860: Why Your Paycheck is SMALLER Than it Should Be - The Tax Secret NO ONE Talks About

Brian Nichols  0:00  
Hi. Instead of focusing on winning arguments, we're teaching the basic fundamentals of sales and marketing and how we can use them to win in the world of politics teaching you how to meet people where they're at on the issues they care about. Welcome to The Brian Nichols Show. Well, hey there, folks, Brian Nichols here on The Brian Nichols Show. And thank you for joining us out of course, another fun filled episode. I am as always, you're humble those joining you from our lovely cardio miracle Studios here in sunny Eastern Indiana. The Brian Nichols Show is powered by our amazing friends over at AP America, folks, if you're looking for the news, you need to know without a corporate media bias or fluff head over to amp america.com We have podcasts we have news articles, we have opinion pieces, and more. One more time, amp america.com. Also, The Brian Nichols Show is powered by our amazing studio sponsor, and that is cardio miracle. Now, folks, I've been using cardio miracle for well over a year now. And you all heard the story time and again, the cardio miracle difference is 1,000% real. What is cardio miracle? Well stick around for later in the episode we're going to talk about how cardio miracle is in fact, the best heart health supplement in the world and will help lower your blood pressure present you a better night's sleep plus, improve that pump at the gym, lower your resting heart rate and more stick around. We'll talk about how later on in today's episode, but for today's conversation, we're talking about something that everybody knows and loves taxes. And as someone who was born on tax day, it's been a special part of my life. Fun fact peek behind the curtain. Little did I know that it wasn't normal for folks every tax day to literally bring their taxes to the tax place and get them all prepared with the accountant. That's just how my family did it. And I always thought that's what we do on my birthday. We just go and do that. So taxes Yes, they have always played a part in my life. And I'm sure in everybody hates his life. So let's talk about taxes today, and specifically, what you don't know about taxes and how they are impacting you in your everyday life to discuss all that and more and digging into his brand new book that talks about just that. Joining us here on the show is Scott Hodge talking about his brand new book tax. Ah cracy. Scott, welcome to The Brian Nichols Show. How you doing?

Scott Hodge  2:43  
Hey, Brian. Oh, great to be with you. It's a true honor to be on The Brian Nichols Show. Well,

Brian Nichols  2:48  
thank you Scott's a true honor to have you on The Brian Nichols Show. So thank you for joining us. And I'm really looking forward to digging into your new book tax tax ah cracy. As we mentioned there in the intro, there it is right there. As I said earlier, your publisher will be proud of the hit rate for the camera. And by the way, folks, if you're listening to today's episode, and anything you hear about tax accuracy is sparking some interest, you want to go ahead and check out this new book, links will all be available in the show notes. So please make sure you stick around afterwards. And check those out. But Scott, do us a favor. Before we dig into your brand new book. I always love for the audience to get to know who the folks are that wrote these books. So do us a favor, introduce yourself here to The Brian Nichols Show audience and why this focus on taxes and how they impact us on a daily basis.

Scott Hodge  3:32  
Well, I have quite a history in the libertarian free market movement. I started out in in Illinois, nearby Illinois in 1981, joining the Libertarian Party there. And I got I helped start the Heartland Institute in Chicago in 1984. came to Washington in the late 80s. And I've been here ever since working in think tanks. I've studied federal spending for a decade then I moved on to tax policy. I ran the Tax Foundation, from 2000 to 2022 stepped away from that the presidency at the end of 2022 in order to write this book, and try to promote tax reform as best I can. And one of the things that I've always tried to do is communicate these really difficult topics in English rather than geekspeak. Because it's critically important that AG you know real people be able to understand how impactful taxes are in our daily lives. And what the research shows is that you know taxes affect the cost of our housing, our health care, they they make college tuition more expensive. Everywhere you turn taxes are a part of our daily lives. And we need to understand how we can use some of the lessons of tax policy gone awry, try to reform the tax code in a way That doesn't harm the economy, and doesn't affect our daily lives. And that's what the nature of the book is, is to take the lessons from tax policy gone bad, apply those lessons to our current tax code, and move toward a tax system that's simple and transparent. And neutral doesn't affect the way we think about our daily lives, and can get the politics out of the tax code as well.

Brian Nichols  5:28  
I think it's terrifying to your average person, when they hear the elephant in the room. And by the way, when I teach my sales teams, we always talk about the importance of leading with this elephant in the room approach. And that's exactly what you did here, Scott, and let's talk about that. Now. We live in a world ruled by taxes. So how did we get to be a country where rewind 250 300 years ago, we fought a revolutionary war on a tax on T? Two, now we are sitting there saying, tax me harder government. How do we get here, Scott?

Scott Hodge  6:02  
Yeah, it's an evolutionary process is, you know the old adage about the frog slowly getting boiled. And it really obviously started in the early 1900s, when we moved toward creating an income tax, first a corporate income tax in 2000, or in 1990 1909, and then the individual income tax in 1913. And through that, the years, government has been continually expanding the tax code to cover more and more aspects of our daily lives. Sometimes, interestingly enough, they've exempted certain aspects of the economy, and certain sectors from the economy. So now we have an untaxed sector. That's about three and a half trillion dollars a year. That's everything from untaxed credit unions and universities, hospitals, and so forth. But then on the flip side, politicians have been adding more and more to the tax code that affect us in every aspect, where there's our mortgage interest deduction, child tax credits, lots and lots of tax credits. Now, for all kinds of environmental purposes, there are over 220 Different deductions, credits and exemptions in the tax code. Each and every one of those has a constituency, it has a fan base that's going to protect it to the death. And that's one of the big challenges of tax reform, is you're going up against these entrenched interest groups that are willing to do anything to try to keep their protected deduction or credit.

Brian Nichols  7:44  
Well, Scott, pardon the expression, but it does sound like we got some folks in DC who have gone through and, dare I say, picked winners and losers with the way that they write the tax policy. And I, I'm gonna guess that the winners happen to be the folks who write those really, really nice campaign checks. And I'm guessing the losers are, I don't know, your average everyday. John Q citizen, am I on the right path? Or?

Scott Hodge  8:10  
Sadly, that's exactly what's happening. You know, look at the the inflation Reduction Act, which the Biden administration passed two years ago, with billions, if not more than a trillion dollars worth on handouts through all of these green energy and environmental credits, and solar credits, and so forth. All of those are aimed at basically, micromanaging the economy in about through all of these, you know, some 24 or 26, different tax credits. All of these provisions in the tax code are attempt by politicians to micromanage either the economy or our social behavior, through you know, either punishing with punishing us with with various taxes, or subsidizing certain types of behavior through other types of credits or deductions. That

Brian Nichols  9:04  
sounds a little scary, and frankly, a little dystopian, because I don't know, I thought we grew up in America, where you could be what you want to be. It's the land of opportunity, manifest destiny, Scott, and yet, I don't know I'm hearing that well, if I'm Elon Musk, and I see manifest destiny as building a colony on Mars, and that's where we're going to restart civilization. Thank you, Elon. Things aren't looking too great here. But you know, if that's his approach, and all sudden, you know, John, John Smith, the evil senator from Alaska, let's just call him as our future Senator there, and he is going to go through and spend every waking ounce of time energy and effort not to let that happen, because I don't know maybe maybe John Smith, evil senator from Alaska, maybe he's finance and backed by a big earth right. They want us to stay here on this little rock floating third planet from the sun. So I know I'm painting this really silly picture there. But I mean, Scott and Mike kind of articulating what actually happens behind those closed doors.

Scott Hodge  10:09  
Well, you know, if you, Brian, if you believe in freewill, and you believe in individual liberty, you should desperately want to reform the tax code. Because each and every one of these provisions in the tax code is meant to, for us to do what politicians want us to do, and not what we want to do. So the way to liberate Americans, in give them as much freedom as possible, is to move toward a tax code that we call economically neutral, meaning it doesn't pick winners and losers, it doesn't try to punish some people and subsidize another, it simply is there to raise revenues for the federal government, but in the least economically harmful way possible. And that ought to be the goal to have a tax system that just simply raises revenue, so that whatever government needs to manage, but it does so with the least amount of harm to the economic or to the economy, and the least amount of intrusion in our daily lives. And that means scrapping a lot of the provisions that are tax code, and moving towards something like a flat tax, or some something like that, that has is minimal deductions, credits, exemptions, and so forth in it. So that it's simply as in is unintrusive as possible. Well,

Brian Nichols  11:38  
you you highlighted a phrase, and I want to ask you a question. You said, it's economically neutral. I think it I'll take it a step further, Scott, not only is it economically neutral, it also is politically neutral. Because you're now you're now diffusing the incentive structures that were behind the scenes to create the economic, I guess, the economic perversions versus that economic neutrality that you mentioned. So I think this is as much as an economic remedy as it is a political one. Well,

Scott Hodge  12:10  
there I close the book with three things that are going to get us to tax reform. First, we taxpayers are going to have to give up some of our credits and deductions. You know, there's, there's a lot of people think, Oh, well, no, if I give up my mortgages to duck duck deduction, or my charitable tax credit, or something like that, I'll be worse off well, how about if we just lower tax rates and you then you can do without a lot of those credits and deductions. So we have to give up sort of this notion of loss aversion, where we have to have faith that something is going to be better off with a simpler tax code. And then of course, businesses are going to have to decide that the tax department is no longer a profit center, chasing credits and deductions in order to lower their tax bill. And then finally, politicians are going to have to come to the realization that the IRS is the worst place that you can try to micromanage or manipulate the economy or individual behavior. And that may be the biggest challenge of all. But that's exactly what we need to do. If we want to simplify that, simplify the tax code, get that the politics out of the tax code and get the politics out of the economy and our individual lives.

Brian Nichols  13:30  
So let's talk about something that maybe we don't really think about and we talk about the political the economic implications, but what about the societal progression implications? There's one little call out here in your your Amazon listing. History is full of misguided tax policies that lead to quote, see through buildings tax free attics, three wheeled cars, women in children's clothing and bake chips to go along with our hard seltzer. So talk to us about how a perversion in the tax policy can actually lead to a perversion in normal normality or normalcy.

Scott Hodge  14:08  
Yeah, incentives matter. And in every tax, there's a story to tell about the unintended consequences that they'll those taxes can have on incentives. For instance, I talked about the the window tax, for instance, which was an 18th and 19th century tax in England, on the number of windows that every building or house had in it, and it was a progressive, so you paid a higher tax rate for the more windows that you had. Well, naturally, it incentivize people to brick up or board up the windows in their home so that they would pay a lower tax. This had a really punitive effect on poor people, because landlords in some of these tenements would completely break up all the windows in those buildings in those apartment buildings, and thus it became a tax on lightened air Are that punished poor people disproportionately, because of the fewer windows they had the luxury tax that Congress passed in 1993 taxed yachts and and high priced cars and furs and so forth. It will those had a disparate impact on the workers in those industries. In fact, the US yacht building industry was basically destroyed because of that tax and moved offshore, because wealthy people could go anywhere to buy their yachts. And then the three wheeled cars is an interesting story, because that's another British tax, called the road tax that tax cars based on the size of their motors. And, and so what this automaker did called the Reliant Robin, was create this three wheeled car that would be taxed like a motorcycle, and it's at a much lower tax rate. The they have a single wheel in the front and two wheels in the back, they did have a little propensity to tip over occasionally, but they were very popular with working people, because they were so inexpensive and they paid the lower tax. Again, in Britain, you have women buying children's clothing, actually clothing aimed at teenagers, because children's clothing is what we call zero rated meaning the value added tax is not placed on children's clothing. The description of children's clothing goes up to like age 18. So you have all these women that are saving 20% on their value added taxes, buying, essentially, clothing that's aimed at teenagers, and the list goes on and on. We have all of these examples from history about tax policy gone awry, all of the incentives that make us do stupid things. And we can apply those economic lessons to our current tax code, learn those lessons to be able to reshape the tax system to make it less distortive to change the incentives so that they're not making us do things that we'd rather not do. Scott,

Brian Nichols  17:04  
you just told a story about more or less the failures of central planning, right and this right here, I mean, this speaks to exactly a problem that we're facing today. And frankly, we've been facing for generations at this point where you have these these politicians, I'll even go ahead and point as you mentioned, to the IRS, these bureaucrats who they're like, Oh, well, this is going to take care of this problem. And then it's like a game of Whack a Mole, they whack that mole, then three more moles pop up out of holes down the road, they never thought we're gonna exist. And yet, here we are. And this speaks to why just freedom works, Liberty works. Now, that's not to say that safeguards can exist. But when the safeguards come down, not from culture, but rather from government, you start to see the negative implications there. And because when culture is the one guiding these decisions and culture, I'm just using that term, to express when people go out and make decisions in an open free marketplace, whether that's the way they buy or sell goods or services and a way to interact with people in their communities, you're going to see culture change and grow in very unique ways. But when you are the central planner, your Mr. or Mrs. bureaucrat, and you have this, you know, it's the Tarkin, from Star Wars, that the tighter you grip, the more systems will slip through your fingers, right. That's the exact mentality we see here carrying over from the world of a long time ago, in a galaxy far, far away to the world that we all live in today. And we see and just, I mean, look no further folks than the past four years of insanity that we all had to go through with the COVID restrictions and to see all these these do good policies, right? Oh, we're going to keep kids home, they're going to learn from home, it's gonna be great. Except it's not great. And now we're seeing that we have a generation of kids who their future prospects have been absolutely destroyed. Plus, it's also opened the eyes of parents who got a peek behind the curtain to see my kids learning why in school. Maybe I don't want my kid to be in school. And maybe I want them to go away from these government schools to a different schooling solution. We just talked about that last episode with Hallie Faulkner from the Yes, every kid foundation how that one of the glimmering lights from the pandemic was actually a huge surge in parents wanting school choice. I can almost tell you, Scott, I mean, I'm smarter than the average bear. But I think you're looking at your average bureaucrat. They didn't expect that they weren't looking forward to that. And frankly, they probably didn't have that as something that was even in the purview. And yet here we are. So to those central planners out there. I mean, this is the exact reason why central planning doesn't work and why we should embrace a free and open market. I'll end my monologue and rant there, I guess.

Scott Hodge  19:55  
Well, not only does freedom works, but more markets work and the taxes can mess up the market. And you look at nothing. Healthcare is a great example were during World War Two, they decided to, in one way to avoid the wage and price controls, they would exempt health care benefits from taxation, because and they made it a free good or free benefit. Well,

Brian Nichols  20:22  
by the way, here's here's where it starts. Right? That sounds like a good idea, Scott. And here's where it goes wrong. So continue, sorry, no,

Scott Hodge  20:29  
but And over time, we've decided we want to take more of those tax free benefits, then tax benefits like wages. And so these tax free benefits have been growing as a percentage of our overall compensation over the last few decades. Worse, it's really screwed up markets, because the real consumers now have health care, our employers and insurance companies, not we the consumers, not we the patients. And so it's messed up the entire marketplace for health care, raising costs overall, because we're not acting as true consumers. On the flip side, you look at things like try attempts to try to lower the cost of tuition or make college more affordable. Well, we're going to provide tax credits, guess what universities know what the size of those tax credits are. So what do they do? They raise tuition costs in order to capture the value of those those tax credits. And so the attempt to make college more affordable, makes it more expensive. The same thing goes with the mortgage interest deduction that gets baked into the price of the house, making housing less affordable for low income people. And we go on and on and on. So all of these do gooder attempts to try to make things better actually make things worse, because they destroy the marketplace in the market forces that would otherwise make these things more affordable. Scott

Brian Nichols  21:58  
your Ryman an episode, we did a back probably. I don't know how long it was COVID is messed up my perception of time it was either six months ago or six years ago. I can't remember. Right? We did an episode is called the danger of do good politics. And this speaks to exactly that problem. Because raise your hand if you're in the audience in a couple of the things Scott mentioned there hit home to you personally, I know you mentioned two of the big ones, right? The the mortgage rates and then the school tuitions, yup, everybody out there, if you own a home, or you want to own a home, or if you are going to college, or you've been to college, and you're now dealing with the student loan fiasco that I just talked to a buddy of mine, poor guy, and like it made me kind of feel bad for him. But at the same point in time, like, what are you doing, Dan, going after your like your third degree, but anyways, he was saying how he's been paying his his student loans. And he just looked and he realized that every single payment he makes towards his student loans, you know, how much is going towards the principal $1.37 $1.37 out of 1000s of dollars he is spending every single month now that's not a discussion about should he have gone to college for his third degree or Shouldn't he have, I think we're all on the same page he should not have. But back to the point you raise Scott, incentive structures matter. And when you put artificial incentive structures in place, people are going to make some silly decisions, because that's the system that you have built for them. In order to be successful. You must take part in this system, you must take part in this silly little game that everybody else is playing. And I'm not sure if you're a fan of the TV show The Office which has been off the air for nine years now. But no 11 years. Oh my gosh, I'm old. But you look at the office. There's one part in the show where one character Her name is Nellie Bertram. Nobody really liked Nelly. She comes to the office, and she just usurps Andy Bernards role, she pretends that she's the manager, and he's not there one day, and she just walks into the office. And she starts saying, Oh, well, if you believe in me, as the manager, I'm gonna start giving out raises. And she she's like, it's like, it's like Tinker Bell. If everybody believes that I'm the manager. This is the same game we've all been playing. We all pretend this is working, right? This is working. And yet we look around and we know fundamentally, it's all broken. And we're just kind of playing this game because I think we're afraid Scott and tell me if I'm wrong. We're afraid that if we stop playing, or if we point out and say, this game is inherently flawed, that the whole system is just going to come crashing down. So is this a matter of sunk cost fallacy or sunk cost politics here when we look at from an economic standpoint, like we've just invested so much that we don't know how to get ourselves out of this? Well,

Scott Hodge  24:51  
I think we have a feeling like you know, we're shopping at Neiman Marcus and we've been given a 10% off coupon. So that makes us feel a little little bit better about overpaying for an inferior product. And I think that the more that we can move toward a simpler tax system that is so unobtrusive is to be economically beneficial. That's our only salvation here. And that's what I've tried to do in my book tax tax holacracy is outline how we can move toward a system, a tax code that gets out of our daily lives that is economically, not only economically unobtrusive, but economically beneficial. Because it rewards saving, it rewards capital investment, it rewards economic growth, rather than punishing all of those things. And our tax code today it does exactly that. And it does so because politicians have been trying to use the tax code to manipulate the economy, manipulate economic behavior and business behavior, and ultimately manipulate you and I to do what politicians want us to do, and not what we want to do. So if you believe in free will, and individual liberty, you ought to take time read tax, ah cracy, learn how we can reform the tax system to make all of us more

Brian Nichols  26:22  
free. Well, Scott, you did my job for me. And that was get ready to cue you up for a promotion of said book tax accuracy. Now I know it's available over on the Amazon. So all those links for checking out the book will be available there but call to action give give the audience a quick rundown of what they can expect in the book. And is this one of those books that it's you know, Hey, John, you're my you're my buddy. Go ahead and read this book, I think you'll get a lot of value out of it. Is it one of those kinds of

Scott Hodge  26:51  
books? Yeah, it really is. It's full of stories, anecdotes, and little narratives that help you understand the economic harm from tax policy in a memorable way, in a way that you can actually apply and use. It's easy to read, it's aimed at an everyday reader. The chapters are short, their blog length, which is maybe at most 1500 words, you can read each chapter over the course of having your cereal in the morning. And then you can move on to the next chapter. Each chapters summarizes the basic facts and information that you have just learned and a couple of little bullet points. And then you can go on to the next chapter, and learn about all of these crazy things that the tax code makes us do. But also then learn a lot about our current tax code, how messed up it is, but also learn the basic principles of what a good economically sound tax system should be, so that we can fix it and really take this crazy tax system out of our daily lives.

Brian Nichols  28:02  
You said you could read it while you're having your cereal for breakfast. I don't know what the economic conditions were in Kellogg's was telling me I should be having cereal for dinner. You know, if the prices are a little too hard to make it work for, you know, chicken, or potatoes, or you know, just normal dinner food, but that's a different conversation for a different day. Scott, this has been a great conversation. Thank you for joining us. And with that being said, beyond folks going ahead and purchasing their own copy of tax zakresie we want them to be able to continue the conversation with you. So where can folks go ahead and reach out to you on the social medias, Twitter, Facebook, any of that fun stuff?

Scott Hodge  28:36  
Yeah, I'm on Twitter, you can email me at hajat tax foundation.org Come to the Tax Foundation website to we've got some great tax literacy information, lots of information that you can use, it's all accessible, all free, and all usable, so that when you're communicating with your your local politician, you can be better informed, and raise your tax IQ so to speak, so that you're smarter than your local politician about the harmful effects of today's tax code.

Brian Nichols  29:06  
And hey, I don't know maybe you go ahead and read a book called How to Win your local election afterwards because then maybe you want to run for local office or you want to run for state office. I don't know that's just a thought. And by the way, if you want to read that book, it's a free ebook available here on Brian Nichols show.com link down below in the show notes folks, I hope you got some value from today's conversation I say I hope I know you got some value from today's conversation because taxes is something that impacts us all so I want you to please go ahead and share today's episode because just like you sitting there saying oh man yep this hits home everybody else looking at the episodes gonna be like yep, this hits home. So please go ahead, share today's episode, Twitter, Facebook, wherever it is. You want to go ahead and give it a share. Please tag yours truly at B. Nichols liberty, Twitter, Facebook, Instagram is where you can find the show you can find yours truly but also where Can you find the video version or the podcast version of the show? Well, if you want to go ahead and check out the video version, YouTube, Rumble, Twitter, Facebook, Instagram, we are uploading the entire video version of the show in its entirety over there. So please hit that subscribe button, hit that little notification bell. And of course head down below into the comments. We want to hear your thoughts. How have taxes impacted you yet stop you from doing something you wanted to do, where you were getting ready to start a business or maybe start a family, buy a house, go to college, and all of a sudden, you realize that the way that taxes are impacting you maybe is holding you back, we want to hear your story, head down below into the comments. And if you're joining us on the podcast version of the show, Apple podcast, Spotify, YouTube music, wherever that may be, again, hit that subscribe button and then hit download all unplayed episodes. Reason being, we have over 860 episodes here of the program. And this is the only place you can catch all 860 episodes because, yes, we've had to remove some videos. As I mentioned during that Affer mentioned COVID hysteria, we had some videos that YouTube said was harmful content. So yeah, those had to get nuked. So if you want to check out all the episodes of The Brian Nichols Show, in their entirety without the corporate media censorship, yes, head over to the Brian Nichols show.com. And by the way, you want to go ahead and hang out with Scott you can head over to Freedom Fest if you have not gotten your tickets yet. Rumor is Scott, you're gonna be there with your band of of good folks. They're helping raising awareness about taxes. Is that true?

Scott Hodge  31:32  
That's right. And I'll be on one of the panels about tax policy and, and freedom.

Brian Nichols  31:39  
Perfect stuff that we really like to talk about. So head over to Freedom Fest tell Scott, you saw him over on The Brian Nichols Show. I'm sure he will appreciate that. And also one final plug and that is folks please support the folks who support us and that is our amazing sponsors like our studio sponsor cardio miracle we got our good buddy over at a liquid of freedom energy tea, Dan Berman. It's one of the best energy drinks I've ever had seven ingredients seven go look at your, your energy drink that you get from the grocery store or the from the fast food place. I guarantee it's going to have like 35 Ingredients maybe down seven of them you can actually pronounce or pretend that you know how to pronounce so yeah. Don't don't put garbage into your bodies, folks, which I can almost guarantee that the reason that there's garbage in those drinks Scott is because something with the tax autocracy. I'm going to call it out right now. That's probably what it is. Look at that. We've learned some stuff here on the show today, folks, thank you for joining us. With that being said Brian Nichols signing off here on The Brian Nichols Show for Scott Hodge. We'll see you next time.

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