Discover how your taxes may change next year. Andy Puzder joins Tom to discuss how recent and upcoming political elections will greatly impact taxes on your business, investments and personal wealth.
03:39 – Are American Still Voting Their Pocketbooks?
07:22 – How Will The Senate Runoff In Georgia Impact Taxes?
11:21 – How Will Changes To The Corporate Tax Rate Impact Businesses?
14:59 – How Will Capital Be Impacted By Tax Changes?
16:40 – What Tax Increases Should We Expect In 2021?
20:19 – What Role Should Capitalism Play In Reducing Income Inequality?
26:07 – How Can Individuals Prepare For Upcoming Economic Changes?
This is the WealthAbility® Show with Tom Wheelwright. Way more money, way less taxes.
Welcome to the WealthAbility® Show. Where we're always discovering how to make way more money and pay way less taxes. Hi, this is your host, Tom Wheelwright, founder and CEO of WealthAbility®®. So a lot of uncertainty with president elect, Joe Biden, and an unknown Senate majority. And with that, we have a very special guest to help us navigate through the potential of what happens under a Joe Biden presidency from a tax and economic standpoint. And Andy Puzder has an enormous amount of experience, probably best known as CEO of Carl's Jr. Probably, the easiest one for us to remember, but Andy, it is absolutely terrific to have us on the WealthAbility® Show.
Great to be here, Tom. Thanks for having me.
Could you just give us a little bit of your background, and why you're doing podcasts now? What are you up to right now?
Well, I started out scooping ice cream at Baskin-Robbins back in 1966, 67. Went on, went to put my way through college, put my way through law school. I didn't have any family support or any grants, had to work my way through. Became a lawyer, was a trial lawyer from around 1978 to around 1991. Then I began doing more corporate work. I became in-house counsel, general counsel at Fidelity National Financial, and then CEO of CKE restaurants.
Carl Karcher, who was the founder of CKE restaurants was a client of mine and a dear, dear friend. And then from CEO of CKE, I retired in 2017, and I've been writing. I wrote a book called the Capitalist Comeback. I've co-authored a book called Job Creation: How it really works and why the government doesn't understand it.
Some pamphlets about getting America back to work, following the pandemic. And articles in the Wall Street Journal, The Washington Post, Fox, RealClearPolitics, New York Post. And then I do podcasts and TV because I think it's important to get the message out there about capitalism and free markets, and how incredibly well they work.
I love it. And you were nominated as labor secretary, right? For [inaudible 00:02:38] President Trump.
I was, and I was viciously attacked by the Democrats on the left. And at that point, you could only lose two Republican votes and then Mike Pence would come in and break the tie. And I lost three. I lost Johnny Isakson's vote. I still don't understand why he's retired now. But with that one vote short of getting confirmed, I decided that rather than have a loss on the Senate floor in president Trump's first month with my name on it, I would withdraw. But President Trump and I, have remained good friends. And I worked with the administration since then.
So obviously a big fan of capitalism and why capitalism works. So what do you think happened? Why Joe Biden gets elected even though, by all appearances, the economy is good. People tend to vote their pocket books, but in this case, did they? Did they vote against the high income earner? First of all, can you just set that stage for us?
There's two possibilities. One possibility is that, president Trump actually won the election. He certainly claims that. And I got to think, I'm not a conspiracy, but there's a lot of strange things. The media can try and cover it up, but there's a lot of strange things that happened. And a very significant portion of the country, I think 47 or 48% thinks that the election was stolen. And I think we need to resolve that and make sure that at least by the next election, that we have systems in place to make sure that there couldn't be fraud for people to feel confident about the election.
The second possibility is, that people, they didn't… You couldn't vote against president Trump based on the job he did. I mean, the job he did was incredible. 2019, economically, was the historic high point in our country for the labor market. We have the highest median family income increase, since they've been recording the data, to the highest number ever $68,700, since they had been recording the data. And poverty dropped to the lowest level ever, 10.5% and increased by the largest amount ever, 1.3 percentage point.
So we had an incredible year for American workers, more job openings than people unemployed for, I don't know, 24 consecutive months. 20 months of 3% plus wager. So you couldn't vote against him on the economy.
Now, the virus hit, and the economy immediately collapsed, but it didn't collapse because president Trump shut things down. Matter of fact, he didn't shut things down. The States shut things down. And I mean, did people really expect that we'd shut the economy down and it would just keep rolling along.
I mean, that's ridiculous. And then we had the most dynamic economic comeback in the history of the country. We had five straight months of historic job gains. Three of the months were record setting, [inaudible 00:05:31]. June, July, August. So three were record setting. Two were the highest since 1983, but for the preceding months of the preceding four or five months, and the economy is getting back on track.
So I don't think it was the economy. Now people were upset about how he handled the Corona virus, but quite honestly, I think everybody did the best they could. Certainly, the Democrats, like Gavin Newsom, or our governor Cuomo in New York, didn't do any better job handling it than president Trump did. And by many measures did worse. And ultimately, his pursuit of a vaccine I think is what's going to save the economy and the country.
And obviously, we've now got two, possibly three, that's positive. I think people… And foreign policy, my God, we're talking about peace in the middle East. This is incredible. What's going on in, on the international scene, America's back. We haven't gotten involved in any foreign war. So his record as president, for a first term president, was nothing short of spectacular.
But a lot of people just didn't like his personality. They didn't think he was presidential. I argued with people, I shouldn't say argued. I discussed with people at the campaign, trying to emphasize what a good guy he is. I mean, nobody who actually knows president Trump, doesn't like him. He's a very good person.
Yeah. I've met him personally a few times before he was president. And that was my impression too. So it's always a struggle, right? Because his public persona, it seems to be so different than his private persona. Okay. So let's presume that… It looks like Joe Biden's going to be the next president.
And first question is, let's talk about Georgia. Because I think January 5th now is as big an election as November 3rd, or it's going to turn out to be as big an election is November 3rd. What will the impact be of a Senate controlled by the Republicans versus the Senate controlled by the Democrats?
Well, if in fact the election goes to Joe Biden and we hold Georgia, the Senate, the Republicans hold Georgia. Then that means, tax increases, significant changes to the tax code, the green new deal, these efforts to use vast amounts of federal funds to empower unions, and the efforts to destroy the energy sector.
All of those things will be much more difficult to accomplish. You really can't do those things through executive orders. You need legislation. And as long as Mitch McConnell and the Republicans are in charge in the Senate, I think things will continue to go along kind of at that pace state. Remember the Obama administration after the Republicans took the house, we never had spectacular economic growth. But we ended the disaster that was the Obama presidency when the Democrats controlled the house in the Senate, the decline stopped.
And I think we could see things chug along as long as the Republicans keep control of the house, and or the Senate. If they lose control of the Senate, and we do not have control of the house now, for the next two years, we need to step back and hold our breath. Because the economic programs that Joe Biden is proposing would be a disaster for the country.
I would encourage people, go to his campaign website, just go there and read. Every program, every proposal is government spending, more government spending, more taxes, more government involvement in your life. Not one proposal, not one single proposal is a proposal to encourage businesses to grow and create jobs.
With president Trump, where he'd cut taxes. He slashed regulations to encourage domestic energy production, and negotiated trade agreements that were fair to the United States. Not only free trade, but fair trade. All of that will be gone. Those things that encouraged businesses and drove business optimism will disappear. And we will be in for a very rough time.
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So I have a question for you. So one of my concerns has been the talk about the increase in the corporate tax rate. And because I thought that when we went to a 21% tax rate, which I thought was long overdue to bring the corporate tax rate down. But it might encourage companies and investors from outside the United States to locate in the United States, that it would actually almost make this a tax haven. Like Ireland, made themselves a tax haven with their 12% tax.
With all of the discussions of during the democratic primary. Every one of them, basically said, “We're going to undo that corporate tax rate reduction.” Now, people don't see this as affecting their pocketbook. I mean, you can make the case well, but your 401(k) is in the stock market. But what do you think happens if we have a 28% corporate tax rate? Because while it's still lower than the 35% rate we have, and still comparable to a lot of other countries, Europe, et cetera. They're around that 30% target. What do you think that does as far as investment in the United States?
Well, we know what it does. It'll drive countries out of the United States. And it happened in the sector I was in. When I was CEO of CKE restaurants, which was Carl's Jr. and Hardee's. As you mentioned, you recall Burger King moved out of the country. Burger King bought Tim Horton's, which was a Canadian chain and decided to relocate to Canada. I mean, why would you relocate to Canada?
Well, the reason is because of taxing. Pfizer who's now come up… The first company to come up with a vaccine. One of the dreaded big pharma companies is going to be saving millions of American lives, and helping us get our life back to normal. They were going to move out of the country. They were trying to do one of the transactions where you merge with an out of the United States country to avoid the tax burden year.
Apple has brought back tons of money to the United States because now we don't have that terrible a tax penalty. So it does, this will affect people's lives. It will affect tax revenue. The criticism of the tax cuts and jobs act was extremely misplaced. Number one, revenue did not go down because of the tax cuts and jobs act. Revenues basically stayed where it was, but the top… Even though corporations paid a lower rate, and people that made over $500,000, so high earners paid a lower rate.
As it turned out, higher earners went from paying 37% of the tax burden in this country to paying 40%. They paid $16 billion more in 2018 than they did in 2017. So after the TCJA and before. And people, under who made less than $500,000 paid $80 billion less in taxes, even though rates went down. This is because, itemized deductions like the salt deduction, basically disappeared, and the standard deduction was dramatically increased.
So we've seen just the opposite result that Democrats claimed would occur. People instead of leaving the country, businesses have been staying and others have been moving into the country. Everybody's benefiting from… That's why for 2019, we had 12 straight months with more job openings than people unemployed. And for nine of those months, there was over a million more job openings than people unemployed.
Do you know how many months prior presidents had since they began recording this data with more job openings than people unemployed?
Zero. None. There was Obama, Bush. They didn't have a single month where job openings exceeded people unemployed. For Trump, there were 24 consecutive months and all of 2019. So these are the benefits that people got from the tax cuts and jobs act. And when there's more job openings, businesses do what? They compete for employees. What happens when you compete for employees? Wages go up.
That's why we had 20 straight months of 3% wage growth. You know how many months we had post recession for Obama, where we had 3% wage growth? Zero. None. So the tax cuts and jobs act was a miracle for the American economy. It helped everybody. And when you hear otherwise, the data just doesn't support that.
So you talked about capital. Because I'm a huge fan of entrepreneurs. I've devoted my life to entrepreneurship. Why is capital, and bringing capital in and capital availability, which is really what the tax cuts and jobs act did was make capital a lot more available. Why is that so important to an economy?
Well, businesses can't grow if they don't have capital to grow. And in capitalism, it's really not a fair term. I mean, Carl Marx actually came up with it. A fair term would be free enterprise, but I'm okay with capitalism. I even put it in the title of my book. That's what we're calling it, that's fine. Because an economy needs capital to thrive. Businesses can't grow. If they don't grow, they don't create jobs. If they don't create jobs, there isn't competition for workers, and wages don't go up.
So we've got an economic system that infuses cash, puts it right where it should go towards corporations that are trying to meet the needs of American consumers or the world's consumers, which is what capitalism does, is what entrepreneurs do. And it's created an incredible, incredible benefits, not only for America, but across the globe.
We've seen the reduction in poverty for billions and billions of people across the globe because of American style capitalism, and the way that it creates capital investment, even in third world countries that adopted as an economic system.
So what do you think happens if, let's say, we do get a democratic controlled, all three houses basically, and we get these tax increases. What do you think it does to the economy, to jobs? And then what I'd like to talk about after we do that, before I forget is still, how do we bridge this gap between the rich and the poor? Because we can't ignore. There is a big gap. And I think that is what drives a lot of these elections, but let's start with, what happens if we get these tax increases. What do you think happens from an economic standpoint?
Well, first of all, the tax increases. Everybody's talking about tax increases for the rich, right? He's going to raise the tax rate for the wealthy. Well, guess what, they want to eliminate the salt deduction. They want to put back in place a deduction that was responsible for 40%, right? Of the increase in taxes for people over $500,000.
Before the tax cuts and jobs act, there was $1.3 billion claimed in an itemized deductions. And after the tax cuts and jobs act, that number dropped to $650 million. 40% of that decline was the loss of the salt deduction, the state and local tax deduction. If you reinstate that, you actually decrease taxes for wealthy people in these high tax States. So what they're going to do is, they're going to decrease taxes for wealthy people and increase taxes on everybody else.
So, number one, how does that help middle-class and working-class people? Number two, their taxes. They're talking about taxes on carbon. They're talking about energy related taxes. Who do you think that hurts? Doesn't hurt wealthy people. You think a guy that's living in a penthouse in Manhattan, or has got a down in Boca Raton is going to worry about whether his air conditioning is going to get shut off.
That's not going to happen. That's going to be impact working people. And it's going to impact businesses. Because when businesses know, when government spends, their taxes are going to go up. And they know if their customers are being taxed, they have less money to spend.
Well, if you know your profits are going to be reduced, you know you're not going to have as much money to support growth. And if you do grow, your customers aren't going to have as much money to spend. What do you do? You stop growing. When you stop growing, you stop creating jobs and wages stop going up.
So this would be a complete disaster for the country. I hope the people of Georgia understand what a critical, critical, critical role they're playing in this because the direction of our country for the next four years is in their hands. And maybe for many years after that.
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All right. So I do want to switch, just because this has been fascinating. Thank you so much, Andy, for having this conversation with us. We can't ignore that there is a lot of pressure coming because of this wealth gap. And I don't think there's any question. There's a wealth gap, okay.
So the question is, how do you solve the wealth gap? Obviously, what the… We'll call it, the laugh, but what the Democrats want to do is, they want to take money from the rich and give to the poor. Though I questioned whether it won't just go to the bureaucrats, That'S my philosophy. But that's one way to do it obviously, is to bring down the rich. What role does capitalism play and what roles should capitalism play in reducing that wealth gap?
Let me talk about two things. One is, what do the Democrats want to do? And number two, how do you reduce wealth and income inequality? And with respect to what the Democrats want to do, they don't want to tax the rich. They want to tax rich Republicans. They don't want to tax rich Democrats. If they wanted to tax rich Democrats, they wouldn't be talking about eliminating the salt deduction.
When you eliminate the salt deduction, you benefit rich people. Middle-class people, working class people do not take the salt deduction. The vast majority of that deduction goes to rich people. So if you want to take wealth from rich people, you're not going to put the salt deduction back in place. That's only if you want to tax people in low tax States. Like my state is Tennessee.
We have a zero state income tax. So the salt deduction loss that really mattered to us. It matters to people in New York, Illinois, California, these high tax States. I think what the Democrats claim they want to do, and what they actually want to do, are two very, very different things.
I think Margaret Thatcher was… No, it was Winston Churchill, who said that, “Capitalism is the unequal distribution of prosperity and socialism is the equal distribution of poverty or despair.” And that's absolutely true. Now, let's talk about income inequality.
First of all, number one, income inequality, the way it's measured, what you hear from Bernie Sanders and people, doesn't consider two things. One is, it looks at pre-tax income. So it doesn't look at taxes, which reduce wealth for people at the top, right? And it doesn't consider government transfer benefits.
So it doesn't look at welfare, which increases income for people at the bottom. And so, assuming that that's the case, assuming that's a fair way to measure income inequality. If you're going to increase taxes and redistribute the wealth to people at the bottom through these government transfers, the way they're measuring income inequality, it wouldn't change at all.
What Democrats are talking about doing wouldn't even affect income inequality, because they don't consider taxes. And they don't consider government transfer benefits. Okay. But even looking at income inequality, even looking at the way they're measuring it, right? Which ignoring taxes, ignoring government transfers. For the last two years under president Trump, with these policies that increased wages for working class workers, for blue collar Americans, this was a blue collar economy. Income inequality decreased both of the last two years, according to the Census Bureau.
Now, I bet you didn't get that reported a lot. In fact, last year, the press misreported that it increased. I had to do an article. I did one in RealClearPolitics, that came out and said, “You people are lying. Here's the numbers.” It decreased in 2018. And it decreased again in 2019, why? Demand for workers. If you don't think it was hard to get a job done, you don't own a house, and tried to get something done to your house. Because you couldn't find somebody to do the work.
Back in 2019, people were switching jobs for better jobs. All the time wages were soaring, that's because there was a demand for workers. That's how you reduce income inequality. You don't reduce income inequality by punishing people that create jobs or by punishing people that have been successful.
The way you reduce income inequality is increasing wages at the bottom more than you increase them at the top. And that's exactly what happened in 2019. In fact, wages for workers went up about 3.4%. wages for their managers for higher income workers went up 2.2%.
So what we saw was an economy that was reducing income inequality. And when you're reducing com inequality, you also reduce wealth inequality. Because where does wealth come from? It comes from the money that people earn and invest. I think it's 70% of investments in the stock market, or by pension funds, IRAs, 401(k)s, insurance companies that have paid benefits, and then mutual funds.
All of those things benefit working class Americans. So when people can invest in the markets, when they can buy homes. And obviously, we tried to force home ownership on to poor people that couldn't afford homes without increasing their income, so what we ended up was with the real estate bubble of 2008.
But when we encourage job growth, when we encourage business growth, when we encourage wages to go up, because there's a demand for employees, then you see income inequality, wealth inequality, and poverty, all decrease while medium family income increases. And we know that. We know it, because in 2019, that's exactly what happened.
I appreciate that. And of course, I've been a business owner for 30 years. And I know that, and I've been through those times when the labor market's been tight, and it's terrible as an employer, frankly. It's frustrating because people want higher wages. It's hard to find people. The people you do get tend to not be as good as what you were getting before. So to me, a down economy is actually good for employers from the standpoint that they can hire more people, and they get better quality people for lower prices. So I do appreciate that.
So looking at this from a practical standpoint, Andy. Outside of moving to Georgia, and booking in the Senate race, what can people do? Anybody who's even middle of the road, right? I think this country is primarily middle of the road. I don't think it's primarily right or left. I still think there's a whole group of people that's in the middle. What do people do practically in order to prepare for what's coming over the next few years?
Well, luckily, if we carry Georgia… I mean, there's a group called Make America America again, Bernie Marcus has that group that's raising money to try and support Republicans in Georgia. Senator Todd Young and Karl Rove have a group, the national Republican senatorial committee, that's raising money for the…
So you can contribute to the campaigns in Georgia. And I think that's important. I hear about people flocking in. These Democrats are bringing them in by the busloads. They're trying to influence the election in Georgia. So hopefully, the election in Georgia will go our way. And if it does, really, I think things aren't going to change dramatically over the next couple of years, it'll be frustrating.
They'll do everything they can implement these collectivist socialist policies, to try and redistribute wealth, to do all the things that they've committed to their base that they will do. And I think you can protect yourself. I don't think the stock market will drop materially. I don't think real estate will decline materially.
If we lose Georgia, I don't know what you do. Hide in fear, put your money under the mattress. Even if you put your money under the mattress, I think there's a risk that the dollar is going to depreciate so fast, that it's really going to be harmful. Because kind of, we're so far in debt, and all they're talking about is further increasing that debt, what arms to the dollar, when you have to start printing them to meet the needs of the government while the dollar becomes worth less and less and less.
And at some point, the world doesn't even recognize it as the world currency anymore. But I can't tell you how big a threat I think a Democrat control of the house in the Senate, and a Biden and eventually a Kamala Harris presidency would be four people. I don't have a great solution as to what you can do.
The good news is that, I've never seen a politicians ever given up any power that he had. And the power to affect the economy through the tax law and actually use the tax law to create incentives, I think is actually something that I don't think that's going to change, no matter who's president, no matter who's in the house or who's in the Senate.
And so from that standpoint, we can always look at the tax law and say, “Well, look, all they're going to do is they're just going to change the incentives. They're not going to eliminate incentives.” So we'll always have those incentives. So yeah, instead of being oil as the incentive, it will be solar as the incentive.
So I look at that as maybe there's the silver lining, is that people don't give up, they're not willing to give up that power, that control. So under a Biden, while we may have a shift, it will be a shift in incentives, not in elimination of incentives. What do you think?
I think that actually the stock market likes it when the government spends money. As we've seen over the past couple of months, when the stimulus looks like it's going to happen, the market goes up. When it looks like it's not going to happen, then the market comes down. Because big corporations do make a lot of money when the government spends money. They're the ones that profit from that.
Small businesses, not so much. And which is why you don't end up with the kind of labor market that we had back in 2018 and 19. So I think the stock market should be fine. And real estate seems to be pretty solid at the moment as well. I think because people are realizing they don't need to live on the upper East side of New York to work at one of these jobs, they can get a house just about anywhere in the country.
I know… Here in the Nashville, Tennessee area. I mean, it's just on fire. With people moving in, mostly from Illinois, some from Atlanta, Georgia, surprisingly. I think that's actually the place I'm moving here from the most. But also, New York and California. Everywhere you go, there's people moving into the state because of a low tax rate, and low real estate prices.
So I think as long as we keep control, I think we'll be fine. If they get control of the house in the Senate, there could be a switch in investment directives. But I'm more concerned with the impact that would have on the economy in general. The dynamism behind the economy, and the impact it would have on working and middle-class Americans. I think it would be much worse for working and middle-class Americans than it will be for upper-class or wealthy Americans. I think they will weather this fine. It's the middle and working class that will suffer through a Biden or Harris presidency.
Interesting. All right. Well, thank you very much, Andy. If want to get more information about your book and your writings, where would people go?
There's a website. It's called andy.puzder.com, that my son set up. And it started out as a way to just kind of collect things I wrote. So the family could see them or TV interviews. And now there's a bunch of followers. Every TV appearance I do, everything I publish goes there. As far as the book, The Capitalist Comeback. You can get it on Amazon and I hope people give it a read.
Thank you, Andy Puzder. Great to have you, great discussion. Just remember, the more educated we get, the more we can do about whatever comes our way. And we're always getting educated. We'll always have way more money and way less taxes. Thanks. We'll see you next time.
You've been listening to the WealthAbility® Show with Tom Wheelwright. Way more money, way less taxes. To learn more, go to wealthability.com.