How Can You Turn a 45k Profit into an 800k Tax Bill?

In this week's episode, we discuss some of the hard lessons that day traders are learning this tax season. We also discuss the disconnect between unemployment numbers and the recovering economy, how investor behavior continues to thwart investor outcomes, and the backlog of tax returns in the IRS. Take a listen below:

Show Transcript:

SUMMARY KEYWORDS

people, stocks, trading, money, year, tax, market, businesses, investing, companies, stock market, return, week, unemployment, dogecoin, happened, irs, refund, market cap, game

SPEAKERS

Michael Baker, Ross Marynell

Michael Baker 00:00

Welcome back to the money huddle. My name is Michael Baker, and I'm here with my business partner Ross Marynell. Ross, how you doing this morning?

Ross Marynell 00:37

Michael, fantastic...what a beautiful day here in the Carolinas head of action packed weekend. I know you have. And I'm ready to get rolling today. So, my friend, we are one week away from the end of the tax filing deadline this year. So we're about ready to put to rest tax season for 2020. how we feel about that? Well,

Michael Baker 01:00

I think the CPAs are gonna disagree with that, because I can't imagine how many people have been put on extension yet again. But yes, it's coming. It's coming. And I suspect that the plurality of folks in the accounting profession are celebrating that this. This this season is coming to a close.

Ross Marynell 01:21

Yes. So if you know any tax professionals, we all know, the week after the end of the regular tax filing season, they are gone. Vacation One, two weeks not to be heard from don't bother them, don't call them let them reset. All right, extensions don't get back later in the year. So kudos to all of our tax professionals this year, because what a incredible just tsunami of law changes to have to digest and just how much change there wasn't in the tax in tax rules, because this past year,

Michael Baker 01:59

oh, they got I mean, they got put on it like the deferral mid season. I mean, we'd already started this year before they decided to extend the deadline and they did that mid season so I can't even imagine what that did for a lot of folks.

Ross Marynell 02:14

So I thought today maybe we could start off with just a few quick tax tax stories that popped up and I want to start off with a couple of little surf through Twitter found some some funny tax related tweets. I want to share a couple let's get a little lighthearted to be exact cool with Alright, so there was there was a one tweet that came through from Simon he said, Turbo Tax is the worst computer game ever. TurboTax you're like, Oh, my God, I just turned that off.

Michael Baker 02:49

Yeah. Oh, here's

Ross Marynell 02:49

here's one from Abel taxes really hate single people with no kids, bro.

Michael Baker 02:56

You know what? facts man, they this true. It's like you're you're you know, you're out there floating. You're You're on your own. You're on your own.

Ross Marynell 03:07

So, this this young man, Brody said, doing taxes is so easy. I don't know what you guys are talking about. Step one, get your W two step two. Give it to your dad. I don't know what's so hard about that.

Michael Baker 03:20

No, oh, my heavens. Broke Brody, Meanwhiles 28 years old.

Ross Marynell 03:28

So we'll keep the joke story going. So this past week, Elan Musk, the self appointed Doge father of the Dogecoin mania was on Saturday Night Live wasn't necessarily the response to the cryptocurrency people were hoping for I think. But I had to do a quick just summary of your so right now we have Dogecoin, which is basically an open joke of a cryptocurrency is now trading. It's the market cap of this is now hovering around $66 billion. Yeah,

Michael Baker 04:02

I will say this, though. Just don't. Don't say it's an open joke around like the true believers, because they'll be quick, they'll be quick to try to put you in your place about well, you know, look at look at the higher the Yeah,

Ross Marynell 04:15

yeah. So but I do think it's simply just put it in perspective, right of what how much money that is. So $66 billion, the week before it was trading over 80 billion. Just to give you an example, there's a few businesses that operate around our area. So 3d printing, 3d Systems Corporation has a $2.28 billion market cap. So dogecoins 66 billion Pinterest $36 billion market cap, just a very popular stock. Just thought I would throw that out there. This one really got me so Duke Energy, one of the largest corporations in our community that employs 1000s and 1000s of local people. has a market cap of 78 billion. So at some point last week Dogecoin was was had a similar market cap as Duke Energy. It is a little absurd. Just think about how much money has been accumulated in these cryptocurrencies and how fast it's happened. That's a really massive influx of capital. mean, any quick thoughts on that?

Michael Baker 05:22

Yeah, this is what happens when you print trillions of dollars, and you give a lot of it to teenagers and people who have Robinhood accounts. You know, lots of lots of young kids at home last year, couldn't do a lot of stuff got hyper invested. Excuse me hyper interested, I should say, hyper invested, probably not too inaccurate, maybe. But, you know, they basically, you know, couldn't think about it, couldn't go to school, couldn't go to college, I'm trapped at home, internet were shut down. So we're shut down. What became like the the game, you know, if video games and investing in the stock market, because that was like, the big action, and the government put money in a lot of people's pockets. And, and so, you know, like anything, there's there are residual, you know, side effects, if you will, or impacts that that happen. And I think this is one of them. You have a lot of people who've decided, I mean, look at the the the GameStop saga that happened earlier this year. That was essentially a host of people collectively deciding, hey, we're gonna do this. And, you know, money has been made, and everyone has seen it, because it happened in the public square. And now this ball is rolling downhill and everyone that has some leftover money or has some some profits from last year's investing Hall, then they're looking for the next thing to do, and they're looking for, you know, they're not looking at boring companies like Costco, right? Like Costco that's boring. You know, they're like, oh, game, tell me a story. And so, you know, Dogecoin fits the bill. And you've got the the Prophet himself Ilan musk out there saying stuff, tweeting stuff and, you know, talked about, you know, Tesla being a religion, and there are people that are holes, you know, you know, wholesale, anything that Ilan is about, they are going to follow and be interested in. So, you know, hey, we'll see what happens. I think this is gonna probably end up hurting a lot of people. Yeah, but hopefully not think about the same thing it's

Ross Marynell 07:37

investing is zero sum game. So there's winners, there's a winner and a loser to every transaction. So just tread carefully out there. If you've if you've made some significant gains, just be reasonable. I know it's hard to be reasonable in a very unreasonable market, but try. Alright, so So next up quick story here from this was MSN Comm. There is a IRS backlog of tax returns of about 31 million. So I was talking to a few people last week, they were sort of waiting on or wondering when they may see the return coming.

Michael Baker 08:14

Oh, there's like a refund.

Ross Marynell 08:16

Yeah, so the Taxpayer Advocate Service in Oregon, the IRS focus on tax filers rice agency is holding almost 31 million returns for manual processing just ahead of the May 17 tax filing deadline. So that backlog has grown by 2 million returns since mid April. So part of the reason is there were some 2019 paper returns that held up the process because of course some of those returns were coming in during COVID lockdown government shutdown. And I guess that's probably created a little backlog of work.

Michael Baker 08:47

Those those people that insist upon filling out their, their, their paperwork by hand.

Ross Marynell 08:55

Well remember, terrible acts is the worst computer game ever. So they just do it manually is less less painful. Yeah. But it says that some of the newly filed tax returns are getting flagged by the IRS because of issues related to recent tax changes, federal stimulus checks. And one of those is really related to the recovery rebate credit. So that's one that's on form 1040 that allows people to adjust their stimulus payments if they didn't receive all the funds to which they were entitled. So remember, you do have an opportunity to go back and reclaim those if you're entitled to them, but it has slowed the process of refunds. And so one of the things my point of bringing this up is, you know, we talked about this in previous podcast, which is the goal of In my opinion, the goal of tax withholding should be at the end of the year to have zero return 000 refund or zero owed, right try and get as close to the line as you can't. But some people like that, getting that big refund back sort of a forced savings account, right. The challenges you know when we have a situation like this year, the government is We are getting to them, but it may be a while. So they're holding back some of those potential refunds because just the amount amount of backlog?

Michael Baker 10:10

Yeah, I got nothing. I mean, I, I've tried to plead my case with people about, you know, Hey, you, I think really think that you are over withholding, you know, you're getting these huge refunds. And they will, you know, take less money throughout the year, because for some reason, there's something chemically, I think, in our brains, when we see that big cheque come back from the government, we think that that's somehow a win. And it's like, oh, we have this money. And like, you've had that money all along, you just gave it away, month by month, and they're returning it to you. Wouldn't it be great to just have that money in your bank account all this time, but, you know, some people, like you said, it's like a forced savings. And, you know, they get that money back. And that's what they spend on vacation. That's what they spend on, you know, Home Improvement Project. So, you know, I don't think it's the most optimal way to do things. But you know, again, people aren't necessarily rational when it comes to money sometimes.

Ross Marynell 11:14

Sure. Okay, I've got one more This one was I Papi, it's gonna take you may take me just a minute to set it up. Okay. But we were just talking just a just a few minutes ago about sort of hyperactive trading, and the gamification of stock investing, where people are making multiple multiple trades and really short term focused. And it's like you said, sort of hyperactive. So this was a post that came, this is on thinkadvisor.com. So this came from an advisor out of Arizona. And it looks like the forum that he posted this on was the National Association of personal financial advisors. So it says here, this advisor explaining that a do it yourself trader he knows, but it's not as client recently put as 10, nine IV information into TurboTax. And to his chagrin, had a 1.4 million in capital gains and a tax bill just over 100,000. He never do anything about the wash sale rules. So what happened, this trader started with a an account balance of 30,000. That was $30,000. In his revenue account, he had some 45 million in total trades, with a net profit of $45,000. So think about that amount of activity over that period of time.

Michael Baker 12:40

That's a lot of work. That's a lot of work for 45 grand brother

Ross Marynell 12:44

30,000, starting account balance grows to a net profit of 45,000. The challenges when so the what happened is, because he traded so quickly, in and out of certain stocks, the wash sale rule disallowed some of the losses. And so instead of having what he thought was a $45,000 profit, which he would have owed, income tax on, he ended up having a $1.4 million capital gain. And because all the trading activity was short term, treated as ordinary income, he had just over 800,000 in taxes. So per the IRS rules, investors can't claim losses if they sell and buy the same or very similar securities within 30 days. So you can't deduct losses from wash sale, wash sales. And last the loss was incurred in the ordinary course of your business as a dealer and stock are scary. So basically, the wash sale rule kicked in. He bought and sold into the same or similar stocks. Can't imagine how many times right, we would be speculating multiple times, multiple times. In all though he only ended up with a $45,000 net profit. He triggered 1.4 million in capital gains and $800,000 in taxes. So I think there's gonna be a lot of traders this year, a lot of young investors that got started that did something similar that started with the relatively reasonable balance right 30,000 is not an accredited investor. Yeah, traded intense, intensely over the course of a year. And I wonder how many other people have suffered this fate?

Michael Baker 14:28

I'm sure that there's a lot of people that are getting Crash Course lessons in you know, all the ins and outs of trading. But you know, I don't think that this is gonna go away man. I just don't I think that the the platforms that they're using, might Robin Hood for example, I'm not picking on Robin Hood. I mean, they are who they are, but they've made it extremely easy. And and there's a great you know, from what I hear client experience that for people who use that app, and But they allow people to have access to margin, I mean, to trade options to do all kinds of stuff. And, you know, I mean, anytime you you give over complicated or complex tools to people who don't know how to use them, you know, you're going to have people that lead the charge and, you know, skin their knees a little bit. And in this case, you know, this is somebody who clearly spent a lot of time actively trading in pursuit of profits, right? Obviously, you're trying to make money. Did I hear you save over $45 million? In total transactions? Yes, so over $45 million in total transactions $45,000 in profit, I won't even calculate what that percentage of profit is person versus transactions. And now, that bill is legit, I don't know how that they're going to reconcile that they're probably gonna have to deal with pay some attorneys. And, and, you know, they're gonna have to probably throw themselves at the mercy of the court. But that tax is legit. It's, it's legitimate. So it'll be interesting to see if if we get a part two of that, how that turns out, because that's gonna be it's gonna be a mess.

Ross Marynell 16:21

Right. So, you know, kind of just to summarize mean short term trading, it can have some unintended consequences. One, you end up with mostly short term capital gains, tax wise, you got wash sale issues, you could have just simply an expensive tax filing, right? I can't imagine, you know, some of these folks haven't three 400, page tax, just 299. How long do we take someone to enter all that into your tax return, that's you could have, you know, significant costs associated with just just filing it

Michael Baker 16:52

tracking it all? Well, if they get the summary document, that that probably consolidates a lot of the data, and then they'll have all the, you know, the page after page after page at the detailed transactions. But here's the thing that I was thinking about just just a second ago. And I hate to pound this drum, because it's gonna make me sound like an ancient fossil of a of a person. But which I'm not, but I am a dad. And I think about these things. So parents, if you've got teenagers and college kids, I don't know how old this person is, could have been a 45 year old man, we're all fallible, we all can make mistakes. But this sounds like something that a really young inexperienced person would do that had nothing but time on their hands. Please know, if your kids are messing around with these apps that trade, just know what they're up to, you don't have to be in their business, I know, they don't want you in their business, but just you know, take a peek in there, because I can tell you who the first phone call is gonna be. If you're, you know, 22 year old son or daughter gets get some news that they owe the IRS $800,000 is going to be you guys. So have just, you know, a working understanding of what they're up to give them some guidance and tell them you know, hey, make sure that they're not doing anything that's too, too risky. And if they don't understand something, get understanding, get some education first before you leave.

Ross Marynell 18:24

And I would just say to, you know, a root cause of the fair bit of this over hyperactivity is that there's no longer a trading charge.

Michael Baker 18:32

Of course, we want that's what they want. They want people in there, they want people doing just what this person was doing. Writing a million a million times a week, why not? I know.

Ross Marynell 18:43

So. Okay. Michael, far away, you had a couple of things.

Michael Baker 18:47

Yeah, I mean, one of the one of the biggest. So this is a conversation that I find myself I've had this conversation with a few people over the last couple of weeks. And I'll preface it by saying this one, I am very much pro equities. I like the stock market. I like you know, the long term opportunities that can be provided by investing in the stock market. I encourage people to do that we have to understand the risk, we have to understand how we're investing in the context of a plan. All that being said, I think we all need to check ourselves a little bit. Because what we have experienced in the last I would say 12 to 14 months in the market has not been normal. It has not been normal has not been a normal environment. Yes. Nothing about the last year and a half has been normal so that that folds right in. However, you know, this article that came out by Ben Krause and kind of summed up some of my thoughts actually using data. And so Ben, Ben wrote this article it says you know how to lose money when stock market is all time highs and the best premise of the article is, you know, we've all seen the stock market, just rock it up from the lows of last year. And he says, you know, during that time, nearly 96% of stocks and the overall US stock market showed positive returns, you know, in, you know, from 2020 to 2021, you know, April, May, of 2022, April, May 2021. I mean, the market just went like a rocket ship.

Ross Marynell 20:29

So, say that percentage again, he says, oxa went up,

Michael Baker 20:32

I'll give you the exact context of it, he says 96% of stocks, I mean, just tremendous breadth in the market went up, you know, over that, you know, it looks like he's posting about, you know, April to April 2020, to April 2021. And he just says, he's like, it's highly like, we will never experienced 12 month period of returns like that, and hit the point that he is making, is that if you just invested in something last year, the probability was really high that you made money, right, which is why we're seeing you know, some of these additional behaviors where it was so easy last year, that people were getting, you know, that irrational exuberance to use that word right there where they're just trading, they're like running around thinking, we're gonna no matter what we do, we can't miss. So we're gonna we're gonna TEDx our activity, because we can't miss. And so now what's happening is the markets getting much more narrow, and he said, Harry, he's got a chart and he says, 2020 retail darlings, such as Virgin Galactic is now down. 67% peloton down 49%, teladoc, down 48%, zoom down 47%. And he just goes on and on. He says it's worth noting, many of these stocks actually are still have really high positive gains. But those are some tremendous drawdowns. And he shows a chart of the Russell 3000. And there's a little disclaimer here. So I'll read it says there are only 2880 stocks in the Russell 3000 at the moment. But of that, of those stocks, he goes 48% of them are down 10%, or worse. 837 or 29% of the stocks in the Russell 3000 are in bear market territory, which is normal. That's what people don't understand. It's like it's normal for me, you think about the different types of companies, the different services, the different, you know, micro economies that these companies service, the cyclical nature of the market, the cyclical nature of all kinds of different markets, you're going to have, you know, periods of time where it's extraordinarily extraordinarily rare for us to see what we saw last year, which is basically everything move positively, strongly, you know, in that direction where it makes it look like investing is easy. Now the markets getting more narrow, like this is the environment now everyone's been teed up to think that the it's just easy money. You got guys like Dave Portnoy, if you follow him on Twitter, I don't follow him. But he enough people I follow follow him. So he pops up on my feed all the time. And he's like stocks only go up, you get people saying stuff and you know that it becomes a game. And you think, oh, man, I'm interested in stocks instead of investing prudently. And now we're getting back into a market where, you know, we just had earnings and more and more people are gonna start looking at companies and valuations and earnings. And what's going on instead of just hey, we've got stimulus, money coming, recovery, money economy's reopening, eventually that story is going to be over for the market, even though it's not over for us people in the economy, the markets gonna be looking to the next thing. And and I see that being a challenge for a lot of people coming up.

Ross Marynell 24:11

So to piggyback off that, because that's a pretty short timeframe. We're 12 months coming off of one of the fastest draw downs from all time highs to bear market.

Michael Baker 24:23

It's lightning fast or the stock market. Yeah.

Ross Marynell 24:25

Right. So we forget what happened in like February to through March, was that, you know, the stock market dropped really quickly, really fast. And that created this, let's say over a potential over correction, which then resulted in a lot of this, these companies rebounding, like you said, 96% of stocks having a positive year from April of 2020 to April 21. But if you expand that out, and you look at a longer time horizon, I came across this article on Morningstar and they were examining The decade performance from this was the this is decades performance entire market. So 5000 US stocks from January 2011 to December 2020. So this would be considered, I think, a pretty strong year for stocks. So that's coming off of the 2008. You know, great financial crisis 2008, nine into the next decade. And it looked at how many stocks were positive burst, how many were down? versus how many were just gone? non existent any longer? And guess how many over that decade? of stocks, individual stocks were positive?

Michael Baker 25:43

No, I'm sure it's gonna be as much smaller percent than we think.

Ross Marynell 25:48

So the percentage of stocks that were positive during that decade was 42%.

Michael Baker 25:54

Yeah, not even half.

Ross Marynell 25:56

Right, with 36%, down. 22% gone. Now, some of those were acquired and folded into larger other entities. And some were then the opposite, which is they were out of business. So we think in the short range, right, we all we think, you know, one of the one of the challenges with investors, we think what's happening today is what's going to happen next year and a decade later. Oftentimes, that's not the case, things change. And the longer we look back, you think, well, golly, during that decade, how many stocks were positive like, and you think 36%, were down, another 22% just gone. So either acquired, or literally out of business. That's not necessarily an easy stock picking environment. It's not like you said, a 42% chance of getting a stock that's positive, that doesn't mean it's Excel, excelling or beating the index or hitting the return that you want. And so we've gotten, I think, a little too comfortable with just expecting all stocks to go up. It's just not the way it works.

Michael Baker 27:02

Well, that's, you know, you know, we read a lot of Nick Murray, in our office and, and one of Nick Murray's famous quote is human nature is a failed investor. And I think that is what we see time and time and time again, is we let our emotions tell us a story. And then we act upon that. And then we justify, you know, we justify it, you know, like, well look at this and look at that, and you really think I mean, and we go back to look at look at Kodak, for example. Right now, Kodak feels like an ancient dinosaur, when we mentioned it nowadays, especially with the fact that we have unbelievable cameras and all of our smartphones. But there was a time man with Kodak was it right? We had this phrase Kodak moments. I mean, they were the company when it came to taking pictures. I mean, I went to I remember vividly going to a wedding. And the bride and groom one of the things that they had done is they had put disposable the Kodak disposable cameras, you know one time use on everyone's table and they wanted everyone to take as many pictures as possible. They were and then you had a bin to collect them. And you know, they processed all these photos and they had all these candid pictures and stuff from their day. It was so cool. Gone. They don't exist. They don't exist anymore. Yes, they they kind of became like a weird something last year. It's like

Ross Marynell 28:31

a little retro toy now because both my kids now have a Polaroid.

Michael Baker 28:35

Yeah.

Ross Marynell 28:36

Because they're so used to everything being digital that when they actually get the print something out and hold it in their hands. They're like, Oh, look at this. It's it's actually novelty now, and so

Michael Baker 28:46

used to be the norm you know, you think about and this and this isn't me. This isn't me trying to make a prediction. But let's let's take a company like zoom right? So zoom was around before last year, last year just happened to be like the perfect storm for zoom to exist. And they did and and that company is now expanded. But now we all know the game. All right, video conferencing, virtual meetings, all that who is now waiting in the wings. I mean, now, Apple for sure is gonna be looking at this Amazon's gonna be looking at this. Facebook's going to be looking at this the biggest of the big companies, Microsoft Teams, you know, you're going to see everybody looking at whether or not that's a viable market for them. Who's to say that zoom is still around 10 years 15 years from now Who knows? So it's it's really silly for us to think that Oh, we've got it all figured out. Because if 2020 didn't teach you anything it should have taught you that hey, life can turn on a dime and everything you thought you know, everything you thought you could control can easily be like altered Singh. You know. tremendously in a blink. So that is why it's like, we love investing, but we want to do it prudently. And we're trying to help people, you know, part of our job as financial planners, as advisors, is to help people keep themselves from blowing themselves up. Yes, those little sometimes we have to scratch a little itch. And we'll carve off a piece of a client's portfolio to maybe look at some individual securities. But there's such a significant amount of risk when you start to concentrate your investments, that that's not the whole strategy. We don't want that to be the strategy, we want the strategy to make sense. And yes, if we've got a little play money, or a little satellite portfolio over there, that we're taking a little bit of extra risk. We know, hey, if things go up, things go, well, wonderful, we're gonna feel great if things go bad, is not gonna blow up our entire plan. And I think that that's what a lot of people are doing right now. And that concerns me is you have a lot of risk seeking behavior where people think, Hey, I'm going to use this opportunity to get rich, I'm going to use this opportunity to catch up make up for lost time, for years that I didn't invest, and maybe some of those people will be successful. But the probability is, is that it's going to get harder and harder and harder, because the easy money was made last year.

Ross Marynell 31:26

Okay, so, you know, I agree with the sentiment, it is we don't want to get too comfortable in the environment that we find ourselves in today. As you noted, there are a number of corrections underway already. A number of individual stocks that had seen exceptional gains from April to December of last year struggling a little bit year to date. It's part of the process is that sometimes we overcorrect, too, we Oh, II Oh, it's it's it's not uncommon to overcorrect in both directions, right, where we fall a little faster and maybe a little further than we should. And we grow back a little faster and further than then we might as well. And so that's that's the stock market game. You know, when you look at the past decade of just that, that story I've brought up. One of the things about an exchange traded fund tracking an index or SPI, whether that's spy or some some type of, you know, just market index that follows all stocks, you're gonna end up owning a little, a little bit of everything, right, you own the index. So you're going to own those companies that would go down, you're going to own those companies that are gone. But you're also going to own the companies that go up. And what we know over that decade is that the market did grow. It's just not that every stock did. So we know that only 42% of the this toxic combos compile that index score positive. But they were positive by such a wide margin that they made up for the losers. And that's kind of the benefit of just passive investing is only you're going to learn it all. But if the big winners exceed the losers, then we can end up in positive territory with a lot more diversification. So I think that's a good synopsis there anything else today, Michael?

Michael Baker 33:09

Yeah, me, I just I wanted to point out that one of the big stories, at least locally, that came out in the past week was governor McMaster. He's our governor here in South Carolina. He's now the second governor, that has made an announcement that they're going to be again withdrawing from the federal unemployment assistance programs and return to pre COVID unemployment, you know, policies. And I think part of that is one of the things we're seeing is you have a lot of businesses they're trying to reopen right now. And they can't get workers, they can't get workers, you know, these are going to likely be a lot of service industry positions or, you know, hourly workers, you know, they these, these businesses are trying to get reopened and they can't find staff. And there's a huge debate right now. And it's going to be fair, there's a lot of people saying, well, these people would return, you know, if, you know, if they were being paid adequately, I'm I am much more of a proponent of letting the market actually determine what page B for certain positions. It's easy for a worker who is making, you know, $10 an hour to say, Yeah, I should I deserve $15 an hour. Does that work in the marketplace? Let's find out. Let's find out. Right now, what's happening is the government is supplying an additional $300 a week on top of the unemployment benefits. And so there are a lot of people that are sitting home, they're doing the calculus, they're saying, well, I could go back to work, and maybe I can make a little bit extra money more than what I'm getting on unemployment. But right now, I'm getting unemployment to to not work. And unfortunately, there are folks that just don't get the math of that. And there are businesses that are hurting and I've had some conversations with folks and you know, hey, we all can feel free to disagree. But at the end of the day, it's like The market needs to sort that out, the government coming in and creating an artificial competitor for labor distorts what should happen in the marketplace. And you're going to have businesses that can't operate, and they're going to have to close now your foot Now, those jobs are gone. You know. And so I think that, you know, we're probably going to see more and more states follow suit, especially states that didn't fully close all the way or states that are trying to fully reopen those, those extra unemployment benefits are going to be going away. And so hopefully, that will encourage more and more people to get back into the workforce.

Ross Marynell 35:42

There was a pretty big jobs missed last week, which highlights some of this, that there there are opportunities for people to go back to work. But the financial incentive is, in some cases on the side of staying home and collecting unemployment versus getting back into the workforce, because it's just financially beneficial to stay home with the added incentive. So it is having some some economic impact, because we're not seeing, you know, people fully return to the workforce.

Michael Baker 36:12

Well, I think, you know, part of the the issue is, and I don't want to belabor this too much, but, you know, back in, you know, back in the Obama administration, one of the things that they started doing as November they call them MC jobs when they were counting, you know, the people that were going back to work part time, or it was like service jobs, or, you know, not what you would think when you think full time employed a job, but they started counting like, every little job, you know, that they could, and that that's how they've continued to do that. And, you know, right now, the the article that I just peeked at for a second, you know, it's, there was something that came out that said, you know, unemployment tick back up, I think, from why charts, actually one of their economic updates said it, it takes back up from 6% to 6.1% is the unemployment rate. But you know, that doesn't count the participant, you know, people that, that that only counts, people that they call participating workers, right, the people that have considered disillusion that they're not actively working, you know, that that doesn't count the people that have been dropped from the participation rate. And I think that there's a lot of people that just aren't actively looking for work right now for one reason or another. And, you know, now we're in a situation where people can't these businesses that are trying to reopen, they can't hire people. And I'm not smart enough to say I know what the solution is, I just know that when you artificially create a competitor for labor, which that additional unemployment does, there are people that could go back to work that are not simply not going to until those benefits dry up, this is the same thing that happened in the financial crisis, when they continue to extend unemployment, they kept extending it, they weren't adding so much extra, but they just kept extending the unemployment benefits. So hopefully, this will continue to wrap itself up. And we'll start to see some of these companies and businesses be able to get more people involved, because I've seen tons of Help Wanted signs everywhere. I drive lately. So I know people are trying to hire.

Ross Marynell 38:15

Absolutely. Well, that Oh, man, this is so again, our tax professionals. You have one week to go. You're in the homestretch. Let's we'll we'll get you there. And we know that the new administration has put out some tax proposals that are circulating Congress as those get closer to becoming law. We will talk about those in a little bit more detail and start to break down some of some of the effects of those legends of that legislation. And otherwise, what's a good show? Good to chat with you, Michael. Absolutely. Have a great week.

Michael Baker 38:46

Yes, sir. Thank you guys for listening. And if you want to send us a question or something you'd like to talk about on the show, email us at themoneyhuddle@vcplanning.com and like always, we'll talk to you next time.