Welcome to Retire Smart Austin. My name is Cynthia De Fazio, and I am joined today by Phil Capriotti, senior of Empower Wealth & Tax to our viewers at home, we have a very interesting subject for you. We’re going to talk about what happens with the elimination of the Tax and Job Cuts Act. Whoa, Phil.
I’m sorry.
This is a big one, elimination of Tax and Job Cuts Act.
You know happen well, you know, first of all, Folks, I want to apologize to you, I know, talking about taxes and the elimination of taxes, especially tax cuts, it’s kind of like, it’s kind of like sitting through a movie that you just wish would end, you know, kind of like the, oh gosh, what was that? (unclear), the- Groundhog, Groundhog Day, like Groundhog’s Day, and I apologize, but you need to know this. We hear so often that the Biden administration, I just say current administration, because who really knows what’s who’s really running the show? But at any rate, the current administration wants to eliminate most of the Trump Tax and Job Cuts Act. Now this was an act that was instituted right as President Trump took office back in 2017 it was designed to reduce government regulation and increase our purchasing power by giving us more money to spend. So, we’re going to talk about the advantages and the disadvantages. It seems like the current administration, when they took office, just wanted to get rid of anything that said Trump, whether it was good, bad or it wasn’t, it was just like, Get rid of it. And I understand the mentality, but that’s not what I want to talk about. What I want to talk about is, how does it affect our purchasing power and how it’s going to affect our retirement income plans, whether you’re getting ready for retirement or you’re currently in retirement. So, the elimination of the Tax and Job Cuts Act basically has several disadvantages, and we’re going to it’s a lot to unpack. I started reading this bill, and I got sick to my stomach, to be quite h- and I have a pretty strong stomach. Yes, I had to set it down. And then I decided I’ve had a lot of folks talk to me, not just in the office, but playing golf. Hey, what about this? Phil, what do you think? What do you think? So, I decided we’re going to do an entire show on it.
Sure. I think we have to, Phil, it’s a very important topic. People are thinking about it. They’re hearing what’s going on in the news, and overall, what this could mean higher taxes for some.
What you’re- What we’re hearing in the news is it’s not going to affect those that are making under $400,000 and with all due respect, folks, it’s just not true. Not what I read, isn’t true. Okay, so the very first thing is, you know, it says, well, higher taxes for some. Well, let’s unpack it. So, the first thing is, by repealing this, it’s going to lead to higher taxes at all. Now I’m not saying reissue it, rework it. I’m talking about repealing the Tax Cut and Jobs Act as it is today, and letting it revert back to the way it was before Mr. Trump, President Trump took office, reverting back to 2008 to 2016 tax code. All right, so the very first thing, just so you know, if you are now in a 10% tax bracket, when they eliminate this tax cuts act, you go to a 12% tax bracket. And this is some of the things that I just don’t understand. How certain media outlets, just, they kind of whitewash it like, oh, it’s only going to affect $400,000. nonsense, okay, your standard- your standard deduction, if you’re married filing joint right now, your standard deduction is $29,200 well, the old, the old tax was, we got an individual deduction for individual deductions. It was $6,000 a person. So let me see, okay, let’s say it’s 6500- let’s say it’s 7000 a person. Okay, I get a deduction for me for 7000 I get a deduction for my wife 7000. That’s a 14,000 Dollar deduction, right? Well, what goes away? My standard deduction of $29,200. So that affects every single individual, every married individual, in addition to the bracket changes. So just making it simpler to file your tax return is one of the big issues. So, we’re going to talk about the actual tax differences. We’re actually going to put it up later and talk about then, now, then now and potentially future, the impact on businesses. The reason we’ve seen such growth in business was because we reduced the corporate taxes on business. We had to remain more. We had to become, not remain. We had growth of 2% under President Obama. Let’s face it, and this was we were told that’s the new normal. It’s all nonsense. It’s all smoke and mirrors and shell games, right? The impact on businesses, basically this provision that benefits benefit, lower corporate tax rates. You’re going to go from what used to be 35% that’s what it used to be. We’re now at 21% we’re going to get rid of 21% and we’ll maybe make it 28 to 30% so businesses are already being pummeled by inflation because of the expenses of everything, rent, mortgages, taxes. I won’t go through all of the scenarios, but the fact of the matter is, if the business has to pay larger taxes, businesses will simply produce less. They’ll have to lay off employees, which means lower employment. Sure. So, it’s a whole domino effect. So, when we start to look at the economic impact of these tax cuts, it’s almost like some of the folks that are shpeeling these taxes never took economics 101, or never really looked at the tax code. It seems like the children are running the household, unfortunately. And I don’t mean to be cruel, but that’s what we’re seeing. We had a lot of growth during that time, and we still had covid to deal with in 2020 But at any rate-
Well, Phil, what you reminded me of, excuse me for interrupting, but you actually said something so important, talking about companies, the impact on business with the overall decisions with employees. So, we’ve talked in previous episodes, of course, about how the employment has gone up in our country. So, now what I’m hearing you say, with this change, people are going to be laid off. There’s not going to be any new jobs to be given to people that need to work.
Yes, Cynthia, there are only 20 nickels in the dollar. There’s only so many nickels you have in $1 Okay, so if you’re giving the government 28 nickels instead of 21 guess what? That’s eight less nickels that you have to spend. I mean, again, it’s just common sense when you stop and think of it. And so that’s what it makes me think. Is this by design? Is this intentionally? Are we intentionally hollowing out the middle class in addition to inflation and higher taxes? So maybe, maybe not. I don’t really know. But again, the policies don’t match the actions. No. Okay, we say one thing, but the policies don’t match that. So, the next thing is, it’s going to make your taxes more complex to do, sure, sure. So, the whole idea behind this tax cuts and Jobs Act was simplifying your taxes. Anyone can do their tax return. I don’t have to itemize all of these goofy, different deductions that I may not have. I get a flat standard deduction of X amount and so forth. So, with that being said, now we have to look at certain credits are going to be reinstated. A lot of deductions are going to be eliminated. The next thing that I want to talk about is how competitive will we be internationally when you raise the corporate tax rate from 21% to 35% our competitors from other countries. The reason we reduced it wasn’t to lower tax revenue, was to be more competitive on the open market, folks. So, to eliminate that means we don’t want to be so competitive. We’re going to make it easier to work with other countries that have more favorable tax rates. So, when I look at the International the impact of international competitiveness, I’m not seeing a benefit by eliminating these tax cuts and Jobs Act. The other thing is, I’m also hearing, don’t worry about it. I’m from the government. Trust me, I’m good. My dad said, You got to worry when somebody comes to your door and says, I’m from the government. I’m here to help you. Nothing against the government. I love our government. I. Love our country, and I love paying taxes. I pay a ton of them, but the fact that matter is the impact on middle class families. So, some would argue that these Tax Cuts and Job Act helped middle class, but the fact of the matter is it increases taxes 20%. 12% goes to 15% 10% goes to 12% 22% goes to 25% the overall tax rate was 39.8% it dropped down to 37% so all of the different brackets are going to have tax increases again if they eliminate the Tax Cuts and Jobs Act of benefits. So, with that being said, I think we have to make a break for class and I mean for commercial break, you might want to make a break for the old bathroom or the kitchen to get another cup of coffee. We’re going to get into the specifics when we come back.
Phil, thank you so much to our viewers. At home, there’s a number to call on your screen, 888-818-6557, we realize today’s topic is scary to most, because we just don’t know what the future holds. What Phil is offering you today is a complimentary consultation to the first five callers only. All you have to do is call in to 888-818-6557, if you have your smartphone handy, go ahead, grab it. Click on that QR code at the bottom corner of your screen that will take you right to Empower Wealth & Tax landing page, and you can claim your spot accordingly. Don’t go anywhere. We have so much more with Phil when we return.
One of the secondary reasons I got in into the tax business is my very first job. It was an usher at a movie theater. So back in my day, since my baby boomer, people would come, we would tear their ticket, and we would walk them down, see them, and then come back. So up until that point, I was getting $5 a week for allowance, and I’m telling you, I was like an indentured servant. My brother was allergic to grass and pollen, so I had to do all the lawn work. I had to do all of the works. And matter of fact, so I get my first check. I get 37 and a half hours. I’m making $2.10 an hour. This check would be close to $80 I look at the check, and I sticker shock, $41.78 I’m good at math. That’s not adding up. I go over to the manager. He says, oh, Phil. He says, flip to check around, federal income tax, state income tax, FICA tax, all of these different taxes. So that was my first lesson at 15 about how important paying taxes are. And by the way, I think that anyone that has paid taxes every year for 50 years, by the time they’re 75 they should be tax free. I don’t care where they put their money. That’s my belief. I believe we’ve done our fair share.
What Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti, senior of Empower Wealth & Tax and we’re talking about what happens with the elimination of the tax cuts and Jobs Act. Is this going to impact your retirement overall? I’m thinking it probably is, Phil, for all of us.
Yeah, there’s no doubt about it, this is really part of the part of raising taxes on literally all areas, especially middle and middle upper class, or I would say, individuals getting ready for retirement. If you’re middle or upper middle-income brackets, you saw major tax cuts when we saw the difference between the old tax brackets and the new tax cuts and job act, what it did is it reduced disposable income by giving more to the government, but in individuals. Okay, what that also did was stimulate the economy. So, we saw loss in deductions, in credits. Number one, we saw a negative impact on small businesses, the TCJA, and that’s really the acronym we’re going to use tax cuts and job act, it provided a 20% deduction for all qualified business income as a pass-through entity. So, if you were filing as a sketch, if you were filing as a Schedule A Schedule C, or you were a S corporation, it flows through as a K1 so it saw immediate reduction in that the corporate tax rate increased from 35% to 21% which made us much more competitive on the open market or the international markets that will go away. And here’s what I love about these current folks, that obviously they really need a lesson. I believe in spending not in taxing, just my own personal opinion. There’s plenty of tax dollars coming in. It’s a spending problem that we have, seriously have. So, what I’ve heard is, well, don’t, don’t, don’t worry, don’t worry, we’re only going to make it 28% not 35% In either event, 28% is higher than all of the other countries that we compete against, whether it’s Europe, whether it’s Middle East and so forth. So also, the elimination of the Tax Cuts and Job Act will reduce economic growth. Wow. So, we’re not going to see the growth that we’re seeing. Why? Because we’re giving more money to government. Now understand, government is very good at doling it out, but what this particular administration is doing is creating more government jobs, more regulatory agencies and so on and so forth. Well, they don’t produce income. They truly don’t produce income unless they’re fining or something of that nature. But the fact of the matter is, what we see when government gets their hands on just about anything, it becomes a lot less efficient. I mean, it truly does when we take a look, unfortunately. So, with that being said, the other thing is, we’ve seen with this, we’re going to see complexities and increased compliance costs. This is another as far as I’m concerned, uncertainty. So, when taxes go up, that means I get less of something. When the government prints more of something, like dollars, that means I get less of something, because my purchasing power becomes eroded by printing more money. Sure. So, by eliminating the tax cuts, you’re going to slow down overall productivity, which slows down the amount of tax revenues that goes into the coffers, absolutely. And with increased spending, look out, we create more inflation, unbelievable. So exactly what we’re trying to eliminate again. Don’t look at the name behind the bill. Okay, look at what the benefit of these bills provide. So, for us in retirement or approaching retirement, we need to make sure that our accounts are bulletproof. One of the things that I would say is the individual taxes the Comptroller General, I’m going to get off of this subject for a second. But they’ve told us that it’s there’s a high probability that once our debt goes from currently 35 trillion to 40 trillion. In addition to eliminating that these Trump tax cuts, the income tax cuts, they’re going to have to raise taxes somewhere between an additional 15-20% so we do not default on the debt or cut back any of our social programs, Medicare, Medicaid, Social Security interest, paying the interest on the debt, defense budgets and so forth. Okay, let’s talk about a couple other things that you’re just going to be thrilled to hear about. Right?
This is a cheery show.
Sorry, guys. But again, what’s the goal here? The goal is: give us a call, because we have the solution to this. If we created your retirement plan, tax efficiency- Tax efficiently, you don’t need to worry about this. You don’t need to overly concern yourself with this. So, what they want to do is also eliminate now, these are the additional changes. Eliminate capital gains tax. Wow, that sounds great, right? We’re going to eliminate capital gains tax. Oh, great, no more capital gains tax, right? We’re going to make it ordinary income tax, and we’re going to make that capital gains tax more closely to ordinary income with a cap of 44.3% so as part of the Tax Cuts and Jobs Act, you could, if you were married filing joint you could have income of under $88,000 and you could sell things and have a 0% long term capital gain tax. And then from $88,000 to about $450,000-500,000 it was only 15% flat capital gains. Anything over the $600,000 rate went into 20%, well, they want to just get rid of all of that. So basically, what they want to look at is taxing capital gains, long term capital gains as income. And the more capital gains you have in a given year, the higher the tax rate will be. This will also stifle productivity and production, it will also, could very possibly have very negative effects on our equities, in our stock market. That’s just a sidebar benefit or disadvantage. Wow. The next thing that we want to they want to take a look at you, get ready, sit on down, is they want to change. Federal estate tax. Now that’s different than federal income tax, the income tax you pay on your income while you’re live the federal state tax is also known as the death tax, yeah, how much? Remember that Beatles song: Be sure to declare the pennies on your eyes on the tax man. Listen to tax man from the Beatles. Great song. But at any rate, it kind of reminds me of this, because right now the federal estate tax, we don’t have to worry about that unless you have an estate of over $13,800,000 okay, well, they want to dial that thing back that expires in two years. And what they want to do is they want to change it to 3.5 million on individual, 5 million on a family, which means, folks in English, that if you have an estate, property, your entire estate, in addition to paying federal income tax, any estates over 5 million, if you’re married, will be taxed at a rate of 45 to 55% Oh my gosh. So, for many of you folks that have family businesses, family farms, ranches, a serious issue that we must address, wow. So, we’ll finish up with some of the other little tidbits of information that they want to do. So, when I hear we’re only going to tax the rich. I become quite disheartened, because it’s not really completely true. It’s talking about taxing generations that have had ranches and land in their family, like our family, my wife’s family, for five, six generations. We’re going to talk about the other effects of taxing unrealized gains. That’s another little nightmare, but that’s in this new, the new Biden administration bill, and I’ll just call it, and that’s part of this new 2025, new tax bill that they want to kind of jam through. I’d like to say one thing, we have an election coming up, and elections do have consequences. Make sure you get your children, and if they’re old enough, your grandchildren and your friends, and get out and vote your heart.
Wow, absolutely, Phil, we have to take a very short commercial break. Wow. To the viewers at home, we know that we’re saying some things today that are shaking you up and that you’re realizing, wow, what am I going to do if these changes take place. While Phil has the answers for you, he is offering to provide you with peace of mind if we do see these changes and how it’s going to impact your retirement overall, you need a plan. This is your time to call in to get 888-818-6557 better still. Click on that QR code at the bottom corner of your screen that will take you right to Empower Wealth & Tax landing page. You can claim your time with Phil and his team accordingly. Don’t be caught behind the eight ball. You’re going to want to be aware when these changes do take place, we’ll be right back after this very short commercial break.
Our office is in Cedar Park. We employ 14 people. We have experts and professionals. Everyone’s license, if you fit into our company, you love people, you care people, your service oriented. So that’s our home office. We just opened a satellite office in Horseshoe Bay. Within the next 12 to 15 months, we’re opening up another satellite office in Sun City, in Georgetown. I told my wife. I said, we’re going to open up. She said, What? Open up another office? When are you going to retire? I said, Honey, I am retired. This is what retirement looks like to us, and you better. Might as well hold on to your hold on your skirt, honey, because we’re probably going to open one up in Dripping Springs to my son, Philip, he and his wife, who’s also involved, Erica, she’s wonderful, will probably end up running Cedar Park office. My son Parker, he may run the Horseshoe Bay office. My daughter Lisa is going to be running the Sun City office, and I guess I’m going to need a grandchild to run the other dripping spring office. But at any rate, I was really blessed in that out of my five children, three are in the industry. Two directly work for us. This is really their legacy as well.
And thank you for coming back to Retire Smart Austin. My name is Cynthia De Fazio, I’m joined today by Phil Capriotti, senior of Empower Wealth & Tax and we’ve been having a very impactful and important show today talking about the potential elimination of tax cut and job acts. What if it goes away? What’s going to happen? So, Phil, we’ve definitely put some fear into some people out there in the viewing audience, not your clients. Of course, they are completely comfortable. But what happens when people are feeling anxiety right now about everything that we’ve talked about today? What advice? What a guidance? What guidance do you have for those folks? One
of the was one of the reasons that I became an accountant, a couple. Number one, I was excellent in math. My SATs were literally. Are perfect, and even like that, they actually made me take him a second time because they thought I cheated from someone. And my dad said, who else got that highest score in the class? And he said, no one, but, but we so they made me take it again, and I scored the same 97, back then it was the old scoring 97 out of a perfect 99 twice in a row. So, at any rate, I kind of won my dad’s respect. He gives you better be an accountant or something in money or numbers.
I never heard that before, that is amazing.
Yeah, yeah, true. Now, English composition was another story. We won’t get into that. Let me explain something. One of the things my father also told me is, when they close the door, they open up a window. So, with any tax cuts, there’s always a solution to the problem, because many of our elected officials have to squeeze through these crevices themselves as well. So, knowing the tax code and working with a financial advisor, licensed fiduciary, who is also your tax planner. We prepare for each and every one of these instances, whether taxes are being reduced or whether taxes are being increased. It’s extremely important that your retirement income plan becomes tax efficient, and in my personal opinion, tax free, one of the other, and I’ll leave this. We’re going to leave it on a positive note. But one of the other benefit benefits, one of the other codicils that they wrote into this bill, is the implementation on taxing us on unrealized gains, meaning, if my stock is up 30% and I haven’t sold it. At the end of the year, I’ll still pay a tax on those unrealized gains as though I’ve actually realized them. So, this could also have negative effect on the market. But when we really take a look at this overall tax bill, I thought it was a bit draconian, but I but again, I noticed that many administrations, they want to take it all away and then they’ll give you a little bit back, so you feel a little better, okay, but they won’t give it all back. So, the fact of the matter is, tax planning in retirement is crucial. It’s a crucial in maintaining your purchasing power, your standard of living, and if your current advisory team is not exercising tax planning, give us a call today and let us show you how we can structure your tax free and tax efficient retirement income plan.
Phil. Thank you so very much to our viewers at home, most specifically, thank you for spending time with us today. On Retire Smart Austin, we know you have a lot of questions for Phil. Call in, 888-818-6557, or snap that QR codes bottom corner of your screen, Be safe. Be happy, be blessed. We’ll see you back one week from today. Take care, now.
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