Charles’ Note: I’ve decided to no longer charge for any of my research. Instead, all subscriptions will come with a suggested (ahem… mandatory) tip!
I’m not really doing that.
Or at least not until I have a long chat with a cutthroat tax attorney who’d be willing to sign off on it. But I now have every incentive to.
According to our wise and generous leaders, tip income will henceforth no longer be taxed. And it’s not hard to see the perverse incentive structure this will produce.
Apart from my (probably?) illegal scheme to convert subscription income to tax-free tips, companies really will be incentivized to encourage tipping for virtually everything.
That annoying “add a tip?” screen that seems to pop up at every cash register now?
It’s already so out of control that my dry cleaner requested a tip last month. Now we’re going to see a lot more of that going forward. Every company in America is incentivized to pay their workers virtually nothing, expecting you and me to make it up in tips.
Great!
Why wouldn’t I want to start tipping every dentist, flight attendant, or Home Depot cashier?!
I guess if there is any bright spot, tip inflation might slow down now.
The standard tip when I was a kid was 12%-15%. Today, if you leave 20%, you might get a dirty look from the waiter. But given that every service worker in America just got a pay raise at the taxpayer’s expense, I’m struggling to understand why I’m on the hook to pay the same percentage as before.
It also makes the transition to AI and robotics easier. Patrons won’t grumble about a lack of human interaction if they’re not having to pay the bot an extortion-level tip.
But I guess that’s not for me to decide. Only Congress, in its infinite wisdom, gets to pick and choose society’s winners.
It seems that I’m not the only one who took issue with parts of the Big Beautiful Bill passed by the House of Representatives this week.
Mr. Market also had a thing or two to say about it, and he wasn’t pleased. Bond prices tanked on the news, and the 30-year Treasury yield jumped to within a hair of 20-year highs.
What happens next?
Well, pop some popcorn and get comfortable because we’re about to find out.
To help me make sense of it all I turned to Bill Bonner. As founder of Bonner Private Research, Bill has dedicated his life to understanding market insanity and using that knowledge to invest successfully. The man’s been connecting the dots for longer than I’ve been alive.
We remind readers that we do not take sides… nor do we imagine that we know the future. Our goal is merely to try to understand the primary trend and thus avoid the big loss.
Being on the right side of the primary trend is the real key to increasing long-term wealth.
So far this century, investors beat the stock market (the Dow) three to one, just by being in the best, safest asset class – gold. Can that go for another 25 years? We don’t know… that’s why we’re paying attention to the farce now playing out on Capitol Hill.
We also remind ourselves that the primary trend is not determined by what people want… or what they expect. Instead, they get what they deserve… shaped by patterns of history rather than the conscious efforts of those who live in it.
In the news yesterday… Barrons:
The bond market’s May meltdown has taken a turn for the worse.
Long U.S. bonds sold off Wednesday, pushing their yields through their 5% ceiling… Bond yields and prices move inversely. The rise in yields was exacerbated by a disappointing 20-year U.S. Treasury auction.
That 5% level has been the general cap on the 30-year for about two decades, and the security hasn’t closed above it since October 2023. The 10-year Treasury’s yield, at 4.539% on Wednesday, has moved past its own psychological threshold of 4.5%.
Why are bonds selling off?
Congressman Thomas Massie told us yesterday. Bond buyers have eyes and ears. They see Congress recklessly passing another big spending/big debt budget… and they “realize we aren’t fiscally responsible.”
Bloomberg:
Congress Pulls Tax Cut All-Nighter With SALT Fight Unresolved
Once the House passes the bill, the Senate could take weeks – if not months – to revise and approve the legislation.
The Republican budget proposal… already more than 1,000 pages of exceptions, qualifications, ifs and maybes… is getting more complicated all the time.
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We can simplify.
The idea is to pass a “big, beautiful bill” that changes everything… but nothing. Some spending will be cut. Some will increase. Some people will get a juicy plum (keep reading)… others will get lumps of coal.
The “all nighters” determine which group has the stamina, insomnia, or lobbyists to get what it is after.
Here’s another headline from yesterday. USA Today:
Senate unanimously approves bill to create tax deduction for cash
The deduction would only apply to cash tips and could be claimed by people who earn up to $160,000, which would rise along with inflation.
Wow. Not a single member of the Senate thinks that tips should be treated like any other form of income. Not a one of them, apparently, is worried about raising deficits by reducing taxes.
This is a sign of a country that is not ready for a major change in direction… one that is not desperate for reform.
And how about this?
Donald Trump went over to Capitol Hill. His mission: To make sure Republicans didn’t actually try to cut spending. In addition to telling them not to “f*** with Medicaid,” he told them that he didn’t want “anything meaningful” cut, but was instead focused on “waste, fraud, and abuse.”
This is what you’d expect… from a leader who is not interested in real disruption. No need to make sacrifices. No need to change course. No need to cut “anything meaningful.” Things are basically OK… just trim out the “waste, fraud, and abuse.”
Are we already headed to a $60 trillion national debt… with interest payments that will take up half of all tax receipts?
What’s the big worry?
We’ll cut taxes on tips… and make the deficits even larger.
Have Medicare rolls doubled… to 80 million people (Trump himself added 10 million of them during his first term) since Obama expanded the program?
Do they not cost $11,600 per person?
And couldn’t $4 trillion be saved by turning back the eligibility standards to the pre-Obama era?
Couldn’t America really be made Great Again if some fundamental changes were made?
