Congressional candidate and Bay Area County Supervisor, David Canepa, discusses taxing the top 5% and Financial specialist Demrie Henry makes a both pragmatic and philosophical case for tax avoidance.

Episode Transcript

Intro:

Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm.

Disclaimer:

The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation.

Chip Franklin:

Welcome to Practical Tax with tax attorney Steve Moskowitz. Steve, how are you?

Steve Moskowitz:

Well, I'm looking forward to talking to our next guest.

Chip Franklin:

Our next guest is a veteran of the San Mateo County Board of Supervisors, and he is also running for Congress. David Canepa. David say hi to Steve.

David Canepa:

Hey Steve, how are you?

Steve Moskowitz:

Great, Dave, how are you?

David Canepa:

Great.

Chip Franklin:

So let's just, let's jump right into this. David, during COVID you wrote a letter to governor Newsom asking for a pandemic tech tax as groups like Facebook and Amazon were recording record profits. How did that work out?

David Canepa:

Look, I think, you know, that the governor had mentioned in 2018, clearly that there was interest on looking at a dividend for data and I think the impetus of that was obviously a lot of these tech companies, this before the pandemic, that they were receiving record profits and one of the things that I've seen and I've been a small business owner before I was in politics and I thought it was kind of interesting when I was looking for a job, I created my own job with my own business so that is something that I understand. I think the one thing that I've seen and about fourth generation San Mateo County resident is really, we live in the most prosperous times, but we also have a huge need and a huge need meaning there are people that really don't have that tech skill set and so I'll give you an example.

The average home in San Mateo County is $2.8 million okay? The home where my... I grew up in now is $1.9 million. My sister lives there, she's a teacher. My parents bought the home for $90,000 and my dad was a chauffer, for my mom was a bank teller but they were able to afford this American dream. That's out of touch for a lot of folks and so what the pandemic tax was to do, and hopefully the governor will consider it, there's been no movement on it, but is to really make sure that these companies that have record tax, record profits that they're taxed appropriately. As you know, in 20, I think it was 2017, Steve may correct me 2018, the Trump administration moved forward with some pretty aggressive tax cuts, especially around the biotech space and I know the tax rate and I don't know what the exact amount was, but it was really just sort of cut in half.

And so I think we can all share in the fruits of our labor. I do believe that big tech has a responsibility. They have tremendous profits. Yes, they've been job creators, but at the same time, we're not talking about a company that's just in the United States, we're talking about companies that are global and I do think there is a responsibility, whether that's through a data dividend or through a tax that it's appropriate and should be reinvested in communities that need it the most.

Chip Franklin:

Steve, there's a lot here to unpack. Does the government know the tipping point where taxes on corporations begin to hurt the growth of these corporations and thus the jobs and ultimately causing the company to fail or even move locations, change locations?

Steve Moskowitz:

See, I would guess, no, because on the one hand, there's some really good people and say, look, suppose you see somebody who has six refrigerators filled with food in his kitchen and you see somebody that, and the kids are starving. You say, "Well, you know, you have six refrigerators. You don't need that much. Why don't you give just one refrigerator? You still have five refrigerators left. That's still more than you need. Why don't you give it to that starving family?" And you know, socially, that's a good thing. You're feeding starving people, but economically somebody says, "Well, look, I paid for those six refrigerators and that guy doesn't have refrigerator because he's a lazy bum doesn't want to work like I do." I won't get into the truth or drugs or anything else for that, but the feelings and one of my concerns for California and I love California, I moved here way over 30 years ago from New York City.

California is a wonderful place to live. I live in San Francisco. I think it's great here but what I'm concerned about is how do you prevent companies that say, okay, you want to tax me some more? You know, Texas is very hospitable to business and they don't even have a state income tax and how about if I just go there and you get nothing from me. How do you like that? That's the toughie.

Chip Franklin:

But then an ice storm comes and it cuts power to the entire state.

Steve Moskowitz:

Well, again, I didn't say everybody was going. I'm not going. I like California. I mean, I'm a tax attorney and obviously I don't want to pay any more taxes than I have to but if you said to me, "Steve, would you personally move out of San Francisco to save taxes?" The answer is "No, I like living here", but with some companies, they just make a decision on the numbers. When I make a decision, I like to make a decision on life. It's beautiful here, the weather, a lot of things other than the numbers. That's where I'm different than most financial guys. Most financial guys will just say, hey, here's what the numbers are. Like, my little joke is you can move to Alaska and that's a state where instead of having a state income tax, they'll pay you to live there but do you want to live in a place where they pay you to live there? So we got to measure everything.

Chip Franklin:

David, it seems to me, it's almost impossible to have a nuanced conversation about taxes without polarization, without one side wanting to burn everything down and anger and spite, and then the other side, ready to do the same.

David Canepa:

Yeah. I just think, you know, one of the things and, you know, the Senate is looking right now relative to the, you know, the... When Trump's, you know, I hate to say Trump, but when he slashed the US corporate tax rate to 21%, they provided tax a tax haven for businesses so that they could get a lower rate so you look at that and in terms of the tax code, you know, and the Democrats right now, they're looking at trying to fix that but these companies, they were getting a tax rate of 21%. Now with these tax havens, Bermuda, et cetera, now it's down, it's down to 10.5%. I think the fundamentals of all this is, I do think, just philosophically that people should pay their fair share of taxes and why.

Chip Franklin:

It seems to me it's almost impossible to have a nuanced conversation about taxes without polarization, without one side, wanting to burn everything down in anger and spite and then the other side, ready to do the same.

Steve Moskowitz:

You know, I remember when president Reagan came into office. The top tax rate was 70%. He dropped it down to 28% and what he said is the lower you make the... Now as an attorney, I'm going to say comply with all laws, but what our former president said was "The lower you make the tax rate, the less incentive you have for people to cheat and vice versa."

And you know, the other thing you have to realize too, is economics. You know, everybody says, well, you know, the tax, and then I have less, and the government has more, but suppose we had a situation where somebody came into office and says, okay, under me, as of today, the tax rate is half. You know what? Prices would adjust. Food would become more expensive and I'm not talking about the inflation we're going through now, food would adjust and we're talking about, you know, your parents bought a house for 90 grand, it's worth almost two mil today.

David Canepa:

Yeah.

Steve Moskowitz:

Well, okay. So what happens is really did the price of the house change or the value of the currency change? Because to get that house back when your parents bought it, I only needed 90,000 of that asset. Now I need two million of it so what changed? So the bottom line is economics. It's just like, I remember my starting pay in New York was by today, laughable, but back then it bought a lot of stuff. So again, in an economy, the prices are going to adjust so when you adjust the taxes, the prices are going to float.

Chip Franklin:

David, when you go to Washington next January to be sworn in, you're going to have to deal with taxes, whether it's raising them as many progressives want, or as conservatives want lowering taxes in order for corporations to grow. I guess the question is, can you find a way to reduce spending and trim the fat yet have enough money in order to get the things done, the necessary things, everything from infrastructure to Medicare, to social security? I mean, you're going to have to turn some enemies into friends and some friends into enemies, right?

David Canepa:

Yeah, correct and you know, so it's a double edged sword, right? So when you look at the California State Budget in particular. It fluctuates basically on really, it does a lot more than it did in the past because of who we're taxing and one of the things that does not provide, and we should always tax. I mean, we should tax those who, you know, are billionaires, etc.