Trump, shoot. It was about two weeks ago. And it really goes through. This is PBS going through some serious, hard looks with honest facts about what has happened in the Trump administration, where it's headed, where we're going. And you ask yourself, does democracy work anymore? And I think we're about to find out. We are indeed. But you know one thing that seems to work is that you and I can talk about the movies. That you and I can sit here and have this conversation. You're absolutely right. So the press is so critical. I mean, not only must we have the free press, we must listen to the free press. I've got to tell you a story. I've been involved with China for many years, as you know. And I worked with the law firms and bar associations in Shanghai and Suzhou and Beijing. And I was taking lawyers to come to stay at our office down here for three months at a time, less 10 years. And there was a guy came into my office. One of the smartest people I ever met was a 40-year-old lawyer in Shanghai. He and I were talking about politics and religion. He said to me, Roger, I wouldn't have had this conversation with a person in China unless I knew him for three years. So it's a great blessing what we have here to be able to talk about anything and free speech and freedom to petition and go out in the streets. And they don't have it in other places. So Trump would like to kill that. He has denigrated the press unmercifully without, I mean just, it's grotesque what he's done. And it's so over and over without any basis for it. Yeah, and even now he's denigrating the investigation into Khashoggi in Istanbul. Again, denigrating the press, denigrating the truth. So it's really important that we have this conversation really important that we cover it. When are you coming back? Whenever you want me. What I think we should talk next about is if we can't rely on a federal government, what does Hawaii do in the Trump era? What can we do? You know, in the 60s, states' rights were for the South who wanted to keep Jim Crow laws in there. Today, maybe states' rights are about California doing what it wants to do and Hawaii doing what it wants to do. If you believe, Jay, what you said, that government is about serving the people, being the servant of the people, being for the people's welfare, whatever that means, of course it includes economics, of course it includes having representatives and many other things. But if you sit down and you say, what do you want Hawaii to look like in the next 10 years? And now how do we pay for it? Instead of how much money do we have and what do we do with it? And you look at the real sources. And one last thing about this economics, if you say, across the board, everybody should pay 15%. And I'm making $15,000 a year and I pay $7,500. And you're making a million and you say, I'm paying $150,000. Well, I'm left with $42,500 to try to make my way in the world and you have $850,000. Not fair. You have so much discretionary income that you only gain because you were in this system. Something on the little guy. You should get more, but you shouldn't get 400 times more. You shouldn't have this huge skew that we've had where wages have gone up two or three, four times and the cost of everything else has gone up 10 or 15 times. And the guys that own those things have made four times what we've had and now it's hard for the little guy to live. Thank you, Roger. Roger Epstein, from your lips to God's ears or at least from your lips to the people's ears. Thank you so much. Let's keep talking, Jay. Thank you. We'll keep talking. All right. Aloha.