Pod Insights Optimist Economy Tax Reform Gone Wild About this episode From California to Washington to New York, states are trying to tax the very rich. The press keeps rehashing whether millionaires and billionaires will flee those states. Wrong question. The more important one is why we’re improvising tax policy state to state when it’s the federal government that should be dealing with health care, child care and affordability—all of which are national problems. Meanwhile, some Senate Democrats are proposing to take even more people out of the tax system entirely. None of these specific proposals make income taxes simpler or fairer, but they do suggest there’s an appetite for reform.
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Chapters:
00:01:18 Announcements
00:02:33 Retcon: Occupational Licenses
00:06:16 Terms & Conditions: Progressive
00:07:59 Big Pilcrow: Everyone Wants to Tax Millionaires
00:38:23 Executive Orders: Unreadable Menus and Tax Complainer Merch
00:41:42 Spiritual Sponsors: Dream Robin & the Nobel Laureate’s WNBA Contract
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Got economics questions, anxieties, or executive orders? Send them to [email protected] mailto:[email protected]
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:30 Robin Rauzi? More professional every week.
0:31 Speaker 03 More professional every week in this unpaid internship that Robin and I gave ourselves mid-career.
0:38 Robin Rauzi? Exactly.
0:46 Speaker 03 Hello and welcome to Optimistic Economy. I'm economist Catherine Ann Edwards.
0:49 Robin Rauzi? I'm editor Robin Rousey.
0:51 Speaker 03 On this show, we believe the US economy can be better, and we talk about how to get there, one problem and solution at a time. Today, big old problem: taxes.
1:07 Robin Rauzi? It's our second tax episode of the tax season.
1:13 Speaker 03 We're playing to the home crowd in LA because we all know Robin loves a tax story.
1:17 Robin Rauzi? That's true. That's true.
1:19 Speaker 03 So this, this episode, we want to talk about who should pay income taxes and will the spate of millionaire, billionaire income wealth taxes make them flee?
1:30 Robin Rauzi? Okay.
1:31 Speaker 03 Wherever the tax is coming from. I guess I should have, like, there's like an end to that sentence of like, flee, like, the world? They all go off in a rocket that they built up into space? And that was the point of it all? Like, no, do they flee a locality that taxes them is the real question.
1:46 Robin Rauzi? Right.
1:48 Speaker 03 But first, some announcements.
1:50 Robin Rauzi? We are nearing 800 ratings on Apple Podcasts and have 185 written reviews. So keep those coming. Two that I liked recently said, one said, "Whatever I was expecting out of an economics podcast, this isn't it."
2:05 Robin Rauzi? But it was a positive, positive review.
2:07 Speaker 03 That's good.
2:07 Robin Rauzi? And the other one was, this is for people who are into solutions and not whining. Okay, over to you.
2:13 Speaker 03 Okay, well, Optimist Economy is a registered 501(c)(3) nonprofit, and we can take your contributions from Substack and from Buy Me a Coffee and Patreon. But we are also newly registered on Benevity, which is a way that lets big employers make regular donations to nonprofits through your employer. Really important note here.
2:35 Robin Rauzi? It's like a paycheck deduction.
2:37 Speaker 03 Yeah, it's a paycheck deduction. I think your employer plus is up.
2:41 Robin Rauzi? I think it depends on the employer.
2:43 Speaker 03 The important thing is, is that we on this show believe the corporate income tax rate can be higher, and if you work for a corporation that's registered with Benevity, you can make them help us by supporting the show. Starbucks employees have access to Benevity, our favorite of the podcast.
3:00 Robin Rauzi? Exactly.
3:03 Robin Rauzi? All right. Next up is Red Con, where we reflect on stuff that we talked about previously. I was thinking about something that stemmed from our last two episodes that related to both moving and a question about occupational licensing from a person who worked at a state labor agency. One of the things that I found out that we didn't wind up talking about was that occupational licensing is also seen as a big barrier to moving. This might be most familiar to people because of the restrictions on nurses moving from state to state and working from one state to the other that became an issue during the first year of the pandemic. About 22% of the workforce, including teachers, nurses, contractors,
3:47 Robin Rauzi? are all licensed by the state, and it makes it hard for them to move to another state. There's a lot of progress on this. There are kind of strange workarounds. One is states having what they call a universal recognition, where they will recognize somebody else's license and good standing. And there are also compacts that are sort of multi-state licenses, where like nurses in one state would all be recognized by all the other states in that compact.
4:15 Robin Rauzi? Anyway, state licensing is suspected to reduce moving by 7%, something like that. And occupational licensing reform is kind of an ongoing project on the state level.
4:25 Speaker 03 I mean, economists have studied occupational licensing and they're good jobs. Like, they have good pay in part because the supply is being directly regulated by you cannot be, you know, a plumber unless you have a license to be a plumber. And that ensures that the quality is high and the supply can be somewhat regulated and so the pay is good. But sometimes it makes sense for different states to have licenses and sometimes it doesn't. Like, a law license.
4:54 Robin Rauzi? Yeah.
4:54 Speaker 03 Laws differ across states. Makes sense. You know, plumbing, I don't know, like nursing also, I mean, there are some health rules across states, but I mean, pretty much the same. So it's a real toss-up because it is a, can be really popular within a state. Not much comes down federally. It's a lot of it is like from the state up. And license is not the same as apprenticed. So if you're an apprentice, you have a nationally recognized credential, which is like a step up from license in terms of quality and it's a federal. The credential that you get on the federal level has to be recognized nationally. And then some apprenticeships or just state-level apprenticeships is very confusing. Okay, so yours was a real one about economics. Mine is not.
5:37 Robin Rauzi? I know. I love it when I can look serious compared to you.
5:41 Speaker 03 Well, a few episodes back, I made references to star people and astrology. And it was pointed out to me by a long-term listener that I sounded just a little bit smug when I referred to star people. And so as a response, I had to do my star chart so that I could explain to you all why the stars would say that I was too dismissive. And that is a, let me see if I get this right, sun, Gemini, moon, Cancer, rising Scorpio thing to say. And if you understand astrology, there was a mic drop buried in there. I think it was the Scorpio, the rising Scorpio.
6:21 Speaker 03 I will say that I was reading my star chart and some parts of it were like chillingly accurate. And other parts, not so much. But there were a couple of things where I'm like, you don't know me, internet-free website for star charts.
6:39 Speaker 03 Don't say that. So I apologize to the Star people.
6:45 Robin Rauzi? Terms and conditions.
6:46 Speaker 03 Terms and conditions. Did you look anything up this week?
6:49 Robin Rauzi? I mean, I looked up a lot of things, but not a term and condition because it was clear you were going to live in this chapter a bit.
6:57 Speaker 03 Well, I wanted to talk about progressive, which we apply to politics and to public policy and various things. There was a whole progressive era in the United States. It has its own feel and vibe. We have new progressives today. In tax terms, what we would think of as a graduated progressive income tax means that the rate increases with your income. That is what we mean by progressive in terms of the tax system.
7:23 Robin Rauzi? Are these related at all with the progressive era?
7:26 Speaker 03 Yeah, I mean, because it's the spirit of progressivism, of reform, of broad social movements meant to lift up people at the bottom, inclusion in society, all of that kind of went into the federal income tax being designed so that people who made the least paid the lowest rate and people who made the most paid the highest rate. So it was reflecting the progressive era. But progressive and regressive are technical terms to describe the tax system. So a regressive tax is one in which people who make the least pay the highest rate. And it's not a dollar amount, it's a rate. So if the poorest pay the highest rate, it's regressive. If the poorest pay the lowest rate, it's progressive. And the
8:07 Speaker 03 US is a combination of a progressive federal tax system for income taxes and everything else is like
8:16 Robin Rauzi? Pretty regressive.
8:17 Speaker 03 Maybe progressive to could be very regressive.
8:21 Robin Rauzi? Okay, we're going to take a quick break and we will be right back with the big pillcrow.
8:30 Speaker 03 Okay, so we have a very special big pill crow today.
8:34 Robin Rauzi? I'm so excited.
8:35 Speaker 03 Because Robin loves a tax story and we are literally swimming in them.
8:38 Robin Rauzi? Oh, my God.
8:39 Speaker 03 There are so many bonkers proposals.
8:42 Robin Rauzi? So, as listeners know, I live in California and we have been all over the news with this proposal that has not even yet qualified to be on the ballot that is called the California 2026 Billionaire Tax Act. And it would be a one-time 5% wealth tax that will tax roughly 200 people. And it's, you know, the news has been all over the who's moving, who's moving out of state to avoid paying this tax, you know, is Sam Altman moving out of state, is Steven Spielberg moving out of state? Even though it's supposed to be a one-time tax, I think everyone also realizes that
9:24 Robin Rauzi? temporary taxes do have a tendency to stick around. This particular tax, though, it was proposed by the SEIU, specifically the United Healthcare Workers Branch of the SEIU, which is the largest union in California. And so it's written so that of the revenue, it's all going to go to health coverage. Supposedly, this is because it's sort of revenge for losing Medicaid funding from the federal government. Only 10% of the funding, if this thing goes through, only 10% would go to like education or food assistance or other things that were impacted by the changes in the federal budget. It's been a mess. It's polling at about 52%.
10:09 Robin Rauzi? This particular union boss, Dave Regan, has put a lot of things on the ballot in California over the years. He tends to use a lot of these things to leverage, like when he can't get the legislature to do something, he threatens to put it on the ballot or does put it on the ballot. But this time, of course, he's tapped into this just general sentiment that we've got a real wealth inequality problem and it may make it on the ballot this time and who knows, could pass. And it would be a constitutional amendment. I mean, that's how things work here.
10:39 Speaker 03 Oh, man, that is...
10:42 Robin Rauzi? It's a little...
10:44 Speaker 03 High stakes.
10:45 Robin Rauzi? Yeah, it's kind of a one-two punch. It's like a change to the constitution. We put everything in the constitution here.
10:51 Speaker 03 Well, so we should explain to optimists that California, I mean, the key part is that it's a wealth tax. So it's, and it's really about billionaires, not millionaires. It's not to be confused with two other progressive tax movements on the state level. One in Massachusetts, they added a quote unquote millionaires surtax, where it's a 4% tax on people who earned over a million dollars. They added that a couple of years ago. Washington State does not have an income tax.
11:18 Robin Rauzi? Yeah.
11:18 Speaker 03 They just passed an income tax, and the income tax is solely on people who make over a million dollars.
11:24 Robin Rauzi? And it's 9.9%.
11:27 Speaker 03 It's a lot. 10% for people making over a million. And then the, I believe, the tax that Mom Donnie wants, which he needs the New York State Legislature to pass, is based on basically both of these, as some kind of millionaire surtax, where if you earn more than a million, you will pay some tax rate to the state government. So the Massachusetts, Washington, New York, they're adding on to their income tax system. In Washington's case, creating them, California's is a one-time billionaire tax. So like, what is happening?
11:57 Robin Rauzi? I know. And then, but then what's happening on the federal level, to me, like, on the surface, anyway, looks a lot like, it's like the Democratic proposals are trying to out-tax cut the party of tax cuts. So there were two proposals. I don't think either have been introduced in Congress yet. They're just sort of floated out there, but both released in March. One was from Cory Booker, which he calls the Keep Your Pay Act. And this would more than double the standard deduction for all taxpayers. So for households filing jointly, the first $75,000 of income would be totally tax-free.
12:36 Speaker 03 That's wild.
12:37 Robin Rauzi? Yeah. He's claiming that the median American family would see their taxes cut by roughly 85%. Now, he says this is going to be paid for by closing loopholes used by the ultra wealthy, but there's been no sort of specifics on what the revenue, the exact revenue sources would be on that.
12:56 Speaker 03 Well, then there's the Working Americans Tax Cut Act by Chris Van Hollen, Senator from Maryland. And that one is...
13:05 Speaker 03 I don't know how to say this without sounding so mean, a disaster. It basically takes a very confusing tax system and then creates an alternative one that ends up operating as a cap so that the amount of money you pay in taxes is capped. So I think, again, similar question.
13:22 Robin Rauzi? What on earth?
13:22 Speaker 03 What on earth is going on?
13:24 Robin Rauzi? I had to read that like four times to try to understand what was going on with this. And it's like you calculate your taxes twice and then you pay the lesser of the two. This reminds me of when gay marriage was legal in California, but not at the national level. And we all had to calculate, gay couples had to calculate their taxes twice. To calculate it as if you were married on the federal level to file your California state taxes. And then you had to calculate what the federal government was actually going to make you pay because you weren't really married.
13:55 Robin Rauzi? I paid a lot for tax preparation in those years.
13:58 Speaker 03 Wins all around, y'all. There's two issues here, and I'm happy to talk about either because I think they're both interesting. One of them is that states want more money to do things the federal government has shown a complete lack of initiative, like childcare, education, health, these really important issues foundational to the affordability of families that the federal government's not moving on. So they want more money. The tax base of a state is just orders of magnitude lower than the tax base of the federal government. So they have to go after more money. The article I read about Chris Van Hollen's Working Americans Tax, WATCA, Working Americans Tax Cut Act, that one, you know, he basically said no tax on tips was a really effective campaign strategy. And so they're trying to come up with something similar, which
14:42 Speaker 03 was like, not even that this is a good proposal, but we think it might sell well.
14:47 Robin Rauzi? Yeah, no, I mean, both of these seem like that to me, that they're not actual, seriously. I mean, the Tax Foundation analysis of the Cory Booker Keep Your Pay Act says that it would lose $6.7 trillion over the next ten years.
15:03 Speaker 03 Well, they're a conservative minded.
15:05 Robin Rauzi? Sure they are. But it's like, still.
15:07 Speaker 03 $6.7 trillion over 10 years, 50% larger than the tax plan that was just passed. So like, the federal government just gives up on having money and we're not a country anymore because of debt. Yeah, I mean, the federal level, it seems like we're looking for, we're testing out messaging that could address affordability for like the working class. The states are legitimately looking for money, not clear that they're going to be able to do it as well as they want.
15:31 Robin Rauzi? Well, I think the states are also, they're seeking, I don't know, they're seeking to plug holes, right? It'd be nice that if they were, if they were doing these things just to be able to add, but they're trying to plug holes from what the federal budget did to states in this last year.
15:47 Speaker 03 Yes. And that they got a lot of money in the pandemic.
15:50 Robin Rauzi? Yeah.
15:50 Speaker 03 That they liked spending on things. Like it was, it was really nice. It was kind of nice that the federal government gave them a lot of money to have childcare and they got to spend money to help families in their states and then it all went away. And I, you're definitely seeing a hangover of people, you know, we like having nice things and now they're gone.
16:07 Robin Rauzi? Mm hmm.
16:08 Speaker 03 I think if you take both the federal tax proposals and the state tax, you know, in one case, signed law and then the California proposal, I mean, it is a real populist shift from where we were 25 years ago.
16:22 Robin Rauzi? Mm hmm. And I think it's a populist shift from where we were 10 years ago. I mean, and I think they're tapping into that, that same sentiment that was in that essay that we argued about, we didn't argue about, but that we talked about early in the season about like, what's the true level of affordability for people and that that's the sort of the standard. So even the WATCA, the Working American Tax Cut Act, you know, it's basically talking about using $46,000 for single filers is just like, well, that's the cost of living. And so people shouldn't be taxed on the first $46,000 because that's just how much it costs to live. They're wrapping a lot of these things in the language of this discourse around affordability and how much
17:07 Robin Rauzi? things cost now.
17:09 Speaker 03 I'm taking deep breaths.
17:13 Speaker 03 I mean, like you need your federal government to have money to fix affordability. Like your life isn't unaffordable because of taxes or like you won't have a fix to affordability issues if you just focus on taxes. I think this is the part that really drives me insane. It's like the, the US tax system is incredibly progressive. And yet as we've gotten richer as a country, we are collecting less in relative earnings.
17:41 Robin Rauzi? What do you, what do you mean, less in relative earnings?
17:43 Speaker 03 All right. So if I were to think about a progressive tax system in 1950 and say it collects 10% of GDP.
17:54 Speaker 03 In terms of the amount of federal tax receipts we have.
17:57 Robin Rauzi? Sure.
17:57 Speaker 03 What should that 10% be in 70 years? If we have a federal tax system that is progressive and it collects higher rates from people who make more money, the more money we make, the more the federal government should be taking in. And in 2000, before we entered our tax cut era, we collected just under 20% of GDP in federal tax receipts.
18:19 Robin Rauzi? And that's all taxes.
18:21 Speaker 03 That's all taxes, not just income taxes. And it's now at 17.
18:25 Robin Rauzi? Yeah.
18:25 Speaker 03 We talked about this in the corporate income tax episode. If you are collecting two points less of GDP, that's more than $600 billion a year you're not collecting. That's money that we need to do things like have a federal childcare system. Or if we want socialized healthcare, y'all, we can't tax cut our way there. So I get really frustrated with these proposals that work through the tax system when that tax system is not going to make healthcare affordable.
18:52 Robin Rauzi? Yeah, it's this idea that the only way that the federal government can affect affordability, it's like the only lever it has is taxes. And that's not the only lever it has. It has policies are perfectly good lever that it could use, but you actually need money to implement those policies.
19:11 Speaker 03 Well, this is what I mean too about kind of this like poisonous populism of like, well, we should restore tax rates for the top 10% of Americans, but that's only allowed if we cut taxes for people in the middle.
19:22 Robin Rauzi? Mm hmm.
19:23 Speaker 03 You could just restore them at the top and like, we move full steam ahead. Like, let's just bring the estate tax back up. We don't necessarily have to touch the bottom to have, you know, some thrown around money, some like childcare money. But it's like every, everything that comes from the top, the bottom needs to have a little bit too.
19:39 Robin Rauzi? Yeah, yeah.
19:40 Speaker 03 I've said before, like you, we can't get to a solution if we don't diagnose the problem. And these tax proposals in some ways really highlight that for me because the problem isn't that someone making $40,000 a year is paying too much in taxes. That person can't afford a whole host of necessary services and goods. The tax code isn't the problem. So the, the solution coming from the tax code or fixing the tax code doesn't seem to me to be applicable. But I do understand that people hate taxes. Like, I do get it. But we do live in a society, so like, I don't know. Take your pick.
20:18 Robin Rauzi? I know. I mean, I'm sure there are people who agree with the sentiment that, well, if you just make it so that the government doesn't actually provide any services, then people get even more resentful about paying taxes. And if you are anti-tax, that becomes a self-perpetuating cycle. And it's hard to break people of, I think.
20:39 Speaker 03 I mean, aside from any of these, like, forget affordability, like, forget elections, forget things that poll well. If you were to ask any reasonable tax expert, what is the biggest problem for the US tax system? It would be that it is way too complicated and people don't feel like it's fair.
20:56 Robin Rauzi? Yeah.
20:57 Speaker 03 There's not a ton of evidence that there's a massive tax burden that is, like, drowning the middle class. You know, I was looking this up for, here's a fun fact. And what do we call these in my family? Like, a cocktail fact of like, something to bring up at a cocktail party just to get conversation going, where there's a real lull. If you were to look at every single item in the Consumer Price Index, all of them.
21:22 Robin Rauzi? Your cocktail parties are different than mine. Okay.
21:26 Speaker 03 All right. So if you were at a boring-ass party with me, and we were talking about the Consumer Price Index, a little fun fact that I would point out to you is that of every line item in the Consumer Price Index, the fastest-growing price since 2000 is tax preparation.
21:47 Robin Rauzi? I mean- Because your taxes have just gotten so hard to do.
21:50 Speaker 03 Your taxes have gotten so incredibly complicated that everyone has to pay. And at the same time, you have these massive for-profit companies that are moving into the filing space. And so, yeah, tax preparation is the fastest-growing price in our economy. And then you look at Chris Van Hollen's proposal of like, well, we're gonna come up with a whole new tax system that has a minimum, and you pay the top of two. And I'm like, oh, my God.
22:11 Robin Rauzi? I know. And I can tell you, I can tell you, again, it costs more when you have to calculate your taxes twice.
22:18 Speaker 03 Yeah, it costs a lot more when you have to calculate them twice, and you have some alternative minimum, but-
22:23 Robin Rauzi? Isn't there also a downside to- Basically pushing a bunch of people out of the tax system. Like if all of a sudden, a third of of American workers don't even have to file a tax return, that's not great either.
22:39 Speaker 03 No, not in my mind. I think some people would say that's awesome. You know, let's not make workers pay. You know, when there's a recession and you get a stimulus check, that goes through the tax system. I mean, the government, the federal government knowing.
22:55 Robin Rauzi? It's the treasury that knows where you are.
22:58 Speaker 03 Yeah, it's the IRS that knows like what your bank account is and where you live. Nobody else does. I mean, this was one of the big challenges in the pandemic was that we wanted to get money to people quickly. But it's really hard to get money to people who don't have an income tax return. And which included a lot of people on social security and a lot of retirees, a lot of people who were disabled, people who would really benefit in a health crisis from having additional funds. It was hard to get them money because they're not plugged into the tax system. So I think I could understand why a listener would say like, maybe this is like doublespeak on my behalf because I don't like benefits going through the tax system. And I've said that before. I think our tax system is too complex and it shouldn't be a reward mechanism. But at the same time, like I want everyone to be connected to the tax system so that we can send out rewards.
23:43 Speaker 03 I can see why that would be very contradictory.
23:47 Robin Rauzi? Fair.
23:48 Speaker 03 The benefit of having people connected to the tax system isn't to accomplish some kind of social goal. The goal is just to be connected. So one way an economist explained this to me was just how much easier it would be to help after a natural disaster. If you had some type of delivery mechanism where like, oh, you filed taxes like in the city of Houston, and it just had a massive hurricane, we can just push out $500 to like everybody who filed, whose address was within like the primary hit zone of the hurricane. And we don't have to do anything else. But it's it's a way to build fairness since so much emergency relief goes through the tax system. You want everybody to be in it. But I could see why someone listening would be like, yeah, she's seeing a difference where there's not one.
24:32 Speaker 03 But in my mind, it's like a very clear difference of like, what are you trying to accomplish? What is the timeline? What is the delivery mechanism? What is the advantage?
24:40 Robin Rauzi? Yeah, yeah. I forgot to say that amid all the income tax proposals.
24:47 Robin Rauzi? The president did suggest again at the State of the Union that tariffs are going to replace the income tax, and I think we should, we should just point out that that's not really likely to be the case.
24:57 Speaker 03 Yeah. I see, I would say almost expressing it as a likelihood gives it more credence. Like, the idea that the likelihood would be over zero and positive, I think is a lie. It is dead wrong. Like, there's nothing to support it. We don't consume enough goods from abroad to raise that type of money anyway.
25:15 Robin Rauzi? Mm-hmm.
25:16 Speaker 03 Like, we'd have to shift our consumption to have more money.
25:19 Robin Rauzi? We'd have to import more things?
25:22 Speaker 03 Yeah, we'd have to import more things in order to have tariffs raise enough money to replace the income tax, which is like, kind of not his whole thing to begin with.
25:30 Robin Rauzi? No.
25:31 Speaker 03 So I, I read this really fascinating article when he became president about tariffs that were like, at no point is any stated benefit of tariff compatible with each other.
25:41 Robin Rauzi? Yeah.
25:42 Speaker 03 Like, if the goal is to raise revenue, that means you, you have to consume from abroad. If the goal is domestic protection of industries, you shouldn't consume from abroad. So the idea that we'd have a manufacturing renaissance and incredible tax receipts to replace the income tax, like, no, they can't happen at the same time.
25:58 Robin Rauzi? Yeah.
25:59 Speaker 03 And that we wouldn't pay anymore as consumers. Like, all of it kind of falls apart on its own. None of them cohere together, and yet we find ourselves in the worst of both worlds, where we're giving the tariff money back and the manufacturing jobs have declined anyway. So, bully for you.
26:13 Robin Rauzi? So, do you find anything to like in any of these proposals?
26:19 Speaker 03 Bad. I mean, not, not really, not really.
26:28 Robin Rauzi? I mean, I had mixed feelings about Washington's being, I mean, you live in a no-income-tax state. I had mixed feelings about it when I lived in Washington because of what they tax to get any revenue at all, because they have no income tax, right? Alcohol taxes are high, business taxes are high, real estate taxes are high.
26:47 Speaker 03 Sales tax is high.
26:48 Robin Rauzi? Sales tax is high.
26:50 Speaker 03 Yeah. I mean, in Washington, I can kind of, I see it as, you know, moving towards an income tax system would be helpful for the state, given that they have one of the most regressive tax structures in the US. It's like Florida and Washington. What's that joke that, it's a...
27:06 Robin Rauzi? There's a tax joke?
27:08 Speaker 03 It's, it is, well, okay, so that just kind of primes people to think it's not that funny.
27:12 Robin Rauzi? Sorry.
27:13 Speaker 03 But it's, it's something about the... Blue state spending with red state taxes? Not sustainable. So, Washington state?
27:20 Robin Rauzi? Yeah.
27:20 Speaker 03 Fix yourself. But, I mean, I think moving towards more progressive tax structures for the state of Washington is great.
27:27 Robin Rauzi? But that's also the reason that the people are upset about. I mean, in addition to the, does it conflict with what's in the Washington state constitution and all those things? It's like, great, yeah, let's tax millionaires and no one else. But everybody also says, yeah, sooner or later, the income tax will come down to everybody else.
27:45 Speaker 03 Yeah, 100%. It's gonna start with millionaires, but it won't end there. They'll have some type of broad system, because that's the best way to generate revenue, is to have a broad, simple system. Okay. So, you asked me if there was anything I liked about these proposals, and I think, I think there's things I distinctly dislike about both of them, states and federal. On the state side, what is happening? The richest states in our country are going after even more tax revenue to provide services only to the people in their state, which is richer than other states. And we are further entrenching the privilege of having to be born in a state that actually
28:26 Speaker 03 cares about its low-income population, which makes it more likely to care about its families and make those investments. I think a lot of states are feeling the just total lack of leadership on the federal level, and they're taking an initiative for their people, which is great. You know, we should help people afford childcare and have health insurance and good public education and all those things. But I, it's, it's just, it's such a dangerous game to make it state-dependent, because, you know, there are states that will always and just permanently be left behind. Because even if you were to have a millionaire's tax in Mississippi, you would not get that much revenue. Not enough to pay for the things that California and Washington and Massachusetts will buy. And I don't like leaving parts of the country behind.
29:11 Speaker 03 To me, every state tax like this is fundamentally a reflection of the failure of leadership to act on the federal level. Then on the federal level, I don't think there's much controversy that the US tax system is too complicated and we need more money. So that's a pretty, I think to me is a pretty clear fix of like, make it simple, make it fair, everyone's gonna have to pay a little bit more. And it's, instead, like, further warping the tax system just makes everybody feel like a loser.
29:40 Robin Rauzi? Yeah. The other thing is that, I mean, I have feelings about the California billionaire tax. You know, no love lost between me and billionaires, I don't know any of these people, but like, a tax that targets 200 people, those 200 people know exactly who they are, you know, are we just shooting ourselves in the foot as a state, trying to sort of, I don't know, get some kind of billionaire revenge, anti-billionaire revenge, because of something that happened in Washington DC? I can't tell you how many people have asked me to sign this petition to put this on the ballot. I'm gonna also tell you, I know people who work for this union. But, this is bonkers.
30:25 Robin Rauzi? Like, we've got a lot of problems with the variability in California's tax from year to year. This does not fix it. It's a disaster. I mean, at least, you know, Washington isn't trying to pretend that this is a temporary one-year tax.
30:42 Speaker 03 You know, it's funny too, because most of the complaints, complaints, God, I sound like such a hick sometimes. You know, being back in Texas, it slips out, like, you know, most of complaints here, coming from Washington. Anyway, complaints. What you hear brought up about these taxes is that people will flee.
31:01 Robin Rauzi? The millionaire taxes, or billionaire taxes.
31:04 Speaker 03 Yeah, like, the billionaire tax or the millionaire tax is like, people will flee and they'll go to other low-tax states and then you'll have the same problem all over again, that the tax won't raise that much money. And, to me, I'm like, that's kind of a specific complaint, of like, the federal government is failing to enact policy that we desperately need and have needed for 25 years, and state governments are doing all they can with what they can, which is perpetuating inequality between states. But you know what the big problem is? Spielberg's gonna move to the East Coast. That is not the problem.
31:36 Speaker 03 It just seems that people keep bringing it up of like, they're gonna flee, they're gonna flee. I'm like, y'all, they kind of go wherever they want, whenever they want, anyway.
31:44 Robin Rauzi? Especially billionaires, yeah. There was this research paper where they looked at where people moved during the first years of the pandemic, and they looked at high-income earners to see where they moved, and if they moved to low-income states, and very few of them do. And then the argument against that research was, he was looking specifically at, I can't, God, I wish I could remember if it was like, top 10% of earners or something. But there's billionaires, they're just, they're just a group of their own, like that, like, you can't extrapolate from what people who pull down a half million dollars a year do and extrapolate to billionaires.
32:19 Speaker 03 It's funny, the largest flow of people in the US in internal migration is California to Texas, and in most years, the second-largest flow is Texas to California.
32:28 Robin Rauzi? Oh, yeah, exactly.
32:30 Speaker 03 Yeah, I can think that Florida was in there sometime, it depends, like, year to year, but like, it's on net, it's a loss, but of course, California has more people. So it's a, like, it's not adjusted per population, just the gross flows of people, it's just back and forth between our two states.
32:46 Robin Rauzi? There was a really great piece a few years ago that I read, that was about how Texas and California are just essentially two sides of the same coin, and that one sort of is most in alignment with kind of what's happening on the national scene, and then the other is, and they just kind of, I don't know, maybe the two sides, they're sort of yin and yang, but they're like...
33:05 Speaker 03 We're not aliens, we're just Texans.
33:07 Robin Rauzi? They're not enemies.
33:08 Speaker 03 It's like, Californians and Texans, we're not like, something we come from like, different planets, or that they're that different. I actually see, the first time I went to LA, I thought, this place is a lot like Austin. That was one of the first things I thought, I was like, wow, this city is like a big, has an Austin feel.
33:24 Robin Rauzi? Big Austin, yeah.
33:26 Speaker 03 Big, big Austin.
33:28 Robin Rauzi? Which is why, despite all the talk about the Texedus, all the Californians moving there, they tended to move to Austin, right? They didn't move to cities, you know, they didn't move to rural west Texas.
33:40 Speaker 03 Yeah, cities, which have like, separate tax structures that are also high tax. You know what's funny is, I remember the Texas Monthly was covering what happened to the Texedus, there's some amazing articles, but I think my favorite one was like, a lot of them moved right before a devastating summer heat wave, and then they were not there the next year.
33:57 Robin Rauzi? Yeah.
33:58 Speaker 03 It's true. It's real hot.
34:01 Robin Rauzi? Yeah. They didn't want cold, but they didn't want that. The humidity is like
34:06 Speaker 03 Oh, yeah.
34:07 Robin Rauzi? No.
34:08 Speaker 03 No, but this goes back to taxes of like, what does it mean to flee taxes? Like, what does that genuinely accomplish? And are we evaluating these things correctly? Like, is it really the case that like Texas has unlocked some mystery to get people to come? And it's just having low taxes? Or, or like race for impact? Like, they're not that different. The solutions for taxes and spending and affordability, we need to have the power of the federal government to do. Because these are national problems. They don't just affect one part of the country.
34:39 Speaker 03 It's not just Massachusetts and Washington and California that have high housing bills and high childcare bills and high medical bills. Like, it's not as if they're isolated to those places that are tapping into resources. They're federal issues and the fundamental differences between states. And the fleeing just seems like a straw man.
34:59 Robin Rauzi? Hey.
35:01 Speaker 03 Like, it's pulling, hey, oh, my God. The wheels are turning in real time, right? Because it's bringing up cultural differences between red states and blue states, which we don't talk about on the show, but cultural differences between different parts of the country as like what's really at stake for a billionaire's tax? When like, in fact, you should be so mad that California has to deal with this at all.
35:23 Robin Rauzi? Nice, yes, yes.
35:25 Speaker 03 Yes, really? Really? Are you just, you're just saying that?
35:28 Robin Rauzi? No, I think, well, sorry, that's my editor brain going, yes, that's how you would write that piece.
35:35 Robin Rauzi? Take a note. Take a note.
35:37 Speaker 03 Okay.
35:38 Robin Rauzi? Straw, oh, my God. She's so happy now.
35:42 Speaker 03 I mean, we were talking about taxes before. I was already happy. All right, so the straw man is that we use the cultural differences between states that have historical GOP versus democratic leadership to criticize revenue raising bills like the millionaires billionaires taxes. And it's a distraction because that discussion would lead you to, here's why Texas is better and more people move to Texas or Florida or
36:10 Robin Rauzi? Oh, my God, if I read one more story about that.
36:12 Speaker 03 They've been posting them since I was in college. I'm like, aren't you bored?
36:15 Robin Rauzi? I know.
36:16 Speaker 03 With this?
36:16 Robin Rauzi? Yes, yes.
36:18 Speaker 03 Okay.
36:18 Robin Rauzi? I'm bored with it.
36:19 Speaker 03 So, because it's, and it's a straw man because it's take, I'm sure that my readers don't need me to explain what a straw man is, but I do feel proud of myself every time I get there. It's a straw man because it leads you to like, what's a better place to live in? And like, what does it say that people leave California? When it's distracting you from the real problem, which is federal failure?
36:38 Robin Rauzi? Yeah.
36:39 Speaker 03 Okay. So optimism?
36:43 Robin Rauzi? Yeah, I mean, my optimistic takeaway about this is that the notions about the gross problems of income inequality and wealth inequality has sunk in. Like, it took 20 years, I would say, at least from the, you know, Occupy Wall Street moment to now, but that it's no longer debatable that income inequality is a problem broadly politically understood. And that's why we're seeing these taxes.
37:11 Speaker 03 Yeah.
37:12 Robin Rauzi? That's my optimism. What's yours?
37:14 Speaker 03 I think that that's great that we're just, it's not the same world it was in 2000, when we were basically voting for a massive tax cut with a surplus to now, it feels like every issue on the ballot is how to raise taxes on rich people.
37:32 Robin Rauzi? And I also think it also suggests that people feel like there's real appetite for tax reform. And tax reform that isn't necessarily about carving out more exemptions for specific people and specific industries and specific businesses. I think that we're beginning to see through that,
37:52 Robin Rauzi? that making the tax code more complex is always about giving lower taxes to someone. And it makes the tax code less fair. And it doesn't mean we need a flat tax, but it just means that the complexity is the enemy of revenue.
38:10 Speaker 03 I think complexity is the enemy of fairness as well.
38:13 Robin Rauzi? Yeah.
38:14 Speaker 03 I just want like, one person poised to be a federal leader, say, this has gotten too complicated and everybody feels like a loser. We're simplifying the tax code and we're going to start by getting rid of every deduction, every credit, every adjustment, and start from there. Start from a simple tax code as opposed to starting from the one that we have.
38:35 Robin Rauzi? Yeah.
38:37 Speaker 03 And people, there is a salience for it. I don't think there was 25 years ago or even 15 years ago. But there's certainly a salience for it now because I think people are tired of not having solutions to these problems.
38:49 Robin Rauzi? All right, let's take a break.
38:54 Speaker 03 All right, we're back with executive orders where we fix problems, large and small, meaningful and petty in our society. Robin, what is your executive order?
39:03 Robin Rauzi? In the Republic of Rousey, anyone who designs restaurant menus or theater programs must be forced to first read that program as they've designed it in the lighting of the theater or restaurant that will have to be read while wearing tinted sunglasses. I went to, this is gonna sound pretentious, but I went to the opera last week, which was great, by the way, but the type was like eight-point type, in like this thin type, in reverse, on top of an image, and there's 1950s lighting in the door that Chandler provided. I was like, I have progressive glasses, I cannot read a word of this.
39:49 Speaker 03 I can also say that the Houston Symphony Orchestra sometimes does child shows, and that was like, I've never seen like the theater program that looked, or a symphony program that looked like this. Like it was bright white, the font was huge, it had lots of pictures.
40:02 Robin Rauzi? For all of us.
40:03 Speaker 03 Really? It's like, every song had the exact amount of time that the song was, in like massive font, so you knew, so if you're like kid got upset, you could leave and then come back. And I was like, this is so helpful.
40:14 Robin Rauzi? So genius.
40:17 Speaker 03 Now, it also, it also had a scavenger hunt in there, which I assume you might not need.
40:22 Robin Rauzi? I just want to be able to read what the ingredients are in the food I might be ordering, because you know, it might have cinnamon.
40:30 Speaker 03 Longtime outlaw in the Rousey Republic. All right, or the Republic of Rousey, apologies. Okay, my executive order in the Edwards Republic is that if you complain about how much you pay in taxes, the federal government's gonna send you a free shirt, and the shirt's gonna say, well, we'll do an A/B test. So some of the shirts will say, "I'm better than you" on the front, and then on the back it says, "Because I pay taxes and no one else does." Or it'll say, on the front, "We live in a society," and then on the back it would say, "But you wouldn't know it the way I complain about taxes." Just some kind of like, super sarcastic t-shirt for the, a way for the federal government to express, like, oh my god.
41:12 Speaker 03 300 million people in this country, you have the worst and hardest through our publicly voted upon tax system. You, sir, here is a T-shirt for your troubles.
41:24 Robin Rauzi? I mean, I think you need it on a hat, but okay.
41:27 Speaker 03 Yeah, or, or yeah, further A B testing could come on a hat, it could come on a sash, it could come on a, like a crown, like an actual crown. I just hit the microphone, I'm so excited. I think there's lots of ways to convey.
41:40 Robin Rauzi? You've already designed a "I'm better than poor people" sash, right?
41:43 Speaker 03 I do have an "I'm better than poor people" sash. This is just, I'm better than poor people, I pay taxes. I mean, it's just like the beauty queen of people. And then, and then in the end, they all go, we all get the like, we live in a society. The, the brand is labeled, "We live in a society," and it's just, that's my, that's my merch brand that I move into when I start my own home goods line.
42:07 Robin Rauzi? I sponsor civilization.
42:09 Speaker 03 We live in a society.
42:10 Robin Rauzi? Okay.
42:10 Speaker 03 Okay. This show does not have any paid sponsors, but we do have spiritual sponsors that get us through our, our day, our recording, our lives, our week, the afternoon, the outline for the podcast episode. Robin, who's your spiritual sponsor?
42:29 Robin Rauzi? So my spiritual sponsor this last week or so has been people who text me to tell me the dreams that they've had that I'm in. So I was, I was apparently punching out a bully at somebody's wedding in my, in a high school friend's dream recently. And I heard from a guy I have not been in contact with for 10 years. I used to freelance for him, and he had a dream, "I was swimming with alligators." I don't know what kind of life I'm living out in your dreams, but I actually love getting these messages. They're just, they're hilarious.
43:03 Speaker 03 Oh, my God, dream Robin.
43:05 Robin Rauzi? Yeah, dream Robin.
43:05 Speaker 03 This is amazing.
43:06 Robin Rauzi? Dream Robin is tough.
43:08 Speaker 03 I, that's what I expect, dream Robin, from someone who is a moon, Aries, rising Gemini.
43:17 Speaker 03 We're going deep into dream meetings. My spiritual sponsor this week is the WNBA's new contract.
43:22 Robin Rauzi? Oh, anything specific about it? You had some really great maternity clause?
43:27 Speaker 03 Yes, and it had, I mean, they're about to get a massive pay raise, incredible revenue sharing, the league minimum salary is going to go way up. Listeners may not know that the WNBA's new contract had a very important consultant, and that was Nobel laureate Claudia Goldin, who's research is on gender wage inequality and just how much the lifetime earnings of women have been suppressed because of discrimination, how women's role in the economy has evolved, how they are or are not paid for it. She had a research team come look at like lifetime earnings tables of WNBA players, like how long they were in the league, what they earned, and she, she apparently was a real stoic.
44:10 Speaker 03 They described like whenever there was like panic in the WNBA negotiations, she'd be like, it's math, you need more. It's not, it's not really hard, they're going to come at you with some stuff, but like this is what the math says, and just like math in here. So my spiritual sponsor is a WNBA contract that is like lights out more pay for the players. And yeah, I just, I mean, you love to see it.
44:38 Robin Rauzi? I love that Claudia Goldin did that. That's amazing. That's, I have to go find that story.
44:43 Speaker 03 This is an economic show, not a women's sports show. It will be soon.
44:46 Robin Rauzi? Sooner or later, they'll all come together.
44:54 Robin Rauzi? Okay, Sophie Lalonde edits the Optimist Economy podcast, and yes, it was even longer than this when she started working. Our video excerpts are by Andy Robinson, and you can find and share those on YouTube, TikTok, Instagram, or LinkedIn. And if you're on Substack, we have transcripts of the show on Substack, and even free subscribers to our Substack can join the chat room, unless you're a billionaire, in which case there's a one-time fee of 0.1% of your wealth to fund our podcast.
45:20 Speaker 03 A fun chat in the Substack subscriber chat recently was whether or not I'm actually a capitalist, or if I'm in fact a social democrat, which they were, I was weighing in on too. And the Optimist Economy is supported by listeners like you. News from us is that if you have a donor-advised fund or an IRA distribution you don't know what to do with, we would love to help you with that problem. We absolutely and truly appreciate all of the contributions on any platform, but of course, we keep the largest share when you give at optimist economy dot com.
45:53 Speaker 03 And now we need to snap out Andy and Sophie.
45:57 Speaker 03 Ta-da!
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