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May 13, 2022 57 mins

It happens every year as tax season comes around in the US. Numerous media outlets publish excoriating investigations of wealthy corporations and individuals that, somehow, don't seem to be paying taxes. And the majority of American citizens believe the system is, in one way or another, broken. But what gives? Why are so many people convinced the wealthy conspire to avoid paying their taxes? Tune in to learn more.

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Speaker 1 (00:00):
From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn the stuff they don't want you to know. A
production of I Heart Radio. Hello, welcome back to the show.

(00:25):
My name is Matt, my name is Noel. They called
me Ben. We are joined as always with our super
producer Paul Mission Controlled deconds. Most importantly, you are you.
You are here, and that makes this the stuff they
don't want you to know now be behind the curtain.
I think we're gonna call this episode either wealthy people

(00:47):
versus taxes or the wealth defense industry. There's a good
reason for it. If you live in the United States,
odds are by hook or by crook. You just got
through tax season. You might have voted a little bit
of scratch. You might have vote a lot. You might
have received a refund, which is always fun. Uh. You may,
like many people, have filed an extension, or like other people,

(01:11):
you might have had just a lot going on in
life and you let the deadline slip by calling it
a problem for another day. But regardless of how your
personal situation worked out, one thing's for sure. If you're
the majority of people living in the country today, you
believe the tax system is broken. In fact, a very
recent poll just indicated that about fifty seven percent of

(01:34):
adults in the US believe they personally as individuals are
taxed at an unfairly high rate. And that belief, oddly enough,
goes across every single imagined demographic. Anything. You look at
any group of people, no matter how you slice the population,
more than half of them are saying this is malarkey.

(01:57):
To quote President Biden. Uh. And if you ask those
same folks, about six out of ten of them will
tell you that the wealthy in this country very rarely
pay their fair share. So what gives today's question? Is
there a conspiracy of foot Well? To answer that, we
have to start at the beginning. Here are the facts

(02:19):
we think about doing this episode every time we have
to pay taxes, right, it's is it all three of us? Oh? Yeah?
And it just seems like the more you dig into
the numbers and how much is being taken out of
your check and compare that to the perceived value you
get out of paying taxes, Uh, it starts to get
more and more frustrating. I think I've kind of harangued

(02:40):
about this on the podcast before, like, I don't know
where my tax money goes or what it does for
me or my family personally. We still have to pay
healthcare costs out of our pocket, We still have to
pay for all kinds of insurance and extra things, and
I just don't really understand what the tax system does
for me. Yes, and we've talked on the show many
times specifically about how for us and for many of you,

(03:06):
we feel the very same way. What the heck is
going on here? Why do I have to pay so much?
And then why do I read stories sometimes about companies
and extremely wealthy people somehow getting to play by an
entirely different set of rules when it comes to what
the government takes off the top the cream that they
get off the top of the stuff we make. Yeah,

(03:27):
like the majority of US residents, folks we on this
show have always sort of assumed very very wealthy entities
functioned by a different set of legal constraints, and they
do so to avoid ponying up what could be called
their fair share. To understand whether that's true, we have

(03:48):
to understand some basics. First, Hating taxes is straight up
patriotic in this country. It is a huge part of
US history. Think about it this way. Protests against taxes
in the seventeen sixties led to the American Revolution. The
US is literally founded on the idea of hating paying taxes.

(04:11):
In that case, he has to his taxation without representation.
But the point stands, and taxes play a huge juge
role today as they did in the past. It is
currently the primary official source of funding for the US government.
That's what people mean when they say your tax dollars
of work. And you know, when everything runs as it should,

(04:33):
we know there's a hot button issues, so we want
to be as objective as possible when everything runs as
it should. In theory, we can think of the United
States or any country as kind of a club. And
just like any club, you pay your membership dues. Right,
those dues are part of what makes you a member

(04:53):
of this club. And again in theory, you get a
quick pro quote, you get benefits for that, the rule
of law, a safe place to conduct business and raise
your kids. You get infrastructure like trash collection, water service,
so on and so on and so on. But the
problem is people have said this system is broken since

(05:14):
I mean, honestly, before the US became a thing right now,
not even not even on the internet right now, amid
your own friends and family networks, you're gonna find a
lot of people who disagree. You'll see no shortage of
people saying we need higher taxes on certain things, like
maybe we need higher taxes uh that wealthy people actually pay,

(05:35):
which we'll get into. Or we need higher morality taxes,
right like alcohol or or cigarettes or whatever recreational vice
should cost more. But then you also see a lot
of people, many people who will say, you know, what,
taxes should just be a flat percentage, doesn't matter who
you are, all in this together, it's too confusing. Or

(05:57):
you'll even hear people who say these are all to
a little more. On the libertarian side will say something
like some forms of taxes should be eliminated altogether. No
more inheritance tax. The people who don't want an inheritance tax,
by the way, call it a death tax. But that's
simply a pr move, you know what I mean. That's
they're describing the same thing in a way that is

(06:20):
intended to manipulate the audience. Still, you gotta pay it, right.
What's the Ben Franklin quote? Nothing certain but death and taxes.
I can't remember if you actually said that anyhow. And
there's another good quote that says taxation is theft. Is
that Emma Goldberg? I think, yeah, that's a let's that's
a good one. It starts to feel that way look

(06:41):
at it. Just to go back to your point, Ben,
the quick pro quote thing that we do as Americans,
as citizens, as people who live in a certain state
or municipality or local area, we do see some benefits
right from the taxes that we pay. But when you
think about something like water filtration and treatment systems and

(07:02):
things like that, we all still pay our local municipality
or the county we live in for water services every month.
All of us do that, no matter who you are.
And there's still things like that where if there's going
to be a road or specific highway or repairs or
things like that, generally there are extra like sales tax,
like an extra percentage gets as added onto sales tax

(07:25):
in a local area to pay for certain projects. So
it always just feels like the actual income taxes that
we pay don't go to the things we think they should,
or maybe that we've been told they would at some
point in our lives, right and there's an argument here
that we can make via analogy. So supporters of this system,
as imperfect as it is, would say that many of

(07:49):
the things funded through taxation are things that the American
population takes for granted because they've collectively grown up in
countries where you don't have to worry about stuff like this.
You don't necessarily have to worry by large about clean water.
Again in theory, right, the the analogy you can make
is um the function of the human brain. Human beings

(08:12):
take their brains for granted. That's why people still believe
that factoid, that untrue thing that sounds true about humans
using only ten percent of your brain. You're using it's
doing a lot of stuff that you don't appreciate, like
making sure you don't have to consciously try to produce

(08:32):
a heartbeat at a stable rhythm. Your brains taking care
of that in the background. Treat it better, you know,
take it out on the town once in a while. Uh,
not a recommendation for d m T just yet, but
but it is so very true. You know, people pay
taxes not for the most part, not out of some

(08:54):
sense of civic pride nor of patriotism, but to avoid punishment.
If you fail to pay your taxes, you will run
into legal trouble again in theory, if you're most people,
we're talking stuff like penalties for late payment, even wage garnishments. Uh,
it can. It can get nasty pretty quickly. And that's

(09:15):
why there's so much money involved, because a lot of
people don't want to get in trouble. Just in twenty nineteen,
people paid one point six trillion dollars in this country
and individual income taxes. This powers the engine of government
and who boy, people are pissed about it. Honestly, some
issues are pretty practical, like what you were saying earlier.

(09:37):
You have to pay, but you can't dictate how Uncle
Sam spends your money. If, for instance, you are a
person who has strong religious convictions, you can't say I
will pay this money, but you have to do things
that are in line with my personal spiritual beliefs. You
can't object to a war while you're paying taxes. You

(09:58):
can't say, here's my stuff, but not one penny father
you of it can go to that proxy war in
Syria and you can't say, like, you can't specify stuff
they have to do right. You can't say I'm paying this,
but all of it needs to be spent on that
pothole by my cousin's place. Yeah, but you can donate

(10:18):
a significant amount of your income to a religious organization
and avoid taxes at least some taxes that way, that's true, yea,
or any number of charities, or if you you'll you'll
see when you pay your income taxes in this country,
you'll have options to donate to several things right there.
They're baked into the form, Like you can give money

(10:41):
to the Generic Federal Fund for campaigns for presidential campaigns.
I don't know how many people do that. I haven't
looked into the numbers, but I imagine they're freely available
and there are a dozen people approximately. And it's such
a terrible timing, right, It's like at the very and
where you've been through this sometimes harrowing look at your

(11:02):
finances and like, also, by the way, do you feel
like giving more money to someone? Oh, and this just
goes to this doesn't just go to the the candidate,
you might like, this goes to both of them, which
theoretically is a great thing. If we if we all
just paid that in their worn't see packs, maybe we'd

(11:25):
be in a better place. Who knows. I don't know
really quickly. That quote that I mentioned earlier, taxation is theft.
The whole thing is. Taxation is theft, purely and simply,
even though it is theft on a grand, colossal scale
which no acknowledged criminals could hope to match. It is
a compulsory seizure of the property of the state's inhabitants
or subjects. And it wasn't Im Golberg, it was Murray

(11:46):
in Rothbard, who was an economist from the Austrian school.
I think that's pretty it's pretty interesting perspective. Yeah, And
the full Franklin quote is our new constitution is now estabbled.
Everything seems to promise it will be durable. But in
this world nothing is certain except death and taxes, and

(12:07):
death might not be certain in the near to mid
future for the for the people who don't have to
pay tax, that's the way to get around the quote
unquote death tax. I don't know. Yeah, of course, it's
a hot button issue and there's a lot of psychology
in it. Every human being you meet is going to
be highly sensitive to perceived The quality happiness in many

(12:31):
people's personal lives is not an absolute, self contained thing.
It is relative. People don't want to just be doing well,
They want to be doing better than other people they know.
For many people, happiness depends on thinking other people are
doing worse, which is so messed up, but it's true

(12:52):
and and a lot of that's why a lot of
spiritual schools of thought work assiduously to to get past
those roadblocks. But when you think of taxation, you're thinking, well,
I have my own life. I already have so many expenses,
especially when inflation is climbing, everything costs more than it
used to. I want my kids to have a decent future.

(13:15):
How come I am How I am subsidizing other people
who don't pull their their weight. That's another belief that
you'll find in a significant minority of the US public.
They think that they are being forced to support people
instead of those people being responsible for their own mistakes.

(13:36):
That's a huge oversimplification, and there are a lot of
different ways to look at it, but we're just we're
walking through really quickly the problems people have with taxation
in this country, regardless of their ideology, and without even
getting to the wealthy, everybody knows their tons of loopholes, credits, deductions,

(13:56):
other exceptions that come into play, and we can say
the system is definitely rigged in a couple of ways
that are provable. It's so complicated, it's intensely confusing. That
is provably at least in part by design. Private companies
profit off the confusion. They have lobbied to make taxations

(14:17):
seem time consuming and difficult for the average person to
do on their own. We're talking about all the software
programs that the i r S dot Gov leads you
to on a Google search that are not part of
i RS dot gov. Their companies that are making money
off of you, mistaking them for that making great money
off of you. Not long ago, we were we were

(14:39):
owned by a holding company that also owned tax Act.
Was that the one? I think? So? Yeah, And I mean, look,
we've got a little bit of insider you know info
here at least perspective on how important that business became
for the larger company that once owned us as uh
when tax season came around and then they just it

(15:00):
just kept getting bigger and bigger and bigger, and it
was a huge profit center for the larger company that
we once were owned by. Yeah, those were weird days, man,
weird days. A lot of the a lot of the
top cats were in a great mood around April. Right
after April. It was funny because that was the time
to ask them for crazy stuff that they usually wouldn't

(15:23):
put in the budget. It's so close to getting a
fake astronaut costume. Caught that guy in a good day anyway. Yeah,
it's uh, some of these companies are getting in trouble. Uh.
Illustrative of this fact, the parent company of Turbo Tax
is a gigantic fintech financial technology company called into It,
and they were very recently ordered to pay a one

(15:44):
hundred and forty one million dollar fine for misleading people,
misleading people who weren't wealthy enough to hire a tax
person or wealthy enough to have a family office, and
those people would end up paying for service is that
are technically free and because no one went to jail

(16:06):
because their punishment was a fine. As we said in
the past, if a crime results in a fine, that
means it's a cost of doing business. Ultimately, it's the
only way to look at it. Man, I just used
a service to pay my taxes. One of these like that, uh,
And it's just crazy, Like I they I paid the

(16:29):
minimum of what you can put what you can pay
to have your taxes file through one of those, and
it was still like fifty hundred. I think it was
a hundred bucks altogether to file my taxes, which I
could do right now by printing out a couple of
pieces of paper and filling it out and sending it in.
We totally could. But it's like if you make one
little mistake or tick the wrong box like that, come

(16:51):
back to haunt you. I think it's like we live
in a in a constant state of fear and anxiety
about bureaucracy and about um, just feeling like we don't
actually understand any of it. Therefore we should just leave
it to the professionals, right um, But like to pay
a human being to do it, or a tax prep
service where we actually sit down and then go through
and itemize your stuff where you that's even more expensive.

(17:13):
That can be up to like three to five dollars.
They certainly can save you money, but Leaven, the notion
that you need someone to help you find loopholes to
save you money is a little weird in and of itself,
don't you think? And it's it's a big part of this, uh,
because the idea is, well, if I'm paying someone a
couple of hundred to save me several thousand, how is

(17:36):
that not a no brainer? That's at that point. That's
a very quick investment. It's a very smart one and
it's something that people often do. Everybody does it if
they have the means in the time. Currently, if you've
got to hit that bracket first, right, you have to.
You have to make enough money or have enough money
to get to that level. So, and that's what we're
gonna see throughout this episode. You you have to have

(17:58):
enough money to get here, and then to get there,
and then to get there, and somehow your taxes get
reduced every time you make more money somehow. Yeah. Yeah,
Because there's a doughnut hole too that a lot of
people in the audience find themselves in today. Uh. Currently
the US has seven federal income tax brackets. Your income
at the state level or community level, that taxation is

(18:20):
going to differ wherever you go. It's just a message spaghetti.
It's a huge bag of badgers. These brackets are based
on a number of factors, one of the primary ones
being income income from work foreshadowing. Uh. And you can
look at any number of websites that will give you
a quick group of grids or visual depictions to help

(18:44):
you estimate where you would be. I like to recommend
smart asset dot com because the name is funny. That's
literally the only only calculus there. It's just the one
that had a pun. Uh. So okay, so that person
in this average person and you say, okay, that's what
I have to pay. They're looking at smart asset or

(19:06):
something like that, and you say, well, how much the
wealthy people pay. This is where we go to the
stories you mentioned, Matt Sicklically Predictably, these stories come out
around tax seas and saying they're they're excoriating the well
to do individuals and corporations. They're saying, you know, Apple
is doing some sketchy in Ireland to get away from

(19:26):
paying taxes, or insert billionaire here is screw it over
the American public. But these stories don't all come from
you know nothing. They don't come from like muck raking
journalists or disinfo agents. A lot of times the specific
stuff these folks are reporting on is true, and sometimes

(19:47):
it comes straight from the proverbial horse's mouth. Warren Buffett,
a multiple occasions what are the richest guys in the country,
has pointed out that he personally thinks it's weird that
he pays a lower tax rate than his own secretary,
who spoiler alert does okay, but doesn't make war in
Buffet money nowhere near that. And it's like the Department

(20:08):
of Treasury even says that they say that in just
just last year, wealthy people were dodging at least a
hundred and sixty three billion dollars worth of income taxes
every single year. Yeah, on the War and Buffett thing.
We're going to talk about this after a break from
our sponsor in just a moment. But one of the

(20:29):
main reasons his tax trays that way, he's a billion
or hundreds of billions of dollars. But the dudes income
actual income as would be you know, associated with that term,
it's actually relatively low. Guys. Yeah, we'll get to it.
So this is the question, is this true? Is the

(20:50):
game rigged, and if so, is it rigged in a
criminal way to the top one percent so called actually
pay taxes. We're gonna paul us for word from our
sponsor and then we'll dive in, just like Uncle Scrooge
dives into that vault filled with filled with coins. I
like him when he spits the coins with capital gains.

(21:14):
And you can't dive into a pull of coins, you
will break yourself. Don't try it at home. Here's where
it gets crazy. Uh, Okay, Well, the one percent don't
don't pay taxes the way that you do, not really

(21:36):
not the same way an ordinary person would. And in
another way you could say they do. It's a financial pickle,
you know, it's it's a paradoxical statement at times. We
have to understand from the jump is that very very
wealthy people look at money in a very different way
to to many of the very wealthy people in the

(21:56):
world today. Money is a tool simply used to generate
more wealth. As such, you want to maximize the effectiveness
of that tool, you know what I mean, keep it
in good working order. And anything that goes against the
effectiveness of your pre existing wealth or value or money,
uh is therefore anathema to your position. In most cases,

(22:20):
there are cases of people who feel ideologically compelled to
spend their money making the world a better place instead
of making themselves more money. But Unfortunately they're they're kind
of rare. You know, they're like the lobsters that are
half blue and half read. They exist, but it's sort
of big news when you find one. So anyhow, it

(22:43):
is the pot with three D glasses. They're amazing to
look out with three D glasses. Nice billionaires and those
two to tone lobsters. But here's here's the thing that
you foreshadowed it beautifully. In this country, taxation looks at
a few things in a very different light. Income from work.
You know, if you have a job or career that

(23:06):
generates hourly wages, you have a fixed salary, you have
like a commission rate, stuff like that that is taxed
differently than income from wealth. And the vast majority, virtually
all of the top one percent or point one percent
people that you here talked about in the news, virtually

(23:27):
all of their money comes from wealth, not their actual job,
if they have one. Their income is from assets, stockholdings, property,
fine art, moving across the moving across the world in freeports,
or other investments. And so what that means, like he's
let's say you own like two million dollars worth of

(23:52):
some very cool stock David Busters, whatever the stock goes up,
the value you have, the pieces in your art collection
get more expensive because somebody in Vanity Fair or Paris
Review wrote a cool think piece about Bosciot or what
have you. Uh, the real estate market shifts in your favor,
then that means you're wealth increases too. And you didn't

(24:15):
really do anything except maybe ask the editor of Paris
Review to green light that Boscot piece in exchange for
a donation to you know, a foundation that you're both
on the board, others Ctera, etcetera. Well, and it's weird
to think about because that wealth, while on paper, is amazing,
it's huge. It's oh my god, so rich. Look at
my wealth. That money sits in places like stocks and

(24:39):
bonds and other things that aren't tangible. You can't actually
pay for anything with those. But our system is built
to where you can sell off, let's say, a small
amount of stock or even a hefty amount of stock
that doesn't fully reduce that wealth bubble you've generated, but
gives you enough liquid income, actual cash to functional. You'd think, well, okay,

(25:01):
that money that comes through that would be treated the
same way as income, but no, in our country, that's
treated in a completely different way, and that is pretty
baffling to me, just that fact alone. It's a convenient law,
you know, it's a convenient policy and process that certainly

(25:21):
benefits the very well to do. Does person want to
introduce Chan Ching Huang, who is the executive director of
the Tax Law Center over at the n y U
S School of Law. And Huong points out that income
is only subject to taxation if these people who own
these assets sell the asset on the way out, it

(25:44):
can get taxed. And this can mean that people are
hot of high net worth can choose when or whether
they pay taxes on the growth of their wealth. And
if you look at specific examples, it gets even weirder.
That thirties seven percent the highest tax rate all right,

(26:04):
right now, that applies to individuals who are making a
little more than half a million dollars a year and
for mary couples making a little more than six hundred
twenties something thousand dollars a year. If you want to
avoid the tax rate in that income bracket, here's here's
an easy move for you. Just give yourself a crappy salary.

(26:28):
It works every time, you know what I mean. Also,
it looks really good if your pr folks are on
the ball, will be like this ceo refuses to take
more than a dollar and salary until they get those
stock prices back up and until employee uh demands or
met just one dollar. How does he do it? What
a hero? Well, it's why you'll commonly see in the

(26:51):
Fortune five hundred companies CEOs who make about four hundred
thousand dollars a year on paper and then the rest
of their income is all in stock options. And that's
why we recently on this show talked about the trend
of paying CEOs in stock options and why that's become
such a big deal and why they make so much

(27:14):
ungodly amounts of money in stock options, but specifically in
that way. Well, so that means that they're paying less
income tax on their salary where they're still paying capital
gains taxes right if they sell their stock, if they
sell their stocks. So it's it's like, you know, and
when um um Elon Musk you know, just bought you know,
collected the financing to buy Twitter, he was not liquid

(27:38):
and nearly you know, forty billion to the tune of
forty billion dollars, so he had to get loans that
he leveraged against his holding whosout actually having to liquidate,
which is another superpower of the ultra rich, right, which
we'll get to in just a moment. For to stay
on this shalary thing. Here, Bezos, Jeff Bezos, you know him,
He collected something like seven nine to eighty grant in

(28:01):
salary as a CEO of Amazon. That was on purpose.
That's not making or breaking his bank. He his light
bill is going to be fine. And then we see
we see a laundry list, a cavalcade of corporate goliaths,
people like Steve Jobs, people like Meg Whitman from Hewlett Packard,

(28:21):
the co founders of Google, Sergey and Larry, and of
course Mark Zuckerberg. They have all at some point taken
a salary of literally one U s dollar per year
because this is a smart, rational move from their perspective,
and it works, and it's also not illegal yet. Right,

(28:43):
there are people on the usually on the left of
the political bell curve who tried to adjust this, like
Elizabeth Warren and Bernie Sanders In they both had their
wealth tax proposals, which very simply says, we want to
find a way to make it such that income from
wealth or assets is taken into account kind of the

(29:06):
same way income from work is taken into account. But
wealth and income two very different things. One great example,
let's say you're a new hotshot surgeon. You're very good,
You come out of your residency, and you are making
instantly four hundred thousand dollars a year since we brought

(29:27):
that number up earlier. But you are a self made person.
You don't have generational wealth hidden and you have like
five hundred thousand in student loans. You're it's gonna take
a while for your your wealth to like, for your
income to transform into wealth, even if you're savvy with
investments and whatnot. So there there are there's a huge difference.

(29:51):
And a lot of people who become very very wealthy
become billionaires. They are profiting from the work one their
ancestors did. That's that's a not a ding on them
at all. So saying they're bad people, that's just saying
this is how the system works. It creates positive feedback loops.

(30:12):
And that's why that's why these wealth plans. You know America,
the land of temporarily embarrassed millionaires. Uh, that's that's why
these these wealth tax plans lead to so much controversy
because people say, well, what about when I become a billionaire? Right?
What about when I become a multimillionaire? Uh? Why am

(30:34):
I gonna have this crab in the bucket mentality of
punishing people as it were, for success? And then these
proposals usually fade from the spotlight because I'm gonna be honest,
talking about taxes bores that out of the average person.
It really does, And that is awesome for the folks
at the top because they can continue making a killing

(30:56):
off loopholes, financial accounting, parkour. They want you to be bored.
Many of them don't particularly want things to change spoiler alert.
Why would they like? Why? Why? Uh? Well, no, I
can't think of anything I like. If you knew if
if you knew that the local local community in your

(31:20):
area was terrified of eclipses and felt like they had
to leave a pile of precious gems near the mouth
of this cave to stop an eclipse, and you knew
that the eclipse were just and regardless, but you were
the one who gathered up the gems at the end,

(31:41):
like and the right before the eclipse ended, Why would
you stop people again got nothing. But you know, you're
always gonna have people that argue that the system as
is shouldn't be changed and it's doing exactly what it
needs to be doing. That assets already get tax and
possibly they conject these these uh anonymous vase conjecture um

(32:05):
at an unfair rate potentially than you have folks on
the other side you'll see arguing that wealth can be
transformed um into spending money without any fear of losing
it to taxation. So if income from wealth acts differently
UM and is tax differently than income from work, how

(32:27):
is it used to purchase something like I was talking
about a minute ago, How does this asset, this um
non liquid asset translate into spendable money um and like
we were getting to a minute ago. It is about leverage.
That is the superpower of the ultra rich. They have
all this stuff that is that exists, that's worth something,

(32:48):
and some of it can appreciate, some of it can
depreciate over time, and you can take a tax break
from depreciation of assets. But at the end of the day,
it's worth something and you don't have to sell it
to borrow against it. Always hear about people like Donald Trump,
for example, being over leveraged. Um, that is when you
borrow too much against your assets, And the fact is

(33:09):
banks will let you do that to a certain decree. Well,
there's a whole other thing there of once you're once
the bank has lent you a certain amount of money,
even if you're failing, they will continue to lend you money,
hoping that their money just doesn't go away, and you
declare bankruptcy and maybe maybe this person that we've given
all this money to will actually do something profitable and

(33:31):
pay us back at least some right, shut out Deutscha Bank. Yeah,
it's like there's a there's another Uh, there's another great
pithy observation here. Uh. I can't remember the original source,
but it goes something like, if you owe the bank
a hundred thousand dollars, that's your problem. If you owe

(33:52):
the bank five hundred million dollars, it's the bank's problem,
you know. Like, Unfortunately that's true because they also have
their own thresholds at which they will be stretched too
thin or over leverage. But but if you are a billionaire,
you are much easier to loan money too. Of course,

(34:13):
people like Larry Ellison can open a nine point seven
billion dollar credit line based on the stock shares. You
can do like you have you have the assets to
bring to bear. Elon Musk used Tesla stock got a
loan for five fifty million. Most people can't do that.
And because this borrowed money, this is the clever thing,

(34:35):
This is the infomercial part. But wait, there's more. Because
this borrowed money doesn't count as income, that money is
also not taxable. It is objectively a good grift. The
biggest drawback is that it's not a grift most people
can afford. You know, you can't take out huge loans.
You are nowhere near as safe a risk as someone

(34:57):
with millions or billions of dollars worth wealth through credit
score doesn't matter at that point. But even like being
i don't know, like middle class wealthy, like owning a
nice house, like in an up and coming area, you
could leverage that into buying another house and turning it
into rental property. Then sort of the cycle goes from there.
Then you have two assets, um that are not liquid,

(35:19):
but they just give you more, like borrowing more allows
you to borrow more. It's just weird, but it also
weirdly makes sense. Like I've got a friend who got
into the property um game, just like buying. You bought
one home, then leverage that and to buying another one,
then bought several other rental properties on foreclosure and things,
and now he owns like seven properties and has you

(35:39):
know um property management companies that take care of all
the rent and everything, and they're constantly generating passive income.
But you couldn't do that, hey, if you had really
bad credit, and me if you didn't have any assets,
it's impossible. And he also is a good landlord and
that he charges below market value for rent, So he's
like of the good ones, you know what I mean.

(36:01):
So it's like you can be part of, you know,
helping solve problems in a situation if you have money.
But many super wealthy people do not look at it
that way, and they look at it entirely is how
can they benefit themselves and further and big in their fortunes.
We're talking about motivations, right. Motivations are a hard thing
to know, but we can look at the logic of it.

(36:22):
One of course, people who are wealthy want to have
a good lifestyle, what they consider a good lifestyle. Using
us as small amount of those liquid assets as possible.
And then secondly, this is this is interesting. There's that

(36:42):
desire to use wealth productively to create more wealth. A
few million in less might not seem substantial, right if
you're looking at it from the outside, But if you
know that you have the access to create those positive
feedback loops, then in your mind, you're not losing a
few milk. You're lose ten times or a hundred times
that amount that it could have become if it were

(37:05):
properly invested. And then there's you know, there's the other
idea about taxes on assets we want to avoid that
we don't have to get into that today. The truth
of the matter is easily understandable. If of your stuff
is in assets, you don't want it to be taxed.

(37:26):
That just makes sense. Don't get me, says says this individual.
There are other ways to fix the system, you guys.
I just have to add one thing in here that
we just haven't mentioned yet. We kind of talked around
it a bit, but the concept of if if someone
makes just let's use those tax brackets before. If someone

(37:46):
individual makes six and fifty thou dollars in income. We
know in the United states, they're gonna get taxed for
federal taxes. But if some individual sells off six hundred
and fifty thousand dollars worth of let's say Amazon stock,
that the tax rate is under right around. So two

(38:11):
individuals who are this, you know, have the same amount
of money coming into them that they can effectively use
to make purchases. If one is from wealth from selling
off assets that they own, they're going to get taxed
sev less than the person who actually made that much
money by working. That's crazy. Well, we should also point

(38:33):
out that because those are progressive marginal tax rates, I
believe the way it goes now is that thirty seven
percent kicks in on income above four dred thousand dollars.
So it's not like the whole six d tax at
Oh sure, got it that. But I mean that's a
great that's a great example. And there are people who

(38:55):
will argue that capital gains taxes already too high. There
are people who feel like they're paying multiple times on it.
And you can freely read these dialogues or these perspectives
just know that yet again, everybody knows the system is
broken in some way. It's like all these factors we've named.

(39:15):
They are clear problems with the system. But in short,
wealth is like fire. Okay, it's like fire in that
wealth wants to generate more wealth, and it will do
so with no limits so long as the conditions are right,
just the same way that a small camp fire turns

(39:36):
into a wildfire in the right environment out west. So
when we so, this means we need to talk about conditions,
and this is where we run into the real conspiracies
of play. We'll be back with more after a word
from our sponsors. All Right, we've returned. The problem goes

(39:59):
deeper than the idea of handling assets or the idea
of paying oneself in uh a less easily taxable way.
You see, people with high net worth also leverage their
resources and their influence to maintain or exacerbate those conditions
that allow their wealth to spread into an inferno. Uh.

(40:20):
They do this by hiring high end financial specialists. This
is this is not what you're thinking about if you're
thinking about your CP A pal that you talked to,
you know, in April or whatever. Uh. They are hitmen,
hit folk, their mercenaries, and they're very very good at
what they do. Uh. They those folks alone make millions

(40:42):
of dollars a year. You'll see why in a second. Uh.
The high net worth folks also spend a lot of
time making strategic donations to politicians. Get this on both
sides of the aisle, you know, depending which way the
monetary wind is blowing. And then they also invest heavily
in policies. We're action groups that keep and maintain those conditions.

(41:04):
We've got to introduce an author named Chuck Collins who
wrote a book called The Wealth Hoarders, and he talks
about how this industry goes far, far past what we
could describe as a broken tax system. Uh. Collins is
a really interesting case. He he was openly born into
a lot of money. He was he inherited part of

(41:25):
the Oscar Meyer fortune. He gave way almost all of it,
switched sides and started trying to figure this stuff out.
So his perspective is really interesting. He has popularized the
term wealth defense industry. That sounds I don't know, kind
of metal. It does like courts paints, but not really

(41:47):
nice suits. M hm m m. So it's what you're
describing already been. It's the group of financial professionals and
law professionals. Who all work to just like, I don't know,
to shepherd this barge of cash that his like generational wealth,

(42:09):
and they're just they're ferrying it down the river and
just making sure nothing gets in its way. And then
as they go along, they're constantly just throwing more piles
of cash onto it. And somehow the piles of cash
just like generate more from nothing, They just like grow.
It's weird. It reminds me of this will be the

(42:31):
only always study reference that I make in this show,
but it reminds me of when Charlie Day asked, Uh,
Frank Reynolds character what their business does. He's working is
like the intern or mentee of Danny DeVito's character, and
he says Frank, frankly, what do we make man? And

(42:53):
Frank goes make What do you mean? What do we make?
We make money? It's like, yeah, but like what do
we actually make? And it's it's a beautifully dystopian conversation
that I think describes what you're talking about. Just doubling
and compounding percentages and interests. Right. Uh, He says Collins,

(43:17):
not Danny DeVito, that as of seven point six trillion
dollars worth of private wealth has been hidden by this industry.
It doesn't it's not up for debate and tax returns
because it doesn't show up. It has become invisible except
when people need to benefit from it, he says. He

(43:41):
describes it as being in an ownership, limbo trust or
partnerships or offshore tax havens. Uh. This isn't being measured,
he says, in the current understanding of inequality. Which is
weird because this remind I know this has I can't
be the only one. This is like shades of the
Panama papers, right, Like that was just one group and

(44:06):
it took a team of experts to figure out how
the shell games all matched together. And you know. Collins
also makes it clear that this is a long game
by saying, quote, a lot of the hidden wealth activities
take place in the second third generations UM, meaning that

(44:26):
people who are able to amass incredible amounts of wealth
usually the originating source of that wealth. Uh. Let's say
a patriarch, for example, of of a multigenerational family. UM.
That person maybe a little more closely monitored, but when

(44:48):
it comes time to actually move that money around to
their successors, they have a ton of tools at their
disposal to start removing that money from the system completely.
Things like rusts, offshore banking, which we've discussed, offshore corporations,
shell companies, etcetera. Things like that, secrecy, jurisdictions, and and

(45:09):
too many more to go into here. One particularly, I
don't know, kind of sketchy and popular technique these days
is the family office, which is something that happens um
in families worth at least two d and fifty million
dollars that bring their wealth defense uh folks entirely under

(45:30):
their literal roof in house. Um. It's it's a it's
a power move for sure that is only available to
that upper, upper, upper echelon of of the wealthy. Well,
this this is the thing we got to talk about.
It has to do with that death tax, the estate tax,
the money when it changes hands from matriarch, patriarch who

(45:53):
you know officially controls a vast fortune and then that
person dies and their errors whoever they maybe inherit that wealth.
We we talked about how money, how when it's in
an account or it's in a series of stocks that
are growing in the amount of money that they're worth,
then you know that fund is growing that the dollar

(46:13):
amount associated with those stocks grows, and all of that
is calculated. All of that uh is not taxed. It's
just growing and growing and growing and growing. Then when
that person dies and it gets transferred, the way taxes
are levied on that amount of money is very different
than how most people would be interacting with money if
it's being transferred like that. Taxes are only levied on

(46:37):
the amount of money that is gained, So the capital
gains and I forget some of the terminology here, ben,
but the interest in the stuff that is grown from
that amount of money after it is transferred. So if
you imagine that pile of money on that barge growing
and growing and growing, then it gets transferred over to

(46:58):
somebody else, there's no taxes levied on that transfer. Only
only taxes and and UH fines and stuff that can
be levied on that amount of money after. You know,
the so called death tax and stuff is on the
amount of money that grows from that giant barge after
the transfer, rather than the wealth that was generated over

(47:20):
decades and decades and decades of it just sitting in
accounts and growing exactly exactly. Then you know, on the
other side, people primarily the beneficiaries of this, or people
who subscribed to the propaganda made by those beneficiaries. Uh,
their argument will be, you are punishing the successful. You

(47:42):
are stealing right from someone who who just managed to
earn this. You know, did they take advantage of loopholes
in the system, Yes, but not in a legal way.
These family offices could be tremendously powerful. I'd like to
shout out David DeJong, who we interviewed a while act.
He had to go head to head with some family

(48:02):
offices who would rather not have it be known that
they're profiting from Nazi collaboration, even though they very much are.
It's a good book. It's a good book. It's called
Nazi Billionaires. He's not really being subtle about it. But uh,
this this goes to something else. And and the reason
we're taking time to point out these differing perspectives is

(48:23):
because we are building toward an overall point. Uh. This stuff.
We're talking about these creative ways of moving and hiding money.
They're not the only operation. Imagine, you know, if you
play a video game where you can dual wheeled weapons,
so you can say they're left hand is doing this

(48:46):
moving money? Right, that's the offshore stuff, that's the shell companies,
that's those are the defensive moves. Their right hand holds
a sword. The right hand is where we would attribute
the aggressive move. Some more AGROS strategies, things like using
political influence in smaller states or communities to get more

(49:08):
friendly laws, to strip regulations, to stop oversight, right to
make sure things stay boring for the public. And in particular,
one great example is the terra part the i r S. Look,
we get it. No one loves the Inner Internal Revenue Service.
They're not gonna they're not gonna win favorite U S
department contest anytime soon. I don't know who would. Honestly,

(49:34):
I don't know who would. They're literally kind of like
one of the shadowy villain villain this kind of organizations
in everything, everywhere, all at once. They're often demonized in
that way. I'm sure there's some great people that work
for the i r S, but yeah, they're this kind
of like creepy, shadowy organization that everyone sort of looks
at is like they're coming for me, you know, it's
only a matter of time. And again there's that fear

(49:56):
quotation or it's like, oh if I don't take that box.
Right then the I R S gonna get me that
a certain boogeyman mentality around them absolutely and especially in
everything everywhere, all at once. Uh, that mentality is coming
from a very real place. We're about to see exactly why.
So if you can increasingly cripple the I r S,

(50:18):
then it becomes increasingly easier for you or the people
you work for to keep these games running. And this is,
by the way, the reason the I r S is
much more likely to audit you if you are a
person listening to this show, or you if you are
a small laundromat owner. Right. Uh, they're auditing you because

(50:41):
they know that you don't have a team of badass
lawyers in your corner. You don't have accountants who can
kind of like uh full weird financial gymnastics the way
Neo flies through the matrix. It's just you and you
probably have to go to work, you have other stuff
to do. So this means, like the problems compounded, it's

(51:03):
probably not worth the I r S is time to
hunt these big fish too often, right, think of the
money you'll lose fighting them in court. They want the
small fry because the small fry is defenseless, and on
paper it looks like a win for the I R
s when they discover small time wrongdoing and in the background,

(51:24):
the Leviathans move unfettered. This is part of a larger
thing called Starving the Beast. Starving the Beast also is
very metal. The album is called Starving the Beast by
defense industry. Yes, the number and the number of the
Starving Beast UH. It is a strategy of cutting taxes

(51:47):
and then leveraging the resulting UM deficits as a motivation
to cut funding for government institutions UM. Some people who
are into this technique or method UM believe that the
ultimate goal is to move government functions to the private
industry UM, but most often the goal is really just
to reduce tax burdens for Ding Ding Ding the wealthy man.

(52:10):
Why would I just don't understand, man, You're just making
money because you've got money and it's just sitting there
and you're just making money and you don't wanna like
I just don't. I don't get it. But but can't
we can we pivot? Maybe this is slightly the silver
lining there is. You know, there is a push from

(52:32):
some corners of the government to tax the wealthy, you
know too, And I've actually there was an NPR piece
recently I heard where it was a bunch of wealthy
people saying, yeah, tax me, I want you to tax me.
I want to help. I don't I am, I am good.
I you know, this money could go to help reduce
the tax burden on the less fortunate. And I I

(52:55):
really appreciated that perspective. And I mean there's an argument
to be made that that this makes a lot of sense.
But why does it? Why does it never fly? Ben?
Why does it never fly? Oh? Because again it's back
to the two tone lobster idea. Those people do exist,
but they're rare enough to be newsworthy. Right. The majority

(53:15):
of people who are just fine with this or not
in the news. They're fundraisers their political conferences. Uh yeah yeah.
And you know, we to be clear, we haven't met
the majority of these people were not not unnecessarily vilifying folks.

(53:35):
We're talking about a system and a system that's broken.
This is either pretty depressing or it's pretty inspiring, depending
on your perspective where you're coming from. But this is
what this is what we can all come together on
on a hot button issue that has a lot of propaganda,
has a lot of tribalism and politics tied up into

(53:57):
it by design, I would argue, Uh, the issue is
not necessarily that the system is broken. Everybody agrees on
that except for very few. The issue instead is that
the people who are quote unquote winning the game have
also one the ability to change the rules of the

(54:17):
game as they see fit. So imagine, to attempt a
sports analogy, imagine that after winning x amounts of World Series,
the Yankees get get the legal right to change rules
of baseball as they see fit, maybe they get one
per World Series, And as they rack up those World

(54:41):
Series wins, they're able to change the laws at an
increasing pace, and they become increasingly favorable to the Yankees
and increasingly disadvantageous to any other team. That's kind of
what's happening with the U. S. Tax system. As as
oversimplified as it is to say there's a conspiracy at play,

(55:03):
shadows at George carlin Man, this is a depressing one.
We need a red and blue lobster superhero in real
life who is invulnerable, invincible if you will, who has
the power to enforce good on the ultra wealthy in
the Cayman Islands and other attacks havens. So yeah, using

(55:27):
his his claws, presumably his dual wielding both the shielding
and some kind of spiky bit. Is he a castor
you know what kind of he does? You have? Like
a magic crap claw cracker? Uh? Yeah, I can shoot
projectiles at you, and it's especially tough on your horse.
Even on your horse, it's hard to avoid, especially when

(55:50):
he drags that claw on the ground and then just
swipes it up at you. You know, it's terrifying when
he's he runs at people's sideways like this kind of
be afraid the super rich, be afraid. And also, yeah,
keep up with the lobster shellfish crabbynology. We're not saying

(56:10):
this to um again unnecessarily vilify people we haven't met.
We're just showing you there's evidence about how this system works.
The rules are being changed, the feedback loops are there.
If we'd love to hear your input on this, we'd
love to hear what your idea of a solution is,
if you believe a solution exists. We try to be

(56:32):
easy to find online Facebook, Twitter, YouTube at conspiracy Stuff,
Instagram at conspiracy stuff show. Those are the ways you
can find us on the Internet, but there's other ways too.
In a world where you don't like social media. Instead

(56:53):
pick up your phone and call one eight three three
st d w y t K. You're gonna hear a
little mu music when you call in. Give yourself a
cool nickname. You've got three minutes say whatever you'd like.
Please include the statement you can or you cannot use
my name and voice on the air. We would appreciate
that very much. If you've got more to say than

(57:14):
you can fit in that three minute voicemail message, why
not instead send us a good old fashioned email. We
are conspiracy at i heeart radio dot com. Stuff they

(57:42):
don't want you to know is a production of I
Heart Radio. For more podcasts from my Heart Radio, visit
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