[00:00:00] Foreign.
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[email protected] and now here's your host Ler. The chatter about tariffs is ongoing. The chatter is loud. People are pissed off, some people are happy, some people are confused. I think I figured I would use an episode to help allay some of the confusion. Those that are too lazy to research themselves and or I know that, you know, modern folks, some of the younger specifically, but the modern folks, you know, you don't, you don't do books, you don't read books like you should and some don't know history. Are US Systems failing? People listen, I understand.
[00:00:51] So I thought I would do a public service. I thought I would help to clarify Donald Trump for the background. Donald Trump imposed tariffs on Mexico and Canada. Mexico made a deal, dearted the deal, made a deal to back off of it. Ostensibly this is around the fentanyl and illegal immigrants and the other the intent of terrorists. The real intent, which I'll get to in a second, using it as a disincentive for them to not do something about these things. Prince, of course, died from a fentanyl overdose, may he rest in peace. And fentanyl has been one of those things the Biden administration completely ignored. Even though it was a crisis by definition of a crisis, continues to be a crisis, disproportionately skews to the young folks. Biden never talked about it. Biden never created a plan for it. Instead, Biden went on the air, threatened Americans who refused to take something stuck in their arm, but never spoke to the fentanyl crisis. That was one of the reasons I was not a fan of Joe Biden, because I felt that the fentanyl crisis deserved more attention than it was getting. I felt he was too busy attacking law abiding citizens and not going after something that really was a critical situation that got out of control. And so Donald Trump's trying to do something by way of terrorists.
[00:02:10] Donald Trump made some other wild eyed statements on the campaign trail. He talked about how there was a time when we had no income tax and that the government was funded by tariffs. He's partially correct in the sense that yes, we were partially funded by tariffs. We were not completely funded by tariffs. It was a partial funding. I thought I would take the time to speak about that and how that worked for those that didn't understand, and it's important you understand income tax Was the target. Not all tax, income tax. If you're renting, you don't pay property tax. The person who owns your building pays property tax. Part of your rent helps them pay the property tax. When they raise the rent. Some of it goes to profit for sure, but I guarantee you a pretty good chunk of it goes to the property tax. Because if it's a larger building, they have to pay that property tax to the state. And in some cases the property tax is like in California, controlled to where it doesn't swell too high. And then the downside is you run into sky high pricing, you run into jacked up streets, homeless bums on the streets, and all these lacking public services.
[00:03:25] The point is, as a renter, you, if you rent, you do not pay property taxes. So you don't know what property taxes are. You pay sales tax. Anytime you consume sales tax largely goes to the state.
[00:03:41] There's a portion that ends up going back to the feds. But you don't see that if you file IRS and you do the long form filing and you itemize, you are declaring certain sales taxes that you paid.
[00:03:55] But in those cases you're declaring it primarily to get some sort of a deduction.
[00:04:02] It's like I put in a new H vac system, I put in a new water heater, there's new windows. I'm doing all these improvements to the home that are for energy efficiency. What the government does is they will use tax incentives to encourage certain behaviors. One of those behaviors is energy efficiency. They do this because they want to lessen your the strain on grids, electric grids, gas pipes. They want you to use less of these and upgrade to modern things. Especially if you're in a house like mine. My house was built in the 50s, so there's all sorts of upgrades that had to happen to make it more energy efficient, make it breathe more efficient, retain heat longer, etc. And so on.
[00:04:48] So when you understand that the tax, when we say tax, we're only referring to income tax. But there's a slew of other taxes and the government uses those taxes to drive behaviors by way of incentives. If you understand all that, you understand why Donald Trump is triggering you on income tax. Because income tax is saddled on everyone at the federal level. You might not have it at the state level. So when I lived in Nevada, there was no income tax. When I lived in Oregon, there's no sales tax.
[00:05:21] So then you skew it, right? You say I have to pay some form of tax no matter what, but if I Don't have to pay, but I always have to pay income tax to the feds. States a different deal. If you live in a state that doesn't charge income tax, you're saving quite a bit of money on that back end. The flip is you're still paying to the feds and you cannot deduct the portion that you would have paid to the state. So you end up actually with a higher federal tax bill to make up for the fact that you don't have a state income tax. I didn't want to go to two deep innards because everybody's situation is different. The reason I wanted to describe income taxes in that detail is to help clarify why Donald Trump is using it as low hanging fruit to justify why tariffs are a good thing.
[00:06:14] Let's talk about the history of tariffs and why he made the statement that he did in the past and I'm talking the distant past. So 1800sish tariffs were the one way for the government to collect money because at the time it made sense to do so because of the way trade worked with the ones we were trading with. It was a different era. We were not as global. We didn't have the same agreements, we didn't have the same needs and some things we were not self sufficient on.
[00:06:49] So it was a different scope, it was a different world.
[00:06:53] We supplanted the tariff income mostly with at the state level.
[00:07:00] They were helping generate in a sense printing money.
[00:07:04] And you might question a world where the states were controlling that it actually made sense for them to do it because they could do it according to the needs of the citizens in each one.
[00:07:14] So then the government, the federal government can kind of collect as a source of revenue from some of this printing activity and everything going on. When that printing went away from a state level, they lost that stream, they lost that revenue stream. And then the rise of electronic payments took away yet another stream based on physical currency.
[00:07:39] Loans also played a part. We, we still have a form of loans today. We talk about this idea of selling debt. What we're essentially doing is we're extending, somebody's giving us money and they're borrowing against debt that we have created debt instruments and things. And that happens even now at the time that was a primary source at current, we depend on it, but it's no longer the primary source of it. We also have to understand a lot of the assets that were in place at the time. There were more sources from which to collect taxes where it negated the need to worry about income taxes for Example, a lot more people owned a lot more land when there were such distributions of land. And they started adding the taxation structure on land plots. We also had slavery was the thing, and they would actually levy taxes on owned slaves. So it wasn't just free labor. Let me just clarify for those who were out there talking that it wasn't free labor. They had in some cases pay taxes on the slaves. That's why they have the slave registers that are out there that you can see yourself and why they need to be accounted for in census and why they need to be duly noted, because they had to in order to send the bills. It's basically like it is today, minus the slave reference. Whiskey was a big source of tax revenue at a time. This is one of the reasons why moonshine and bootlegging and speakeasy and everything else was frowned upon. Because they wanted to tax alcohol during the era where, after Prohibition, where it becomes legal and they still had these underbellies where they're basically milling their own alcohol. It's legal, but they're doing it to try to avoid having to pay taxes. And then that practice became illegal. Horses and carriages are taxed. Again, these are physical property things, but they're taxed. So there was all these things. If you fast forward them, we obviously moved away from carriages and buggies. Alcohol became commercialized. So it's not done at the individual level. It's still taxed, but you don't have as many sources of taxation.
[00:09:54] Houses are still taxed, but you have certain states that have locked down how much could be collected. And then the state takes a pretty big chunk of it. There's no more concept of taxing slaves. You still have tax on land, but not many people own that much land like was the case in, in the older days. So between all of these things, everything circled around a need to fund various wars. You have the War of 1812, Mexican War, Civil War, World War I. You have all these different wars that they need to fund the activities. That was the driver behind collecting all this money is to assist in funding all these different wars that were happening.
[00:10:36] So the bottom line is when I'm expediting some of this, but when the bottom line is once you start getting down the road of wars and we start getting out of wars and people are starting to come back and now they're starting to patriot here and set up homes and establish families and everything's changing and we're establishing trade agreements with different countries. It opened up another opportunity. We don't need as much Money for wartime, now we need money for recovery. We need money to support people. And most importantly, the United States is taking a front seat at some of these tables. So now we need to support our own stuff without damaging these relations with other countries. This is where somebody had the idea in the 1900s to say let's create a progressive income tax, which is what we currently have. I would argue it's regressive, but it's progressive by definition. It's the idea that the more money you make, the more they take.
[00:11:37] At some point, somebody had the brilliant idea of just simply introducing a bunch of deductions into the calculation to help offset the burden upon people. But the calculations are still based on certain predicates. They're still based on for the deductions. They're still based on things that the government's trying to steer you to certain agendas. The government's trying to push, pushed, drive those deductions. And it is true they skew towards businesses and the wealthy, not to the individuals. The entire federal tax system income tax system skews to get more money out of individual W2 workers. That's how it's built is the assumption that the W2 worker is the lowest level source of money. And because there's so many of them, remember what I said before we started losing how many sources of tax revenue we had. Now we just simply shifted it to the millions and millions of individual workers working W2 so we have more places to get the money from. We then created a dependency on having a certain amount of people in the workplace at any given time making certain levels of salary. The reason that everything starts to fall apart is and the IRS starts to bump tax rates is when there's a decrease in how many people are making enough money to justify taxing them. So the tariffs started to piss some people off because at the end of it, the tariffs at one time supported a large chunk of the money that we would need. Those days are long gone. We're no longer at a point where we can support the United States with just terrorists by themselves. Even in part because we've created so much debt and we've created so much dependency on the number of W2 workers out there. We can never get rid of the income tax. Here's what we could do though. We can lessen the burden of the income tax.
[00:13:32] We can slice it, even if you sliced it, let's say down, let's say somebody's is a 30% tax bracket, you could cut theirs in half and still be reasonably okay. And that would be a stimulus to the economy in of itself without having to give money. You just say we're going to use these tariffs and the revenue from the tariffs to offset the burden on individuals. Here's the counter arguments to the tariff approach at all.
[00:13:57] Somebody said, yes, but at some point if we keep imposing these tariffs, what happens? If we start manufacturing the United States, we're going to lose that revenue. What that person doesn't understand is if we start manufacturing in the United States and it becomes the predominant source of said products, and assuming those industries focus on products that are already in high demand, you know the garbage that you see on Amazon that comes from China, if the United States industries take over manufacturing of these, it means more revenue by way of higher prices. Which created the other rebuttal to this, which was tariffs usually impact the lower income thresholds because of the increases in price. You're absolutely correct. However, there's a flip of this.
[00:14:47] In most cases, not all. In most cases, if there's a increase in the products, the service that we need to produce and they're going to cost more to manufacture and we need to produce them at scale and we need to meet existing demand, it's supposed to correlate to an increase in hiring. An increase in hiring in most cases should be driven by demand.
[00:15:12] Demand should mandate an increase in salary to entice the right people to do it, because quality standards in the United States should be higher. This is all theoretical. Nobody can prove it. But the theory is that if we do take it back to the United States, we should have higher quality of what we build. We should be able to get more jobs out of those industries, bringing it back, certainly on the semiconductor side. And by way of having more jobs that pay better, it should offset some of the impact on the lower class. We always know there's a lower class in play. So you're not gonna be able to solve for everybody, but you certainly can solve for the grass majority. Is the counter argument to the benefits. Tariffs in of themselves benefit the United States. That's what they're for. That's what they're designed to do. The intent was to only implement them though, and create a trade war to discourage certain activities from our quote, enemies. What Donald Trump's doing is saying they're by definition are enemies because they're allowing illegal aliens to come in and they're allowing drugs to come in, which is essentially an invasion. And that's why we do it, to get them to stop. They can stop the tariffs by way of Them fixing these problems. We're not doing it just to be punitive. We're doing it because they're not fixing these issues.
[00:16:29] Those have retaliated. Mexico said we're going to retaliate. Apparently they cut a deal to delay it to give them time to fix it. So they bowed down to Trump Canada. Trudeau said, no, I'm just going to apply my own tariff in return. We don't know if he'll bow down. I want you to understand though, tariffs are a good thing for the United States overall. It is true that there's an impact on the lower class at some point.
[00:16:54] It is true that the price of goods and services may go up. Everything is within the control of those industries. They can control the mitigation. That's that they want from the impact by saying, we're going to bring this in, we're going to take it in, we're going to control it here, we're going to manage it here, we're going to build it here, we're going to manufacture it here. This is what we're going to do. Because we're not going to pay those sky highs to do exports and we're not going to pay to manufacture it in China and then ship it over here. And those companies out of China are going to stop sending garbage type knockoff products to Amazon. So Amazon is the one that most commonly is going to be impacted. Walmart to a lesser degree, but Amazon is the one that's most common going to be impacted temu, which I think is a scam. But let's say you do temu, they're going to be impacted because TEMU is all these knockoff products, right? We know what it is. Amazon's knockoff products. We know what it is.
[00:17:51] The only thing I would like to see as a net output of this is a return to malls. Because one of the things that is a discouraged point with this is, you know, when we were manufacturing our own stuff, we had the Toys R USS and the Sears and the Woolworths and all these other stores of Amer American Made that we no longer have. So unless if we return to prioritizing our own stuff and as consumers we support those businesses, the tariff is going to actually be damaging to us. But if we see a return to those and good salaries coming back and an at least the intent to lessen people's tax burden overall, not even talking just income tax and we see that he's able to fix the housing issue because that's still a problem. I think the tariffs are a good thing in the long run, and I wish people would give it some time to flesh out. You are going to feel the burn, at least in the short term, but you have to think about the long term downstream impacts of not doing something where we're just giving money away to other countries, which I don't think is the right answer.
[00:18:56] The last point I'll call out about tariffs in general.
[00:19:00] The one thing with Mexico, and again, allegedly they cut a deal with Donald Trump, but the one thing with Mexico, everybody knows or should know drugs. That's where the predominant drug flow is coming from. It's coming from Mexico. We determined that the primary source of the fentanyl crisis, the origin, was really Mexico. I'm disappointed that we spent so long to focus on something that was a real crisis that's killing people. And people are like, well, if they choose to take the drugs, in some cases, they didn't choose to take the drugs, folks. In some cases it was laced into something benign. In some cases, they went to some party and it was laced into drinks or laced into food, laced in the weed, laced into something else that was expected to be safe. And you cannot trust the origin of what that was. So I'm doing, I'm saying this part as kind of a public service announcement in addition to the tariffs to understand why I also feel it's a good thing because I don't want anybody out there to be subject to this drug crisis that's going on that might be going to some party. And you don't know, you don't know that somebody laced something with whatever, fentanyl, and you're just, you're there thinking it's a safe party and something happens to you. And so that's, this is why I'm so energized about it. If it has any chance to mitigate, it's not going to solve it for good. But mitigate something that truly is a crisis, I'm all for it and I'm willing to give it a fair chance. And I hope that you are.
[00:20:32] Hello.
