https://www.youtube.com/watch?v=FNJpJG-sSXM

1 00:00:00.000 --\> 00:01:00.000 in this video i'm going to talk to you
about biden's new proposed tax plan and what it means for us as
entrepreneurs and i'll try and break down all different levels of
entrepreneurs and how these things may affect you all right and so i uh
made a little list uh of the of the main bullets that i think everyone
should know about all right so i'm going to give you a little example of
what it is what it means for us and then at the end what i'm going to do
is i'm going to kind of summarize what i plan to do to kind of you know
mitigate some of these things that are happening all right now that
being said i've made other videos on taxes and taxation in general there
are a handful of things here that very very deeply concern me and i'll
express those when we get to them all right so let's rock and roll and
if you don't know hi my name is oxford i own acquisition.com it's a
portfolio of companies that does 100 million a year and i have nothing
to sell you and i make these videos because i think they're fun and cool
and i think entrepreneurship is is awesome all right so lots of love
let's see let's rock and roll so number one uh they're gonna increase
the top marginal tax rate to 39.6 percent after 2022 no big surprise
there they're just gonna make the top bracket pay more okay number two
they're going to tax long-term capital gains and

2 00:01:00.000 --\> 00:02:00.000 qualify dividends with taxable income
over a million dollars at ordinary income tax rates okay so if you make
over a million bucks a year all of your capital gains are now being
taxed at again 40 like i just said which double blows but you know noted
do we think that's going to affect uh how people invest not as much as i
think you would think because if you have no alternative you just have
to continue to play the game because you're not going to not invest the
money because of the tax you're still going to invest and then you're
just going to have to pay the taxes now what i do think it will do is it
will get a lot of people to not realize their capital gains because
they're gonna hope for a change in in leadership which is exactly what i
would definitely just not sell or we recently you know exited three of
our companies this last year and it was because we anticipated a capital
getting out because of this but among one of the reasons was that we
anticipated a big increase in capital gains tax and so we thought it
might be a good time to recognize some of our our equity all right so
next one is they're gonna treat transfers of appreciated property by
gift at death as taxable dispositions okay so basically normally you
could you

3 00:02:00.000 --\> 00:03:00.000 could give such at death and it wasn't
taxed in this case they will be now they're going to raise the corporate
income tax to 28 you know which basically bumps it back from when when
trump cut it there's going to be tax on stock buybacks which most you
guys probably don't need to worry about impose a 20 minimum on income
and this is probably the biggest one this is like i mean well it'll
affect me it might not affect a lot of people but it's a 20 minimum tax
on income okay including unrealized gains all right which to me is one
of the most insane concepts of all time and i'm gonna break down this
one particularly at the end of this little bulleted list because like
there's a lot of consequences that i think for lack of a better term are
\[ \_\_ \] insane but i want to break it down so you can at least you
know at your next cocktail party or whatever it is like talk
intelligently about it okay next one is impose minimum term and gift
requirements so it's effective on all trusts created on or after the
date basically they're just decreasing write-offs there i'll cover a
couple more of the big ones carried interest so the private equity guys
are now going to finally pay income tax i think that's probably a good
thing overall uh they're going to cap deferral of gain from 1031
exchanges for the real estate guys uh

4 00:03:00.000 --\> 00:04:00.000 to 500 000 per taxpayer which means
like pretty much if you're a serious real estate investor you're gonna
now not have that 1031 to like shelter all of your tax-free gains and if
you don't know what 1031 is it's basically you sell a house you have the
the profit that you have from the house if you put it into something
that's similar in nature a similar type of building uh within a period
of time like i think it's a year then you don't have to pay taxes you're
basically just transferring it into another building and it continues
and the reason they have those those uh tax treatments is because you
know the government likes to incentivize people to continue to rebuild
infrastructure and so real estate and buildings are a big part of that
and so if they make it incentivizing for investors to uh to invest in
those places then it means the country as a whole will continue to
upkeep its real estate it will continue uh to just overall
infrastructure continue gets built by private money right which is a
good thing for everybody uh but they're eliminating that we're capping
it for the vast majority of people who do the most of the volume they're
gonna decrease uh deductions for easement transactions that's like a
kind of a tax loophole around donating land and things like that and
then limit the use of donor advice funds for private donations so
basically their

5 00:04:00.000 --\> 00:05:00.000 limit how much you're gonna you're
gonna be able to write off off of uh donations all right there's a whole
bunch of other stuff and they also uh limit the duration of generation
skipping uh transfer tax exemptions so it's effective to all trusts
which means that like for the whole concept of like i want to pass on my
wealth to my to my generations what do the rockefellers do they're gonna
they're gonna cut that severely if they pass this okay so this is this
is the bill i think that there's there's there's obviously plenty more
than what you can say in in you know five minutes but i want to talk
about one aspect in particular i'll i'll probably talk about two one of
them is gonna be the income tax the second will be the uh the the
corporate uh tax increase and the third will be uh the one that i'm most
concerned about which is the uh unrealized capital gains tax all right
so first one you know if you're going from 37 or i don't even know what
it was 37 to 39.6 is it gonna make a big difference for you probably not
if you're in that bracket but it is kind of like boiling a frog you know
at a certain point there's only 100 percent that someone can take but
you know i've always made in my last video i talked about how like the
real wealth is always built in growth of equities growth of

6 00:05:00.000 --\> 00:06:00.000 the things that you're building right
uh which is one of the things that they're going to threaten which i'll
get to last the second one is corporate tax right and so if you have a c
corp and this is in the u.s you can leave the money that you have in the
c corp and pay less tax as a result so at this point i think it's 23.
don't quote me my account's not somewhere in there for c-corps and
they're going to bump into 28. where this becomes a real issue is that
if you take dividends from your company you pay income tax on the
dividends like regular income tax so you're going to pay 28 and then 40.
so all of a sudden this starts to like not make as much sense now the c
corp structure makes the most sense if you plan on continuing to
redeploy capital within the business all right so if you are playing the
game of i want to increase the value of the corporation that i own and
i'm going to so it's more efficient for me to have the corporation pay
the 28 percent keep it in retained earnings and then redeploy it through
m a capital expenses investing in you know infrastructure things like
that they're going to increase the value of the business now the vast
majority of the time especially if you're a small business you don't
really have anything besides merge and acquisitions and again i said
small business so this might not

7 00:06:00.000 --\> 00:07:00.000 apply for a lot of people but besides m
a there's not a lot of stuff that you're going to really play that money
for which is why i think llcs and whatnot work for most small businesses
better now once you get a little bit more sophisticated i think c corps
can make more sense but you have to do a cost analysis on both in terms
of how you plan on redeploying the capital so that you can in most
accounting firms will be able to do a side-by-side comparison for you so
you can see what your net tax implications are now i'm a big fan of not
caring at the end of the day because we're gonna die about about taxes
uh on income but if you're going to get taxed you can still be smart
about it and you know just do the normal work i wouldn't i wouldn't uh
you know encourage you to spend a tremendous amount of time wasting on
this stuff rather than building your business because that's we're going
to build the most of your wealth now let's get the last one and then
alex will make two recommendations that i think are going to be highly
controversial and unpopular but i think would be way more beneficial so
the unrealized capital gains so this is kind of complicated the way they
set it up all right and a lot of people are behind and hawing about how
this works but let's just say that your net worth is 100 million dollars
okay now a lot of people might be tuning in i'd be like wow if i'm at
100 million dollars like i

8 00:07:00.000 --\> 00:08:00.000 won't care and you might but you might
not and i'll tell you why it's like right now the reason you get 200
million is because you believe in the american dream and you believe in
the american dream because you believe that opportunity is endless and
what happens is and this is why i'm very afraid of this particular tax
is that it makes it much more difficult to attain and so what it will
essentially do is is massively massively massively affect how much
people can basically build their net worth too and i would more or less
be okay with that from a from a cognitive you know from a from a logical
basis excuse me if the capital were being redeployed through a an
efficient system but the private sector deploys capital 10 times more
effectively than the government does and so you're basically taking
money out of people's hands who are very good at deploying capital and
putting it into people's hands who are very bad at deploying capital
people who work for the government don't normally have the best capital
deployment skills uh compared to people who do this for a

9 00:08:00.000 --\> 00:09:00.000 living and so that's like kind of like
a systemic concern that i have the other one is that i think it will
kill innovation because i mean i think this would be a kiss of death for
the u.s economy and be really honest with you because we want to be at
the cutting edge of innovation starting new companies etc where do you
think so many of these you know really exciting you know startups
software companies etc get their initial funding from wealthy people and
if wealthy people no longer are incentivized to do that or massively
disincentivized to do that then they just won't do it or they'll invest
elsewhere on top of that u.s as a whole will be saving less money while
all of our foreign competitors will be saving more money and will have
the money going to people who are better at allocating capital than
their governments and so i think it's a really really really really bad
move just from an economic standpoint now mind you and i just want to be
really clear i've only voted one time in my entire life and i regretted
it because it was a waste of time so just i say this because i i don't
think that my vote matters and everyone's like if everyone thought that
way it's like don't worry no one not everyone thinks that way so it
doesn't matter i'm not gonna like somehow make one youtube video and
everyone's gonna suddenly stop voting because what happens is if fewer

10 00:09:00.000 --\> 00:10:00.000 people started voting then the votes
would matter more and more people start voting right so it's a balancing
act anyways here's how the unrealized capital gains tax will work this
is me broad brushstrokes okay the the armchair uh people who read every
single word of the tax proposal you're awesome i love you and you know
by all means put all of the all of the the corrections in the comments
uh but this is the general gist okay so let's say you have a 200 million
dollar net worth and the 200 million dollar net worth is based on a a uh
a 10x multiple of a company that you own that does 20 million dollars a
year in ebitda or earnings all right i'm trying to keep this simple as
hell okay so you have a 10x multiple on 20 which gives you 200 million
dollars in value now how they're going to to calculate this i haven't
even read into because i actually haven't been able to find it i googled
all over and i could find it but let's just say that that's how it's
being calculated okay and if someone in the comments does know how it's
being calculated post the formula i'm really curious so you got 20
million that's that's coming in uh as ebitda for the company that you
own 100 of just for math's sake and that's worth 200 million

11 00:10:00.000 --\> 00:11:00.000 now let's say that next year you grow
the thing to 25 million even okay and with a 10x valuation that means
that your company goes to from 200 to 250 million okay in value assuming
you took all of the profit of your company as a dividend which is not
likely but let's just assume again to make this simple it means that you
would make 25 million dollars in income okay that's category one and
then you would have taken your company from 200 to 250 million so you've
got 50 million here and 25 million here so that was the net increase in
your like net worth ish ish okay pre-tax ish they want everybody to pay
20 on unrealized capital gains and so that extra 50 million 20 of that
would be 10 million dollars okay so that's 10 right to the side and then
you've got your normal income tax of 40 on your 25 all right which is
going to be another 10 okay which means keeping keeping math keeping
math here if you paid all your taxes up front then you

12 00:11:00.000 --\> 00:12:00.000 would pay 25 million sorry 20 million
of your 25 million in taxes 20 out of 25 million in taxes it's an 80 tax
rate that's really aggressive now that's assuming that you don't have
some sort of tech company that doesn't make any profit because if you
did have that then i don't even know what their plan is for that
situation i think you'd have to sell stock of your own company to pay
the tax on the increase and somehow get like it it would be or you'd
have to take loans against your equity to pay the taxes it's really
shitty the thing that they're trying to do to soften the blow here all
right because i mean think about it literally be like overnight 80 tax
rates and that's that's with that example that i gave right it could be
it could be that's it with a really high cash flow company if you don't
have a high cash flow company that's valued for other reasons it would
basically just drain you like you'd just drain you entirely from all
your reserves you'd have to go into debt to continue to own your company
or you'd have to own less of your company to continue to run your
company so you'd literally be disincentivizing the founders and
innovators from continuing to grow their company because if they grew it
they get taxed more before they can pay for it

13 00:12:00.000 --\> 00:13:00.000 that being said the little special
caveat that they're trying to do to make it softer is that it's it can
be spread over nine years all right so that 10 million dollars could be
spread over nine years so it'd be like 1.1 million or whatever on top of
your normal income tax right but the thing is is that it will stack up
right so it's like it's 1.1 so i might pay my normal you know 10 million
on my 25 that i that i paid in income tax and then i'd have 1.1 that i'd
start paying towards the 10 million that i owe on the 50 million dollars
the thing is is that it sounds it sounds like okay that's not that's not
as bad it's just because no one can think in time right because you just
fast forward 10 years and then you're going to be paying that it just
they're just they're just slowly bullying the frog uh to get to the
point where where it stacks up on top of itself because next year you're
going to owe 1.1 and another probably more than that because if the
company grew again you'd have another you know tax bill you'd have to
pay on top of that and so hopefully you're seeing it's like mount it's
like mountains of debt basically in tax that you're gonna have to start
paying and so nine years from now that's when you're you're you're
getting smashed right because it's going to take nine years for these
payment plans to

14 00:13:00.000 --\> 00:14:00.000 stack now obviously that's one
assuming that they pass it to that they don't repeal it i think the
likelihood that it passes is low but i will tell you this i think it is
one of the scariest tax bills i've ever seen and it's because if you
disincentivize the very people who are building the things that grow
this economy it makes the risk that a founder takes on virtually
untenable it's like when you start a company you risk failure and you
have the the odds are stacked against you that you will fail like it's
very likely that you're going to fail and in the in the off chance that
you actually succeed they will unless you just have a very normal boring
cash flow business which many businesses are not that way that have
tremendous value they will basically just bankrupt you and la and stack
so much tax debt on you for things that you have not realized yet and
here's where it gets worse what if you do that you pay taxes on capital
gains that are unrealized and then the company goes under which is also
very common you basically just paid taxes to the government on stuff you
never got ever and those taxes might actually be the

15 00:14:00.000 --\> 00:15:00.000 thing that destroy the business
because you got saddled with that you could barely pay your own expenses
so the example i gave was a generous one because a lot of times you're
not going to have you know 25 million dollars a year that's coming in
let's say you have i'll give you a different example to really drive
this home let's say you had an exit and you have a hundred million
dollars okay let's just say that that's your your current net worth and
you're probably pretty good at making money or allocating capital
because you have that money right and so let's say you get 15 on that
your net worth goes up by 15 million and let's say that because you had
your you know exit you know you only make 2 million bucks doing
consulting stuff whatever so you make 2 million dollars and you get
taxed 40 so that's 800 000 but then you make 15 million dollars in
increased appreciation on your assets so the 20 minimum tax there would
be 3 million dollars on the 15. that's more than you made in total and
people like well it's going to spread over nine years it's like yeah but
then next year you're also gonna have to pay it and then the night

16 00:15:00.000 --\> 00:16:00.000 you're after that so like it's going
to stack up and people just can't \[ \_\_ \] do math you have three
million dollars in taxes and you only made two million and you still
have the 800 so you have 1.2 million left and you still owe another
three so you're going to have to come up with 1.8 million dollars every
year just because you happen to own stuff and have a successful exit and
so then you start bleeding your 100 million that you risked everything
to get in order to pay off tax for gains you haven't realized so you
have to sell stuff just you basically the government will just force you
to sell your belongings or they put you in prison so i think it's um i
think it is it is one of the scariest things i've ever seen i think it
destroys the american dream i think it is against capitalism i think
that the government is a terrible allocator of capital in general and
they are literally one-tenth as efficient as the private sector is and
so we're just going to take money out of the hands of the people who are
most effective with it but that being said i understand i understand the
the inequality that exists at the top the difficulty that i have is the
psychology around it which is it's just like every mlm every mlm in the
world you know they show that they

17 00:16:00.000 --\> 00:17:00.000 show the number one you know person
and because of survivorship bias people think that's going to be me
stats would show that it's probably not going to be but just the hope
just that the idea that you could someday get there is what inspires the
vast majority of entrepreneurs i think i mean at least me and i think
destroying that incentive and destroying that vision of what what could
happen would be a really big detriment i don't have the best solution i
did say i have a couple of ideas and said these are alex's very
unpopular ideas around taxation i think that and like people are going
to call me crazy for this but here's two very radical ideas number one
is uh decrease income tax dramatically to zero percent and then have an
enormous capital gains tax and the reason for that is because most
people who are poor make money off of income right most people who are
wealthy make money off of their invested investments and so that would
be a i think more balanced way of helping you know then it would still
help all of the basically if you're working you should get you'd be able
to keep all the stuff

18 00:17:00.000 --\> 00:18:00.000 that your hands are making for you
right and i feel like that would be a really interesting balanced
approach to the process right because you're basically limiting how much
people can make passively from their money and forcing more people to
work so that was that's that's an idea i'm sure there's plenty of holes
there always are but that was just one i was like huh that would be
interesting a different idea that i have is because most of you who know
me know that i'm not a huge fan of the concept of legacy because you
know you multiply out your generations 5 000 years they won't know who
you are just like you don't know the people who you came from um and so
the idea of legacy is kind of a myth when you expand it over a long
enough time horizon and because i think that money ruins people when you
have not earned it the alternative would be to have basically like 100
death tax decrease the taxes dramatically on income and capital gains
throughout the entire life that someone has but basically eliminate the
transfers of wealth and what that does is i think it will create a world
where people become significantly more giving as they get older anyways
because they know they can't take it with them both in the like we know
we can't take it with us but for some reason we have this deluded idea
that we're going to be able to pass it on to people and so i think

19 00:18:00.000 --\> 00:19:00.000 it would force the people who know
that the government is going to tax them i don't think that they would
want all that money to go away and so what will happen is that in the in
the end of their lives they will start giving it all away and then
privately allocating the money where they are more efficient than the
government is and actually have a massive improvement in the well-being
of society as a whole and so think about that as like these these huge
wealths get accumulated and then they just can't they can't just pass
the generation keep accumulating and accumulating it instead it just
gets boom back and then it helps everybody else out and so that is that
is actually my best is in my opinion my best idea that i have uh to fix
the tax system which would be massively decrease income tax massively
decreased capital capital gains because i would encourage investment it
would encourage people to work it would mass it would increase the
amount of innovation it would increase foreign money coming to the
company into the united states in the country the death tax the fact
that you can't transfer the wealth to you know people with that you
could do 100 you get 90 whatever it is right some big percentage and i'm
sure you could write a little bit of you know clauses around like

20 00:19:00.000 --\> 00:20:00.000 spouses directly or something like
that but basically not down generations i think that would be a really
cool way to incentivize everybody who accumulates a lot of wealth to end
up giving it away and the key part that i think makes it interesting is
that because they will give it away rather than getting it taxed they
will privately allocate the money where it's more effectively spent than
the government does and i think that overall would flood the u.s with
pretty probably all the social systems that it would need um privately
funded more efficiently and probably alternative educations and things
that the people who make the most money are passionate about and what's
interesting here too is that the people who make lots and lots of money
first generation is very very different second and third generation
wealth they talk about all the time one you know one first generation
builds a second duration uh maintains that their generation destroys it
and the people who are builders most times i think is like 85 like don't
quote me but i think it's like 85 of the the forbes list are self-made
and so people talk about these billionaires like they're these terrible
people but like they're they're one of us who just made it right and so
giving those people typically i think start caring about

21 00:20:00.000 --\> 00:21:00.000 everyone the wider up you go the
higher up the the because you don't need to satisfy your needs anymore
you're really just trying to help humanity at this point and so i think
that you'd have the best most innovative people trying to make an impact
on humanity rather than leaving a legacy to their very concentrated
family anyways that's alex's two cents on on joe biden's plan welcome
mozination if you're new most of the times to talk about business stuff
this one was an exception if you enjoyed it let me know if you hated it
also let me know keeping amazing i'll catch you guys next video bye
