Speaker 1: Let's start with some more economic news and financial news yesterday we started
the show digging into some more meaty economics and finance type stories.
People seem to like it, so let's do it again.
We now have more detail about the proposed Joe Biden tax plan.
Now, you might remember that during a number of White House press briefings.
Jen Psaki, the White House press secretary, would repeat this line.
Nobody making under four hundred thousand dollars a year would pay any more under Joe
Biden.
And Jen Psaki was rightly confronted with the question, is that 400000 individual or
is that four hundred thousand for a couple?
Because typically there are two different sort of cutoffs for individuals versus couples.
And Jen Psaki would weirdly say it's for both, which didn't make any sense.
And at the time I called it out and some of you got mad and said, David, sir, no, no,
it didn't make any sense.
Now we have more visibility into what the actual policy is going to be.
And so let's dig into it.
There's a new report from CNBC.
Joe Biden's proposed thirty nine point six percent top tax rate would apply at these
income levels.
Now, as a reminder, what we're talking about here is something really uncontroversial.
Just just so you remember, we're talking about going back from 37 to thirty nine point six.
All of this debate about raising taxes on the rich.
What we're talking about is just going back to a rate we previously had for top earners,
which was thirty nine point six instead of instead of 37 percent.
That's all we're talking about here.
The rate would affect this is the key part.
The rate would affect single individuals with a taxable income of more than four hundred
and fifty two thousand seven hundred dollars a year and married couples filing jointly
with income over five hundred and nine thousand three hundred dollars, according to a budget
proposal issued Friday.
Also important to remember, the top rate is slated to increase to thirty nine point six
percent after twenty twenty five, even if Congress doesn't pass Biden's proposal.
So understand, you know, when we talk about truly progressive economic policy and we look
at some of the things they have in northern Europe, I have friends in the Netherlands
who are working there and have told me about the tax structure there.
We are here talking about a disagreement between Republicans and Democrats, most around the
edges where we're saying once you get to four hundred and fifty thousand dollars a year
in income on everything you earn beyond that, because remember, it's a marginal tax, marginal
tax system, should you pay 37 percent or thirty nine point six percent.
So let me give you an example of how relatively little of an impact this has on people who
would actually pay it.
OK, remember that because it's marginal, up to 450 to 700.
You pay what, people earning less than that pay.
Once you get to four hundred and fifty two thousand seven hundred dollars a year, you
start paying thirty nine point six instead of thirty seven.
So imagine someone making one million dollars a year.
OK, if you make a million dollars a year.
If on everything above four hundred and fifty two thousand, you go from paying 37 percent
to thirty nine point six percent, that's an extra two point six percentage points on that
difference.
Your total tax from this big tax increase is an increase of ten thousand nine hundred
dollars for the year.
Now, I have you know, I'm a big personal finance guy.
Maybe I'm a better saver or budgeter than other people.
If you're making a million dollars a year gross and ten thousand nine hundred dollars
a year in extra taxes changes your lifestyle, you're doing something wrong.
You're not budgeting correctly.
You're not managing your finances correctly.
OK, when we talk about paying an extra two point six percent on the five hundred and
forty seven thousand dollars, that would be subject to that top tax rate, if that materially
changes your lifestyle in any way, you are terrible with money.
And I'll be honest, you probably don't make a million dollars a year to begin with unless
you are getting that through some kind of inheritance or whatever.
But if you're like an entrepreneur making a million dollars a year, you probably are
good enough with your money that you won't even notice this extra ten thousand nine hundred
dollars a year in taxes.
That's under an extra thousand dollars a month for someone making a million bucks a year.
So that is what we're talking about.
And of course, the reaction from many people to this is going to be why are we talking
about a higher rate for people making even more?
What about as I've proposed before, many times, don't we need a higher bracket where OK, it
goes to thirty nine, six when you get to four hundred and fifty two thousand, but maybe
at one million dollars a year in income, it goes to 42 percent, maybe at two million a
year in income it goes to 46 percent.
These are the types of proposals that have been outlined by some of the most progressive
members of Congress.
And we're like just barely even touching the edges here.
So this is what the debate is about.
And importantly, as the article reminds us, the Trump tax cuts of twenty seventeen, which
dropped that rate from thirty nine point six to thirty seven, they automatically expire
in twenty twenty five if Congress does nothing.
OK, so I know we have a presidential election in twenty twenty four.
It may be consequential in many ways.
One of those ways would be what does it do to that top tax rate.
But what we're talking about here, it's it's almost laughable, right?
Like the debate right now is should the rate for those making over four fifty K a year
go to thirty nine point six from thirty seven now?
And by now, I mean like, you know, this year, next year, or should it not happen until twenty,
twenty five?
That's the big debate.
And I will never understand, although people like Jonathan Haidt have explained it to me,
I still don't totally get it.
Why do people who make forty thousand dollars a year care about this?
You've got people who make thirty thousand forty thousand fifty sixty seventy thousand
dollars a year, even 90 or a hundred thousand dollars a year.
Going crazy about how Joe Biden wants to increase your taxes.
We're talking about two point six percentage points on people making nearly half a million
dollars a year or more.
And the outrage from these folks I don't get now somebody like Jonathan Haidt would say
what's going on here is it's not about whether Joe the Plumber making four I'm sorry, making
forty thousand dollars a year is actually going to pay more.
Personally, it's about whether he identifies he or she.
But we're talking about Joe the Plumber imaginary here.
It's about whether Joe the Plumber, Joe the Plumber, Joe the Plumber believes that this
is a tax change that is on his team or it's for someone else's team.
And we saw it in 2010 with the Tea Party, the Tea Party, a bunch of people making very
little money who were very proudly and loudly against tax increases for the very, very rich.
So that's the situation.
We now have the exact numbers from the Joe Biden proposal and administration.
And it is shocking to me how many people don't even understand that we have a marginal tax
system.
Like I've met lawyers who think that if the tax top tax rate is thirty nine point six
percent, if you make a million bucks a year, you pay thirty nine point six percent on all
of your income when the reality is you pay that only on the income above that top tax
threshold.
Disturbing that so many people seem not to understand this, but these are the numbers.
We now have them and we'll see what the reaction is from the right