Read this headline. The IRS is drafting plans to cut as much as half of its 90,000-person workforce
We're seeing a lot of changes when it comes to taxes. For example, this comes after Trump's new
proposal to slash taxes across the board. And these changes to the IRS are very different than
what we saw before because under the Biden administration, Biden was working to increase
the number of IRS employees by potentially tens of thousands. As an attorney, who's not your
attorney. I can tell you that our tax code is complicated because, well, I keep a copy of the
federal income tax code in my office and it is more than 2,000 pages long with very, very small
font. And now with the shakeup with the IRS and the changes in our tax code, things are going to
change even more. Let me show you what I mean. We have to start by understanding how taxes work
The government has one source of income. It's tax dollars from taxpayers. So here are you
the taxpayers, and you are paying taxes into the United States government. I'll explain how you're
paying taxes in just a minute, but you pay money into the United States government in the form of
tax, and then the government's going to go out and they're going to spend money. Where are they
spending money? Well, Social Security, Medicare, National Defense, interest payments, health costs
income security, veterans benefits, education. The problem that the government is facing with
this model right here is that the government does not believe in the whole act your wage thing
because the government spends a whole lot more money than what they generate from taxes. So
they're spending a whole lot more here. In 2024, the United States government collected about $4.9
trillion in tax revenue from taxpayers, but then they went out and spent about $6.75 trillion in
tax revenue, which means they spent almost $2 trillion more than what they generated. And this
additional deficit spending was financed through more debt. This is where we can start to see a
problem. Problem number one is right here, that there are a lot of different types of taxes and
it can be kind of complicated. And problem number two is we're spending a whole lot more than what
we're generating from taxes. And so this is where now we're starting to see a lot of changes happen
These are the two things that Trump is trying to address. Let me show you what it means. Now again
my goal with these videos is not to discuss the political agenda of the tax proposals. I want you
to understand what's happening from a financial perspective that way you know what's going on
that way you can take better care of yourself, your family, and your community because at the end of the day, it doesn't matter if you believe in Democrat or Republican, money is still green
and you need that money to take care of your family. So now that we've laid the foundation, let's go a little bit deeper to understand the two concerns. Number one, paying too much money
in taxes. And number two, the government spending too much money, starting with paying too much
money in taxes. If you're subscribed to my channel, you might have heard me talk about this before
but there are a lot of different categories of taxes. I broke it up into 10 different buckets
Number one is you pay an income tax. If you go to work, you get paid. That W-2 income that you
generate, well, you have a tax on that. On top of that, you also have to worry about a payroll tax
This is your FICA taxes, your Social Security and Medicare taxes. This is on top of your income tax
and you as the employee have to worry about this payroll tax and your employer also have to pay the same payroll tax If you self and you pay yourself a salary well now you have to pay this twice You as the employer and as the employee you pay double that payroll tax So every employee has to
pay this payroll tax and then the employer paying the employee also have to pay the payroll tax
Capital gains taxes are when you buy an investment and you sell it for profit. That's your capital
gains tax. Corporate taxes are when a corporation makes a profit. That corporation has to pay a
corporate tax. Sales taxes. When you go to the store and you buy something, you got to pay a
sales tax. Six, property tax. You buy a house. Every year you have to pay a property tax. Number
seven, estate tax, also known as a death tax. If you die with a lot of assets, millions and millions
of dollars, and you pass this down to your kids or to other people, well, there's an estate tax on
that. Number eight are sin taxes. If the government wants to discourage something or wants to tax
something a lot, then they can use this sin tax. For example, cigarette taxes. Number nine are
tariffs. We've been hearing a lot about this lately. Tariffs are now taxing imported goods
from foreign countries. And then number 10, I lumped everything else into other. This can be
things like hotel taxes or airport taxes, toll taxes, all the other taxes kind of lumped into
one thing here. So there are a lot of different types of taxes. And this is where we're starting
to see changes. Number one, we've seen a big proposal to cut down the income tax in many
different ways. Number one, Trump has talked about extending the Tax Cuts and Jobs Act
and he's talked about many different ways to reform the income tax bill. We'll see what actually
ends up getting approved and signed by the president. We'll be keeping you posted here
and on Market Briefs, which is my free financial newsletter, but we'll see what ends up happening
with that. In addition, we've been seeing a lot of changes with tariff taxes, where there's been
new tariff taxes imposed, some get paused, some new ones get created. The whole idea being from
a revenue perspective, not from a policy perspective, another way to collect income
for the United States government as those goods come into the country. Are there concerns with this
Absolutely. Could it make the inflation problem worse? Yes. Could it hurt businesses? Sure
Could it hurt consumers? Sure. But we're not focusing on all that right now. I just want you to understand
the tax side of things in this video. But then we have the second layer of concern here
which is, of course, the government spending, because we know that the government has been running this large deficit
meaning the government is spending way more money than what they're generating in taxes
And this is a problem because if the government keeps borrowing more and more money, that money has to come from somewhere
And the United States government can borrow this money from investors, they can borrow this money from China and Japan and other foreign countries
but the largest lender to the United States government is none other than the Federal Reserve Bank
who's a central bank here in the United States. Now, although they're called the Federal Reserve Bank
they're actually not federal, they're not a part of the United States government, they're not a reserve because they're not sitting on any cash reserves
and they're not a bank because you and I can't go there to deposit money, but they have the ability to print money
and lend it to the United States government which is nice because when the government has more money to spend
they can hire more people they can build more bridges they can pay more teachers
they can do a whole bunch of things which is good for the economy especially in the short term
but there's a consequence to that because if the government can just print
this unlimited amounts of money why are we paying taxes in the first place? Why do we have all these taxes if the government can just print and borrow this money Well the reason why is because there a consequence to all that money printing There a consequence to all the deficit spending And the consequence is of course inflation
Inflation hurts the average person, but it benefits investors. That's why if we take a look at the last five years
we have seen median incomes go up by around 20%. We've seen inflation at around 23%
That's the reported numbers. Many people have seen inflation much higher than that
But the reported inflation number is 23%, which is higher than the median income growth
while the stock market has gone up by around 80%. Inflation disproportionately benefits the investor while the average person gets hurt
And this is not a new phenomenon. This is not something that started in 2020. This has been going on for decades, decade after decade after decade
We've been seeing the same thing. Even the Federal Reserve Bank says that we don't want 0% inflation
They want 2% inflation. 2% inflation is low enough that the average person doesn't notice it day to day
but it continues to eat away at the value of your savings
It continues to eat away at the value of your salary, which makes the average person poorer
it makes the middle class smaller, and the people that understand this get wealthier and wealthier
because they get to keep winning in this system. But this is where I want to talk about what's going on here right now
Some people hate it, some people love it. I really don't care. I want you to understand what's going on
The first thing is the Trump administration in this new tax proposal
It has a lot of tax cuts, but also spending cuts as a way to reduce this
Now, there's also a lot of changes being done by DOGE, the Department of Government Efficiency
to reduce some of the spending and waste that's being done by the government. Some of the ways that DOGE is doing this is by reducing government funding
Other ways that DOGE is doing this is by laying people off and cutting departments
The whole idea being, let's reduce some of this government spending while also reducing some of these taxes
based off of the numbers that I'm seeing online. Again, this is just proposals
These are just numbers, it's not for sure. The goal looks like it is to cut taxes
by around four and a half trillion dollars, not over one year, but over a number of years
while also reducing the spending budget by around two trillion dollars. And this now ties into the whole purpose of this video
which is laying off a big chunk of the IRS workforce. What does that do in this situation
Well, it doesn't really change the tax code. I mean, you can have the same tax code with less employees running it
But the whole idea here is it is reducing the amount of government spend
But this is the part that gets confusing because we don't know what the impact of this is going to be
I don't know as a person outside of the government how many employees the IRS needs
I don't know if they need $90,000, $500,000, or $20,000. I have no idea
And this is where it looks like what the Trump administration is trying to do
is they want to see how they can get the same IRS doing whatever they need to do with half the cost
So what does this laying off of IRS employees mean for your taxes? Well, right now, nothing
However, if you are waiting on an IRS refund, I have read some reports online
that because of the timing of these layoffs or potential layoffs, it could increase the amount of time
you potentially need not for sure but potentially need to get that IRS refund We don know for sure but this is what some people are saying According to the IRS website if you are waiting on a refund it should take about 21 calendar days to get that processed
If this takes longer, we'll ultimately see how long that takes. But there is one thing that I do wanna mention
about tax refunds, which is a little bit of a tangent from this video
which is if you are waiting on a refund, this is not a bonus check. This is money that you overgave the government
This is a loan that you gave to the government at a 0% interest rate
The reason why I'm saying this is because there's a lot of false emotions around tax refunds
People get excited when they get a big tax refund. People get excited about the idea of tax refunds
But what a tax refund is, it means you gave the government too much money in taxes in the first place
And then, because you gave the government so much money, they hold on to that money
They spend that money, and then they get that money back to you months later without paying you any interest
So if you are getting a tax refund, that means you did something wrong
It means you paid the government too much money in taxes to begin with. And this is where understanding how some of this tax stuff works can be very beneficial
And I get it. You know, if you're working a job, paying thousands of dollars for an accountant just is not feasible
But this is where there are a lot of free softwares out there. There are a lot of tools that you can use that are inexpensive that you can look at to potentially help you make sure you're optimizing how much money you're paying in taxes
Because one of the largest costs for Americans is, of course, taxes
There are many different types of taxes out there. And as somebody who has spent a lot of time studying the tax law, what I can tell you is that our tax code taxes income differently
and a tax code incentivizes people to become investors. Or some people like to say
it punishes you for being an employee. What I mean by that is
if you earn your money as an employee versus earn your money as an investor
the investor can make the same amount of money as the employee but pay less money in taxes legally
When you earn your money from your investments, you get to qualify for lower tax rates
or higher tax breaks. When you earn your money as an employee
you are getting what's called ordinary income or earned income. It's the same thing. But what that
means is you are paying the highest tax rates and you get the lowest tax breaks. This is why it's
so important for you to understand this because we all know that taxes are very expensive. I don't
care who you are. Taxes are expensive. And if you can understand this, you can use the tax code to
your advantage because what every single wealthy person understands is that the tax code is a rule
book. Most people want to argue about it. Most people want to complain about it. I want you to
understand the game. I want you to understand how it works. That way you can take better care of
yourself, your family, and your community. But you can't do that unless you understand the rules of
the game. President Trump is now considering getting rid of the income tax. Take a listen
As I said in my speech last week, instead of taxing our citizens to enrich foreign nations
we should be tariffing and taxing foreign nations to enrich our citizens
The Fair Tax Act of 2025 was a bill proposed which would effectively abolish the IRS