Tradeoffs With Laws & Legislation





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Jerry's Weekly Newsletter

April 25 · Issue #16 · View online

I'm Jerry, a software engineer, YouTuber, and blogger. Every weekend I write about some thoughts, life lessons, and interesting things I came by for the week. I'd love for you to join.

Dear friends,
For the first time in forever, I actually feel like an informed citizen. As I mentioned last week, I started paying for quality journalism and have been reaping the benefits of consuming it.
It’s a bit overwhelming so I’m still trying to figure out the balance of how much to consume, what to consume, and what to ignore. It’s all an experimental process on my quest to be more well-informed so I can better position myself to capture opportunities.
Lots of interesting stuff happening at the national level. I wanted to deep dive into three specific cases, 1 that already happened and 2 that could happen:
  • Derek Chauvin’s Conviction
  • Biden’s Massive $2 Trillion Infrastructure Plan
  • Biden’s Plan To Tax Capital Gains
I’m going to leave the politics out of it as possible and focus on the facts, numbers, and possible implications.
Derek Chauvin's Conviction
Former police officer Derek Chauvin is convicted by the jury of murdering George Floyd. This event sparked outcry last May, prompting the Black Lives Matter movement at a national level.
Upon conviction, many people (Barrack Obama, many CEOs, etc.) put out a statement citing the sentiment that justice has been served but that this is only the first step to holding police officers more accountable.
On the flip side, police officer morale is at an all-time low. Historically, police officers could usually invoke qualified immunity to shield themselves from many accusations. Now, there’s some action trying to weaken and even abolish qualified immunity.
The public’s desire is to hold the police department accountable. But how will this affect police officers? Will the absense of police officers lead to more crime? Or can they be safely replaced with unarmed public safety officers? Will they be afraid to do their jobs? Will less people want to become police officers? Will less people want to become involved with law enforcement in general? What will be the future of law enforcement?
Only time will tell.
Biden's Massive $2 Trillion Infrastructure Plan
Less than 2 months into Biden’s presidency, the American Rescue Plan pumped $1.9 trillion into the economy. Pretty much immediately after, Biden is proposing another huge government spend. That’s $4 trillion in his first 100 days of presidency.
I hope this is not a reflection of his spending over his 4-year term.
Okay, jokes aside, let’s take a look at some numbers. Here’s a really nice visual breakdown, and here’s the plan coming straight from the white house.
  1. $621B on transportation infrastructure
  2. $650B on quality of life at home
  3. $400B on caregivers
  4. $480B on R&D
That totals $2.151 trillion. It’s a huge number! As of the time of this writing, the US Debt Clock is sitting at $28 trillion. This would even it out to 30. It’s not a light spend.
Things that I think make sense:
Transportation: $115B on bridges, highways, roads, etc. I can see the need for this.
Transportation: $85B on public transit. I like this and believe US could use better public transit, but I’m cautiously optimistic about this actually happening.
Transportation: $25B for airports. I can see the need for this.
Quality of Life: $100B on high-speed broadband. This is awesome! Internet should be considered a utility, but it’s not.
Quality of Life: $100B on improving electric grid. Too many fires in California lately. This had better be addressed.
Things that I’m not so sure about:
Transportation: $174B to build 500,000 EV stations. Personally, I like this since I own an electric vehicle. But, unless these are fast-chargers, it’s still not going to be like filling up gas.
Transportation: $80B for Amtrak. This sounds very much like a bailout to me. Might as well take over the business and make it government-run.
Quality of Life: $213B on retrofitting 2 million residential/commercial properties. I believe it should be the responsibility of the property owner to upgrade their own property. Why should the government use taxpayer money to upgrade the property of property owners?
I’m neutral on R&D.
Overall, while I see the need to invest in the country’s future, I’m skeptical about the government being able to put that money to good use.
Biden's Plan To Tax Capital Gains
Capital gains is money earned from investments. Just like any money earned (such as wages), you get taxed on this (surprise surprise). The difference is that wages and capital gains are taxed differently. For a chart of 2020 rates, see here (scroll down to 2020 Long Term Capital Gains Tax).
Basically, capital gains tax rates are either 0%, 15% (>$40,000), or 20% (>$441,450). That means if you earned $1M from capital gains this year, $558,550 of that would be taxed at 20%, $518,550 would be taxed at 15%, and $40,000 would be taxed at 0%. Your total tax would be $189,492.50, which is close to a 19% tax rate.
What tax bracket were you in this year? If you’re single and make more than $40,126, your tax bracket is at least 22%, and that can go up as high as 37%.
Most wealthy rich millionaires make most of their money via capital gains and not wages.
So you’re probably thinking, this sounds pretty unfair, right?
Let’s give the investor side some consideration.
Welcome to capitalism, where the engine of growth is fueled by investments. Without investments, there’s no risk-taking, and without risk-taking, there’s no opportunity for reward. If capital gains is taxed highly, then that means there’s more risk in investing. Which could lead to there being less investments, which could slow the economy.
Biden’s intention is to tax the rich to fund his $2T infrastructure plan. The real question is whether or not the investors can do a better job of spending $2T or if the government can do a better job.
And it’s not a straightforward answer. Depending on your views, your answer can differ significantly from that of your neighbor.
Okay, that was quite a lengthy newsletter with lots of words. I hope you found it insightful and meaningful. I also hope that it encourages you to look more directly at the facts than simply aligning with politics. I tried to present it in the most unbiased way possible, being careful to explicitly state when something is my opinion.
That’s all for now. See you next week!
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