Program: Cavuto Coast to Coast
Date: 5/27/2021
Station: Fox Business News
Time: 12:00PM

NEIL CAVUTO: Ray Wang is here to help figure it out, Scott Martin here to help us figure it out as well. Gentlemen, good to have you. Ray first to you on what’s happening in California, because, you know, demand is demand. And even in a state that has high taxes and all these other issues, it’s not hurting real estate. In fact, it may be helping it. I don’t know. But what do you think of that?

RAY WANG: Well, what’s going on is the millennial migration from urban cause, they’re having families, they’re getting married, they need a lot more space. The second, though, is interesting. This is the supply issue. There is a war. There’s a war in the American dream, which is the single family home. And there’s everything being done to get rid of single family zoning, which is driving up what people want, which is single family homes. No matter how small they are, people want a house and a yard. And then the last piece is the unions are tacking on tons of legislation on bills to actually require union labor when we’ve got a labor shortage for construction. So that’s driving up the cost. Those three factors.

CAVUTO: You know, you hear anecdotal evidence to Scott, hopeful homebuyers offering anything and everything, from parties to the seller to incentives and tickets to baseball games just to give them an edge here. It sounds a little frothy to me. It’s more anecdotal than it is nationwide. Hardly a rule of thumb. But does does that worry you, that nature of this?

SCOTT MARTIN: Well, if that stuff is out there, Neil, I’m going to sell my house later today because I love parties and I love ball games. So, look, it does show you, though, how crazy it is out there to Ray’s point as far as how much this battle, I think, was the word he used is going on between buyers and sellers. Now, in the case of California, I think, as was pointed out, this could be a kind of a concentration issue, too, of certain areas being hotter than others. I think somewhat real estate is lagging in some of the price corrections are likely to happen in California going forward when things happen. And let’s say the governorship doesn’t turn over, as some of us expect it to in politics, don’t change. But, yeah, you’re right. I mean, there are a lot of tactics going on now in the seller’s market or the buyers market, I guess, really where they’re trying to get any edge possible. I mean, how many times are you hearing from friends or colleagues that they’re buying homes before they even come on the market on the MLS because folks go in and pick off a pocket listing before they even listed publicly?

CAVUTO: Yeah, I think that’s now counting for close to six percent of all sales that they were never even got to listing. Ray let me ask you a little about something else going on in Washington in this environment, not only all the spending, but all the taxing with it. And part of it was Janet Yellen, the treasury secretary, talking about beefing up the IRS so that they can get more tax dough out of folks. Listen to this.

JANET YELLEN: {CLIP} The IRS is in need of additional resources to over the next 10 years, the American people could see roughly seven trillion dollars fall through the cracks of our tax system. Why? Because many of the country’s wealthiest taxpayers do not pay their full tax bill and the IRS is not nearly staffed up enough to ensure compliance.

CAVUTO: All right, my immediate reaction that Ray, let’s say, even tripled the budget for the IRS to thirty plus billion dollars, you’re justifying it that it can get you seven trillion dollars. Sign me up for that if you can make that happen here. But I mean, it does have a bit of a stretch feel to it. But what did you make of that?

WANG: It is definitely a stretch. I mean, we need a fair tax system if we get rid of all the important incentives and all the kind of special rules and all the deduction favors, if you get a flat tax, we wouldn’t have this problem. People just pay it. I think the challenge really is we’ve seen the abuse of the tax system over the past 20 years by the government using that for going after political issues. That’s a big issue. But the challenge really is can we get to a tax system that’s efficient, that actually represents what it means? You’re getting the right amount of spending, the right amount of benefits we’re spending beyond our control. And so good luck. I mean, if you’re going after the crypto traders, maybe catch some things there might catch some things in other weird deductions, but it is a big stretch. I think we should just get to a much more efficient flat tax system so that we can actually make sure everybody pays what they need and they’re not complicated or make a mistake by saying, oh, I made this deduction instead of this other deduction because I didn’t understand it.

CAVUTO: You know, Scott, I’d be remiss if I didn’t mention this other development on the president’s budget. He’s going to sort of outline officially tomorrow, but we’re getting hints of it today. Six trillion dollars, the biggest budget we’ve ever seen in the United States history. But there’s an interesting wrinkle to this of reports that a built into that budget is the higher capital gains rate taking effect in April. In other words, if you wanted to sell your big winners and this goes through, it’s too late, you’re going to be taxed at that higher rate, at least richer investors are, which would be you. So how do you feel about that?

MARTIN: Hopefully me, if things continue to go well. Look, low hanging fruit to me in the tax system right now, Neil, is the capital gains rate because the stock market performance has been really good thanks to, by the way, the large and small businesses out there know, thanks to the government and all their help that they’re providing. But the administration sees it as low hanging fruit. So no shocker there that capital gains are going to be taken up. With respect to these wrinkles in these numbers. I mean, the numbers are shocking, Neil, more than World War two, cost inflation adjusted, by the way. That’s frightening. And I don’t believe that number being as low it is for a second. We’ve seen these numbers from D.C. The new administration just inflate rapidly over the course of the last, you know, one hundred twenty days. So the reality is we’d be lucky if the number is that low going forward is what they’re going to spend going forward. I think it’s going to be a lot higher and we’ve got to be ready for it.

CAVUTO: You know, you’re right about that, usually it starts out low, even eye popping, as the first numbers are, because they end up getting much higher. We’ll keep an eye on it, gentlemen. I want to thank you both very, very much.