White House Tax Advisor Breaks Down Harris vs Trump Tax Plan

 It's fair to say that you are one of the most connected people in Washington DC. Kenneth J. Kenties is managing director of the federal policy group. The federal policy group provides sophisticated strategic and technical tax advice on tax policy matters before the Congress. I can speak from having been either on the inside or the outside. And it is only that portion of the source code. Working on tax legislation for 30 or 40 years. The outcome of the November election are talking about unrealized capital gains and a sick and angry world. We'll have everything to do with what the tax bill, whether it's in 2025 or 2026, it may look like. She would raise the corporate rate from 21 to 28%. Kamala Harris is now proposing to increase the corporate tax rate to 28%. That would increase revenues according to the Treasury Department by 1.4 trillion over 10 years. It's very possible that you would see a proposal to tax unrealized capital gains. Only tell you why you really should worry about it. We've had President Trump come out in favor of eliminating tax on tips. Let me just say defining what is a tip. You may think it's simple, but trust me when I tell you it isn't. A provision to exempt tips would cost over 10 years 100 to 200 billion. Trump has also come out and said, I'm going to eliminate the tax on so security payments. But there's a much bigger picture issue here and that is... It's fair to say that you are one of the most connected people in Washington, D.C. You're the person that was one of the people responsible for the 199A tax deduction. And both sides of the aisle come to you as it relates to questions around taxes. And I know that there's a lot at stake right now. And so what I would love to do is hand it over to you and just get the baseline of what's happening. And then I do have questions around life insurance, annuities, how that might be affected when the tax and jobs act potentially sudden sets, depending on who wins. And then just like what's happening, I know that there's a lot of the news around Kamala's talk about unrealized capital gains. I don't know if that was a slip up. I don't even know if that's constitutional. So we can talk about lots of different areas, but I just want to like hand over to you. It is an honor to have you on and I want to be respectful of your time, but I can't think of a better person to ask these questions too than you. And so thank you. Thank you for coming back on the show. Well, no, thanks very much for having me. So the current state of play is, as everybody knows, unless they run to a rock for the last couple of months, that there's been a fair amount of excitement, a peevil gnashing of teeth over the whole presidential race. And there had in Washington and really around the country, when there are presidential races, people talk about October surprises. And sometimes there is one and sometimes there isn't. Well, we've had so many surprises already. The debate on June 27th between Trump and Biden, of course, was a disaster for Biden. The attempted assassination of the president, which hasn't happened since I believe 81, which was Reagan, the then decision of Biden to step down and then come all Harris to step up literally in 24 hours. These are pretty much unprecedented events. So the joke going around Washington now is the only thing that could be an October surprise is if we have space aliens land. Okay, so it's pretty much, we've gotten to that point. Okay, I'm not saying there won't be an October surprise, but in order for it to surprise people, it's going to have to be really big. So now both candidates have finished their conventions, just to be, you know, a nonpartisan about it. The Republicans had a good convention. The Democrats had a good convention. Both sides had things to say nasty about the other convention. But the truth is both sides pulled off a pretty good convention. And now we're down to the general election, which is less than three months away. And on the horizon in terms of events that matter is the big one right now is a debate between Kamala Harris, the Democratic nominee, current vice president, and former president Trump that's set for September 10th. It's very possible to be one of the most watched debates in the history of politics because there's a lot of stake. There's also a number of states where early voting starts in September, which I've always had trouble getting my head around. Like I always thought the election was the first Tuesday in November. So people voting in September, it doesn't add up to me, but that's what the laws are. And it's up to each state, by the way, in case anybody's wondering, to decide when and whether to have early voting. So everybody's watching the election, a lot at stake, and there is a lot at stake. And the direction, for example, that tax legislation may take in 2025 or 2026. And I can explain why all the articles that you're reading that say there's absolutely going to be a huge tax bill in 2025 may be wrong. Okay. But the outcome of the November election will have everything to do with what a tax bill, whether it's in 2025 or 2026, may look like. And just to clarify why I say it could be 2026, the reason the pundits and a lot of news people, people that write for the press on taxes, have said it's got to be 2025 is because there are a bunch of provisions from the 2017 tax bill that expire at the end of 2025. So the reasoning goes, of course, Congress will address those expiring provisions before they expire. How naive. Congress never does anything until anything hard. And this will be hard, no matter what the outcome of the election. Congress never does anything hard until they're absolutely up against the wall. And a year ago, we talked about Social Security, you know, will be up against the wall there in around 2034, 2035. But Congress won't be up against the wall at the end of 2025 for this reason. Yeah, the provisions expire. And there are trillions of dollars of provisions expiring, including one that you just mentioned, 199 CAPA, huge deal. They're expiring at the end of 2025. What, what is the impact of tax return, which is when the rubber hits the road? Well, it'll be the 2026 tax returns. And when do we have to file those January, February, March of 2027? So the notion that there's this hard deadline at the end of 2025 is not really consistent with the reality on the ground in terms of what the real deadline is. Now, just to be clear, people will be thrown into a real tizzy if they get to January 1, 2026. And Congress hasn't addressed this stuff because people will be gone. I wonder what's going to happen. What should I do about estimated tax payments I have to make? I mean, I'm not saying it's ideal, but all I'm trying to explain is the notion that there's this hard deadline at the end of 2025. Maybe not be accurate. And just, just kind of get a couple of the big items out on the table. 199 CAPA already mentioned, big deal. And that would be if it expires, a big tax increase. And if we go back to, he's a fair to say a 20% like is it? What do you think would impact the taxpayer that takes advantage of that right now? Well, under undercurrent law, if you qualify and most pass-through businesses, which includes subchapter S corporation's partnerships, limited liability companies, and sole proprietorships. Most of them qualify for a deduction from basically what is otherwise their taxable income of 20% of it. So, you know, you do the math. If your income all of a sudden goes up 20%, oh, your tax liability is probably going up 20%. And so, and that one provision when it was enacted in 2017, I had a revenue cost around out $600 billion. So, a big deal. Now, most of the expiring provisions will result in a tax increase. So, for example, that the top individual rate untacks the income, which the press relentlessly says is currently 37%. It's not. It's actually 40.8 because of the so-called Medicare tax, which is 3.8. And the reason I say so-called Medicare tax, even though it's called a Medicare tax, much of it doesn't go into the Medicare trust fund. Complete fraud, okay? But put a silhouet little detail. It just ticks me off that nobody gets it right. But that rate would go up from 40.8. It would go up to 43.8. And so, the top marginal rate would go up. The rate on some capital gains income would go up, but weirdly, one of the more controversial provisions of the 2017 Act, and it's been controversial for all of the last 10 years, is the salt provision, which limits the deductibility of state and local taxes to $10,000. That provision also expires at the end of 2025. So, for the salties, as I refer to them, who really hate that provision, red blue states, I shouldn't have said red, that's too confusing. As in blue states, which is California, Illinois, New Jersey, New York, Connecticut, just to name a few, as a big hit on them. The fact that they are only able to deduct $10,000 of their state and local taxes. And that provision, it also expires at the end of 2025. My only little warning to people is, for those of you that really hate the salt limitation, do not get your hopes up, that it's just going to expire and go away, and you'll be back to deducting all your state and local taxes. I find it hard to believe that will happen, no matter what the outcome of the election. But the outcome of the election will control at least in part how much of it gets extended, does it get extended with a higher cap instead of $10,000, maybe $50,000. The current provision has embedded in a marriage penalty. So, if somebody is married, a couple, they can only deduct $10,000. A single person can deduct $10,000 themselves. So, there are people who argue, I must say, without being very persuasive, that people are deciding not to get married, because the salt cap will be worse. If that's the only reason you're not getting married, and my news for you, you probably shouldn't get married anyway. Okay. That's probably pretty low. You know, I want to rethink the whole decision process there. But as a tax policy matter, come back decades, Congress as a policy matter has tried to not have marriage penalties in the tax code, because it just doesn't seem like good policy. So, one of the most obvious things that could be done, even if you were going to extend the salt provision, is to eliminate the marriage penalty, which would basically mean a married couple would get $20,000, a single person get 10. But there's much bigger money involved in this thing than as relates to just the marriage penalty, whether it's in or out. So, that's a huge item. Now, some people may wonder, well, was everything from the 2017 Act? Did all of it expire at the end of 2025? And the answer is no. The corporate rate reduction, which applies to what we call C-Corp's, think X-on, you know, GM big companies, that was reduced from 28 to 21%. That was permanent law. So, that provision does not expire at the end of 2025, as does some of these other provisions. And just this is really getting a little too wonky, but some people just assume that when a tax bill is done by Congress, under which referred to as reconciliation, and I'm going to come back to that in a moment, that you can't have any provision that goes longer than 10 years. That's actually not what the law is. The budget act provisions say you can't have any provision that goes beyond 10 years unless it's offset by revenue increases. Back in 2017, yeah, big corporations got a reduction of the corporate rate to 21%. But they also had a number of provisions that applied to them that increased revenues. And as a result, the cost of the reduced corporate rate to 21%, beyond the 10 year window, was offset by those provisions. And that's the reason the corporate rate is permanent law, whereas again, things like 199, Kapa, are not. Now, I mentioned reconciliation. Yeah, that's a big deal. There are two possible outcomes to the November election. And weirdly, they may be very close calls as to which one happens. The first outcome, and I'm not putting these in order of which one I think is more likely, because I think it's pretty close. The first outcome is an all-democrat suite. So that means, come on, Harris, elected president, Democrats take control of the House, and they're able to retain control of the Senate, which they currently control, 51, 49, very close. Under that scenario, we are very likely to see a major tax bill that would be considered by Congress under reconciliation protection. And the magic of reconciliation protection is that unlike most legislation that goes through the Senate, you can't do what's called a filibuster of it. And the reason filibuster is relevant is you need 60 votes to overcome a filibuster. If you're under reconciliation, you don't. All you need is 51 votes. So my own prediction is, if it's an all-democrat suite, the Democrats under reconciliation will pass it through the House, their bill, pass it through the Senate, have a conference agreement, which means both sides get together and work out any differences, and very likely send it to their new president before the August recess. So a year from now, that means we would have a new piece of taxal decision. The other possible outcome of November is an all-republican suite. So former president Trump wins. Republicans retain control of the House, which they do currently control by a narrow margin, five, six, eight seats, very very close out of the 435 seats. The speaker every time he comes in has to look around and goes, anybody sick today? Do we lose anybody over the weekend? It's pretty bad. That's the first question you got to ask every morning, Monday, morning. So Republicans win the White House, they keep the House, and they get the Senate. If that's the outcome, an all-republican suite, we'll be looking at a reconciliation tax bill as well next year. But let me just say the two different bills that I've just referred to will look very, very different. And I can give you a little bit of an overview of that. So, Cmoney Harris, as you probably know, has gotten a little bit of a criticism for not having much in the way of policy positions. And some of that criticism is pretty legitimate. And she's gotten criticism for flip-flopping. Some have suggested she probably showed her opinion as a gymnast in Paris because she was so good at flip-flopping. But on taxes, she really has actually said some pretty clear things or at least for people have, which is because that she endorses the Biden tax proposals that were made in the most recent Biden budget, which was sent to the Hill in March of this year. And when a budget is sent up by a president, whether it's Democrat or Republican, at basically the same time, the Treasury Department releases what's referred to as a green book, so-called because it has a green cover, which describes in detail all of the tax provisions that are in the president's budget. Cmoney Harris has basically said, I'm for all that stuff that was proposed in March. And that green book is quite detailed. So unlike some of the other areas where she's taking some criticism for not being very detailed or maybe not really saying anything at all, on taxes, she's actually said, yeah, this is what I'm for. And that bill is pretty breathtaking in terms of the proposals that contained in it. Major increases in, for example, the corporate rate. She would raise the corporate rate from 21 to 28%. That would increase revenues according to the Treasury Department by 1.4 trillion over 10 years, kind of a big number. It would increase the top rate on individuals up into the 45 or 46 marginal rate or higher, which means when you would combine that with the taxes in a number of states, you know, states like California have like 13% tax rate New York up there as well. You're talking about marginal tax rates in the almost 60% range. So that proposal in the Biden budget would raise revenues over 10 years by $797 billion. The Biden budget would treat capital gains, which currently are taxed at 23.8% as ordinary income, which means whatever is the ordinary income rate, you know, if it's 44%, that would be the rate on capital gains. So the Biden tax proposals, which again, Kamala Harris has pretty much said I'm full on for, would result in tax increases in the 3, 4, 5 trillion range. Now she would also increase things like the child credit dramatically. So she would spend a lot of that money on various things all directed at probably low and middle income taxpayers. So that's what a Kamala Harris bill under an all Democrat lineup. That's the kind of things it would look like. What are your thoughts on that one realize capital gains? Like is that you think that's pushed too much? It's very possible that you would see a proposal to tax unrealized capital gains. And what they would probably say is we're only going to do that for rich people. So while I do it for people would say that have income over assets, assets over $100 million. So everybody out there whose assets are below $100 million, they all go, okay, I don't have to worry about that. Well, let me tell you why you really should worry about it. I have never seen a proposal like that get enacted with a high level where it impacts people and stay there. And so if you really think taxing unrealized gains is a good idea, it should be a good idea for everybody. So yes, if it was going to be enacted, it would be at a high level. But again, anybody thinks it stays there is kidding themselves. Now, interesting question, you kind of alluded to it, which is whether it would be constitutional. There was a case decided by the Supreme Court at the very end of June. That's when the session of the Supreme Court ends and they go away for the summer and come back in October. But it was called the more case. And the more case dealt with a relatively narrow issue, which was a provision from the 2017 Act, which taxed US corporations what's referred to as unrepatriated earnings that they had earned offshore in their foreign subsidiaries. But many people look at what the court was going to decide on that case to try and get some insight into whether they were sending a signal that is the court about whether you could tax unrealized gains because people looked at the unrepatriated earnings and said, well, those haven't been realized. The US corporation sitting here in America, those earnings were earned in France. That money hasn't been brought back. So it's an unrealized game too. For all those people that thought they were going to get a clear signal from the court as to whether you can tax unrealized gains from that case, well, they were disappointed. The court took a very narrow approach pretty much went out of its way to say we're not telling you one way or the other what we think about taxing unrealized gains. And so we're not telling you whether you should do it or shouldn't do it. That's not our job. So yeah, I can assure you, if Congress were to enact a tax on unrealized gains, there would be a constitutional challenge, which means that it would take probably two to four years to get all the way to the Supreme Court. In order to actually get a case into court and then on its way to the Supreme Court, you have to have what's referred to as a case or controversy, which may well mean in the tax world that you have to have a taxpayer who's actually been negatively impacted. So if you think about it, if the Democrats were to next year pass the tax on unrealized gains and it would take effect, even let's say it took a big January 1 2025, so retroactive to the beginning of next year. The soonest that there would be a case or controversy is when somebody filed their 2025 tax return, which would be in the January for remarks, 2026 timeframe. And then they would contest whether or not that was unconstitutional. And they'd have to go to tax court, federal district court, then the court of appeals, then the Supreme Court. Now there would probably be efforts made to get expedited consideration by the Supreme Court. And there'd be a decent argument as to why maybe the Supreme Court should do that because you have potentially huge amounts of money and a lot of tax payers impacted. But clearly it would be challenged, but would Congress under an all Democratic control enact such a tax? Very possibly. So we wouldn't rule it out at all. How would the life insurance and annuities and tax-afferred accounts like any of those under under-attacked or any of those you think changing a lot with right now if all Democrats get President, House, and Senate? Well, with an all Democrat lineup, you can see in the Biden tax proposals. And you can also see when you hear some of the general things that, come on here as a candidate has said, that there's a pretty significant focus on hitting high-income tax payers. And there is currently, and there have been articles written about this, a proposal being put together by Senator Wyden from Oregon, who's the chairman of the Senate Finance Committee, he said Democrat, which would attack a product called PPLRI, private placement life insurance. And it's expected, although you never know about these things until it happened, that he's going to release the details of his proposal sometime in September. The Biden budget already had a provision attacking PPLRI. And my own guess is that what Senator Wyden releases probably won't look a whole lot different. Maybe it will be surprised, but a whole lot different from what the Biden administration proposed in March. But there's a much bigger picture issue here. And that is, if we're really focusing not we, but if a major tax bill coming from an all Democrat lineup next year is targeting high-income tax payers, will they target any tax benefit that goes to a person above a certain income level? And some would argue that life insurance has tax benefit. They'd actually be wrong about that, by the way, because there's a thing called the tax expenditure budget, which the Joint Committee on Taxation puts out every year, which lists all the tax benefits in the Internal Revenue Code. For 10, 20, 30 years, inside build-up of life insurance policies was on that list. But about now, 10 years ago, the Joint Committee took it off. And they said the reason we're taking it off is under normative principles of taxation, nobody, a person doesn't have income. If the inside build-up is still inside the policy, they don't have access to it. And if they take it out, it has consequences, including what the face value, what the amount of life insurance benefit there is inside the policy. So the Joint Committee actually, now 10 years ago, said that actually isn't a tax expenditure. Now, having said that, if we're going to be talking about taxing unrealized gains, then taxing inside build-up would clearly not be much of a reach. So, should people be a little worried about this under an all-democrat lineup? I would say, yes, worried. I wouldn't yet say panic. It's a mistake to think that there aren't Democrats who also believe life insurance is actually a really good thing. There are. In fact, Richie Neal, who's the senior Democrat on ways it means comes from Massachusetts where there's a lot of big life insurance companies. But he also, I believe, he believes in the merits of life insurance. So nobody should just assume, just because they have a D after their name, that they would want to go after life insurance. But you come back to Whiten. It's pretty clear, he's going to go after at least some version of it. And the problem with going after something like PPLI is the slippery slope. Exactly. Because just to be clear, Congress rewrote all the life insurance tax provisions back in 1982 and 1984. And I was actually on the ways in main staff when that happened. They were rewriting rules that were written in 1959, called the 59 act. And by the time we got to early 1980, the 59 act was like completely out of date. So on a bipartisan basis, Ways and Means, Henson Moore, a conservative Republican from Louisiana and Pete Stark, as liberal Democrat, as there comes from California, got together and spent three years trying to figure out the right way to tax life insurance companies and life insurance products. And it was out of that bipartisan effort, the code section that defines what is life insurance arose. And that code section without getting into the greedy detail controls how much cash value you can have in a policy relative to the amount of the death benefit. So it can't be overly investment oriented. PPLI satisfies those rules. So it fits the definition of life insurance, which again, on a bipartisan basis, Congress took three years to write. So it's a mistake to just read some of the more hysterical articles that suggest it's something out of the ordinary because it fits the definition of what is life insurance policy. But just to confirm that there are people out there that we should be worried about, there's a draft law review article that just surfaced a couple days ago by two law professors. And it's going to appear in the Virginia tax review, which is pretty respected publication. The title is reforming the taxation of life insurance. Okay. Immediately read alarm bills should go off because anytime you see an article says reforming, it generally means there's a huge tax increase coming your way. And I've gotten a copy of this article. I didn't like, like hack into somebody and get it. It was released in an article that appeared on Monday, a couple days ago. And it's clearly an attack on PPLI. But the thing coming back to something I said earlier, the slippery slope, there was an article that appeared in a publication called tax notes, which is widely read by the tax nerd community, about five, six months ago about PPLI. And it kind of went like this. Yeah, we should go after PPLI defining PPLI is kind of complicated. Maybe the best solution is just to have a cap on all the amount of life insurance anybody can have. Because that way we don't have to define PPLI. We just say anybody that has more than 500,000 life insurance, we're going to tax you. That's the kind of thinking that should make everyone nervous. Because in a way, the guy had a point defining it's sort of like pornography. The springboard said, you know what it is when you see it. And so some people would say, well, I know what PPLI is when I see it. But when you have to start writing a tax statute that defines it, then all of a sudden you realize, geez, it wasn't as clear as I thought it was. So that's why when you read this article that they're going to publish in the Virginia tax review and you go, well, it's only about people. I don't have anything to worry about. You really shouldn't stop there. Because if Congress really starts down this road, because what they'll worry about is as soon as they draw the lines of what is within PPLI, people will figure out how to get it right outside those lines. Yeah. So anybody that thinks that it's only going to be a PPLI debate is really kidding themselves. Yeah, it's the same thing with unrealized capital gains. I mean, even when income tax was first introduced, it wasn't meant for all the populations. And now look at it now. It's majority people are impacted by it. So a couple of questions. 1031 exchanges. That's another topic. What I almost hear from you saying is right now the Biden administration has some gray areas. But at the end of the day, if all Democrats get in, they could write legislation that could potentially attack things like annuities and life insurance. Do you see like 401Ks and IRAs and Roth IRAs? Do you see like any potential changes there? And then my next question is, is it, you know, back in the 1980s, people were grandfathered in even with the modified endowment contracts? Like would you imagine that they would just say going forward? This is the case. And everyone else would be grandfathered in. Or how would you imagine this, like, let's say worst case scenario, this happens. How would you imagine like if people are watching this listening to this now, like, I guess we don't know, we don't know, but history should tell us something. So history should tell us something. And generally speaking, I can speak from having been either on the inside or the outside working on tax legislation for 30 or 40 years, generally speaking, Congress, whether it's controlled by Democrats or Republicans, doesn't like retroactive tax legislation. However, when it comes to some of these provisions that significantly benefit high income taxpayers, and I'll use PPLI as an example, why didn't put out some discussion about what he might be willing to do on PPLI? And it suggested that the rules should apply to existing PPLI policies. So anyone that just assumes no problem, anything that we've got already is going to be protected. That just may not be something you can actually take to the bank. Okay. With respect to unrealized gains, interestingly, when the income tax was originally enacted after the amendment to the Constitution back in our, I believe, 2016, or 1916, it only taxed capital gains that were attributable to assets where the increase in the value of the asset occurred after enactment of the income tax. Because of the concern that if you applied it to the increase in the value of the asset before Congress had passed and the sixth amendment had been ratified that prevented the income tax, that that would be unconstitutional. Okay. But that's not the situation we're in right now. When the income tax has been around for 70, 80, 90 years now. So is it possible that it would apply if there was going to be a tax on unrealized gains that it would apply after an actment, including with respect to gains that had been realized in earlier years? Who knows? And the difference in that choice, potentially is hundreds of billions if not more. So no one can just say no problem there. Because there will be a huge pot of money that will be very attractive to some. You taxed for us. So for one case IRA is Roth IRAs and all, they are they an expenditure to the government. And is there a world where they can play funny math there about your Roth IRA and what not? Like what is your prediction? Is there any of those accounts on the potential shopping black when it comes to an all Democrats Senate House and President? Okay. So there's already been some areas where there's been concern rumblings. There are people that think some people have been able to put too much money in their IRA. There are some people that think some people have too much money in their 401k. And so it wouldn't be shocking the sort of variations here. It wouldn't be shocking that there would be a provision that said if your 401k is worth more than X. And I think fidelity just came out and said there's something like that 435,000 401k's that they administer that have assets of over a million dollars. I think those are the numbers. I could be a little off. But because the kind of legislation we're talking about is going to all about being go after high income people. The possibility of capping how much money you can put into a 401k is not crazy. I mean, it may be crazy, but it's not crazy that it might be considered. Okay. And same thing with an IRA. So those are, yeah, those are the kind of proposals. And then you get into the question of, okay, would that just say, you can't put more money in. We try sometimes as in some of these proposals coming from the Elizabeth Warrens of the world, the Bernie Sanders of the world, there have been ideas like, well, if a wealthy person has too much money in a tax-perferred account, then we will require them, even though they haven't reached retirement age, to take the money out and pay tax on it. So there's any possible number of variations. If the theme is don't let high income people enjoy tax benefits that are in the internal revenue code to a greater degree than we think is appropriate, whatever that means. Then there's a lot of ways you could go about it. You could just say, can't put more in or you could say, gotta take it out. Yeah, I know Peter Teal made kind of like a splash and he like had his Roth IRA and bought equities and business and now grew it to millions and millions of dollars and how some people look at that and say you're abusing or trying to help. So I get that and I'm trying to be as bipartisan as possible just to get the tax. So is there anything else that you want to say as it relates to that? Because I want to go to all Republican, which I think will just be a renewal of what we've been living through. So it might be a lot easier to explain and then I want to talk about what happens if Democrat president, Democrat Senate, Republican House, what that would look like. Okay, so let's go to the all Republican lineup. Through four months ago, I would have thought you just said about what's likely to be in play was correct, which is of the 2017 act provisions that are expiring, which ones do we either extend or make permanent again, things like 199 cafe, the top marginal rate, etc. In the in the on the presidential in the presidential debate that's gone on over the last month or so, we've had president Trump come out in favor of eliminating tax on tips. Let me just say defining what is a tip. You mean think it's simple, but trust me when I tell you it isn't. I saw a meme if Trump gets elected, people are going to go to their bosses and say, hey, can you pay me $10,000 and then the rest in tips. That stuff is out there. I mean, there's lots of wheels turning already. Yeah. Yeah. So the general assumption is without knowing the specifics, because no one can know the specifics yet is that a provision to exempt exempt tips would cost over 10 years, 100 to 200 billion. So all of a sudden, we have in play, maybe a 200 billion dollar cost item. A Trump has also come out and said, I'm going to eliminate the tax on Social Security payments. Well, all of a sudden, we got another 100 billion or so in play. So whereas four or five months ago, I would have said that your speculation about what an all-re-public and lineup would be to was probably pretty right, which is just what do we do with the expiring provision from the 2017 act. We now have other ideas that are not just ideas. They've been endorsed by a presidential candidate. So all of a sudden, it gets a little more complicated, but I would say generally speaking, your statement is still correct. The tax bill under an all-re-public and line-up that would be debated and passed into law probably by next August would largely focus on what do we do with the expiring tax provisions. Now, let's just stop for a moment because I think this is kind of where you are going anyway. How likely is an all-re-public and or an all-democrat lineup occurring? The all-re-public and lineup, you could see a little bit easier happening. Trump and my own view is whoever wins the White House, that party probably gets control of the House, because the House, the control by Republicans is so small. So if Kamala Harris wins the White House, my guess is she will have won the voter turnout war, and if you win the voter turnout, then you bring into office a bunch of people what is referred to as down ticket and in particular House members. So you can easily imagine Kval Harris gets selected, Democrats get the House. Senate is a little bit clearer in terms of where the Senate is going. Under current line-up, there are 51 Democrats senators. If you include Bernie Sanders, I'm not being critical, he's admitted socialist, but he caucuses with the Democrats. So 51 Democrat votes, 49 Republican. Okay, when you look at what the current senators under up for reelection are, West Virginia, Senator Manchin, whose Democrat, is not running for reelection, and it's almost 99.9% of Bernie and Washington in the rest of the country, believes Republicans will take that seat. Okay, so that means you've gone from 51, 49 to 50, 50. There are six other seats, which are Democrat held right now, but there's only one where the Republican has a decisive lead in that's in Montana, which is Tim Shihi running against the incumbent John Tester. Now, Trump's going to win Montana by 2025 points, which means Tester, who has proven resilient in the past, has got a very steep road to climb to win reelection. The other Democrat held seats where Republicans are hopeful they can make gains aren't, they're not seats where in those elections, Republicans are currently winning. But if Shihi wins, that means the Republicans are at 51, 49. That changes the landscape dramatically in terms of a Kamali Harris president and Democrats controlling the House in terms of what tax bill they could do because if Republicans control the Senate, that means that they have the ability to stop any bill from happening. So when you look at the Senate race by race analysis, it is a little hard to see how Democrats actually get the whole sweep. But you know what, you can have surprises, she has a stumble, whatever. But if you're talking about all Democrat lineup, we've talked about what it looks like. But I'm going to say that getting to an all Democrat lineup is not easy. On the Republican side, if Trump wins, again, it's likely that because of Shihi, that Republicans are going to take control of the Senate. And if Trump wins, that means Republicans won the voter turnout battle, which means they probably hold the House. So all Republican sweep looks a little bit more plausible than all Democrat sweep. If it is not a sweep of one side or the other, the whole picture becomes more complicated, it means there has to be a negotiation between the parties to get to agreement on a tax bill. And that's the scenario under which in particular, I would suggest that if you think it's all going to get done in 2025, think again, because this will be a very hard deal to cut. So the possibility that it would stretch into 2026 under what we refer to as split government very real. Okay. Wow. Lots of unpack there. Would you say just follow a question on the split government. Is there issues that Republicans, like what hill are they willing to die on? And then what hill would Democrats be willing to die on? And what do you think a bipartisan bill would be knowing that if that's the case, there's most likely Commaul is the president. And so, you know, you know, what would you, I mean, in two minutes or less, I guess that's hard and maybe we'll just have you back on. Yeah. If that's the case. It is hard. You know, if it's a Commaul Harris president, but Republicans control the Senate, I mean, the Republicans may say, a tax on unrealized gains never going to happen. They may say, eliminating the tax on Social Security benefits, we had to have that, although I'm not really sure that that would be the case. For Democrats, the absolutes would be an increase in the child credit. And possibly, because Commaul Harris has talked about this without being very specific, but actually some specifics about housing subsidies, about $25,000 for a new home buyer. She's actually talked about a specific number. Okay. So, you know, there would be things like that where people would say, we're not doing a bill unless we get this. Now, coming back to my prediction that it could stretch into 2026, we have a small tax bill that passed the House with a huge majority in late January of this year. It increased the child credit and it enhanced the treatment of some business provisions, R&D, bonus depreciation and the ductibility of interest expense. It got to the Senate and it has been stuck there ever since. Notwithstanding the fact that it is supported by the vast majority of Republicans in the House. Senator Republicans said no. And my only point is, if this little bill, and it's about 70 billion over 10 years, which in Washington is not a lot of money, yeah, if that little bill couldn't get done, then think about how hard it's going to be to get a big bill done if you have split government. And that's why my prediction that could go to 2026 is I think pretty. Yeah. Is the pitch the Republicans have almost like, hey, we don't want to necessarily tax the value creators in the world and they could leave and they also like, if people are spending more time trying to figure out how they avoid taxes instead of creating value, like we actually were increasing the rates, but we're actually going to get more money in the long run. So, is that like the overall pitch for the report? Like, because I also, I'm very conservative, okay? I want, I don't want to over-pant taxes, but I also look at the train rack where debt's at and so security and all these things. And so it's like, you can't have your cake and eat it too. And I want to be able to like, and no party, this is bipartisan. Nobody wants to talk about those issues. So I guess I'm wondering, and I want to be respectful of your time, and I don't have a hard stop. But if you do, like, I want to be respectful of that. But just like, as we finish up, how would you, how do you view like this looking out to the future? Because it's almost like we're, you know, changing seats on the Titanic, but we're not addressing the fact that we're sinking. Yeah, so, to some extent, I would say a perspective of Republicans is to protect provisions that help create jobs, economic growth, etc. But it would be a mistake to think that there are no Democrats that don't think about those things as well. And there are a number of Republicans in JD Vance, the Republican Vice Presidential candidate has come out in the last three or four weeks in favor of enhancing the child credit as a pro-family measure. Okay? Now, just to be clear, enhancing the child credit doesn't do much in the way of economic growth. You know, because basically that's money that gets consumed, which has some impact on economic growth, but it's relatively small. For provisions that significantly increase economic growth are provisions that favor capital formation, investment and plant and equip, and which means accelerated depreciation, things like that. So, the majority of Republicans saying the Senate, if they controlled the Senate, would be insisting on pro-growth provisions, which is one of the reasons they would be rather opposed to raising the corporate rate from the 21% up to the 28% that Camilla Harris has endorsed in which was in the Biden budget. But you don't have to be a genius to figure out. One party is at 20, at 21. The others at 28. Do the math. 25. And you know, and then would the economists, particularly the conservative economists say that'll negatively impact growth. They'll say, yeah, absolutely. And the Democrat economists will say, oh, you know, they can handle it. So the focus of Republicans would be economic growth, capital investment, but some would also, as reflected by JD Vance, would be some pro-family provisions. And, you know, Democrats might be put a much more emphasis on how do we create more affordable housing? How do we increase the child credit? You know, there would be some overlap. The problem is, and you touched on it, is this stuff all costs money. And the deficit issue, I've been talking about it for 20 years, but I think I'm really approaching the point where people really realize this is a disaster. And it's not just a disaster for the present, but we have two looming problems coming our way within the next decade, which is Social Security and Medicare. So we are facing what is a fiscal disaster that is now within sight. So all of a sudden, in earlier congresses where people might have been willing to cut taxes and say, we don't have to quote pay for it or offset it. We may be approaching a point where that's just not the case anymore. So that just is one more complexity to how this all plays out in 2025. Do you, depending on how the election turns out, will your services, will you be called on in all scenarios, or is there certain people that may be more poised to bring you in versus the other? What is your life look like over like this year and the following as these things play out? A good thing or bad thing. We tend to do well in periods of chaos and crisis. We're going to do well. You're going to do well. Just draw whatever conclusions you can from that. And it helps that I like now as old as dirt. So I've been around and I've been there. It's almost no new ideas out there. There's just ideas that people actually today don't know were thought of 30 years ago. But I've been doing this for long enough that I'm pretty much aware of every idea that's ever come down the pike. And I've had the benefit of, because I've worked in government twice, of knowing how the inside works. And that's kind of important sometimes. So I'm not really worried about my livelihood. And nobody who's listening, this should be worried about my livelihood. Don't worry. I'll be fine. We just want people like you that have at least a voice because I feel like you're you give me a little bit of hope knowing that there's some people that are seeing big picture. And again, you're not relying on votes, I guess. And so you can maybe be a little bit more long longer picture. There's so many other questions I want to ask. But can thank you, how can our audience support you? Is there anything that we can do or any ask that you would have for the people listening or watching this? No, not really. I mean, just bring me back. Because there's going to be a lot more to talk about after the election. Nothing stays static in Washington. And in the situation we're in right now, that's particularly true. I mean, the dynamic nature of what will be occurring here between now and say next August, when we could having these two very different tax bills, the dynamic nature is unbelievable. And then I mentioned who knows what the October surprise will be. I'm not expecting the space aliens, but you can't count it out. And so, so yeah, I mean, there'll still be there'll be a lot of new things to talk about. Actually, not in the two-distant future. So amazing. That's my final line. You have an open invite anytime. Can thank you for making very complicated things, stealing them into different frameworks and how what the future could look like. Thank you again for all the work that you're doing. And it was a pleasure to have you on. My pleasure. Thanks, Gail. Take care.