Today’s episode centers on taxes, who pays them, who pays the most, and why. Our guest is Tom Wheelwright, author of Tax-Free Wealthon how to make more money and pay less in taxes.

The rich are getting richer…and the idiots are going to school and paying taxes.

That’s the premise to understand. Somebody has to pay the taxes. But to get richer and pay less in taxes, you have to know where to earn your income. Let’s back up.

When the New York Times attacks President Trump for not paying taxes, Robert shares, it’s because they are not explaining that there’s a reason he doesn’t.

He doesn’t have a job.

He doesn’t take a salary as POTUS.

Tom helps explain. The tax law is built for entrepreneurs, professional investors, and the like. It’s built for the government “sharing on the investments” they make.

"Basically the government puts up part of the money, and they (citizen) put a part of the money, and they end up not paying taxes.”

This is the way the tax law is structured. It’s not going to change under Biden. All that will change is WHERE those tax incentives lay. The fact of tax incentives themselves, will never change, according to Tom.

Who gets the tax incentives, then?

The average person won’t get those incentives. The rich will still get the tax breaks, says Robert. And Tom agrees.

There’s nothing in Biden’s plan that says taxes are going down. Taxes will still keep going up. He’ll tax the rich, or the highest income earners.

3 types of income and how they are taxed

Ordinary income, portfolio income, and passive income. Fundamentals of Rich Dad, Poor Dad.

Ordinary income is income you earn, and includes 401k’s.

Portfolio income is from investments like stocks, bonds, mutual funds.

Passive income is income from investments into real estate, oil, gas and other types of productive activities.

Which one of these three pays the least in taxes? Passive income. This is because you are doing what the government wants you to do. They give you the incentives. If you do such and such, we’ll contribute to it. (By way of tax incentives and breaks). If you don’t put your money in passive income production, the government taxes you accordingly and takes their money. As Tom puts it, the government “always comes out ahead”.

Robert reminds us that the proliferate idea of ‘go to school, get a job, work hard, save money, put your money in a 401k’ is ordinary taxes, and those folks will always pay the highest tax rates.

The rich don’t pay taxes?

They don’t. Tom and Robert break it down. The rich put their money into portfolio or passive income, and take advantage of the tax incentives that the government has set forth. President Trump doesn’t pay taxes because of where his income is primarily from, but if you are making ordinary income, saving money, putting your money into 401k, then you’ll pay the highest taxes, regardless.

The rich have a better financial education. It is Roberts belief that the idea of typical education, college, ordinary jobs, saving money is not teaching our children the financial understanding they need in order to pay less in taxes and make more income.

Tom begs the question, “Are you happy with the taxes you pay now?” Because, as he puts it, “they’re not going down”. But if they’re not going up for you, and are instead going up for the rich/corporate side, you (the ordinary income earners) will feel it. The rich are the employers. And they will pass that tax burden on to you.

The truth about minimum wage

Robert brings up the point of raising minimum wage. If Starbucks employees start to make $15 an hour, it will push prices up elsewhere. To raise minimum wage is to get inflation. If we don’t have inflation, we’ll have deflation (a depression).

“They want to push your wages up so that you can pay more taxes…that means we’re going to have inflation in everything.”- Robert

“If you're sending your kids to school, I'd yank them out right now and slap some sense. Put some capitalists information into their head. Because you go to school, get a job, you save money and you put [money in] a 401k, you're going to pay the highest taxes. And they're going to keep driving that up so they can get the tax base up so they can pay off the debt.”—Robert Kiyosaki

Tom reminds us that inflation itself is a tax. And State, local and Sales taxes are continually going up as well. If the Fed doesn’t raise your taxes, the States will.

A good example from Robert is that if they raise the property tax on a building used for rental property for the poor, the rent will, inevitably, go up.

"The Rich never take the hit.”

The Green New Deal

Robert is already making changes, financially, because of The Green New Deal. A shift from fossil fuels to more sustainable energy, with the new administration. These tax incentives and breaks are not going away, but they are going to shift to these areas.

What’s ironic is that the ‘socialists’ are creating the tax breaks for the rich that will inevitably make the capitalist richer.

According to Tom, the socialists can’t make the clean energy/green deals happen. They can fund them, however. And they fund it through tax breaks. The capitalists get the funding and pay less in taxes. The difference is that it’s “clean energy, but in the capitalist way.”

Tom says,”they're complaining about the rich not paying taxes because they pay taxes. If they didn't pay taxes, they wouldn't complain about the rich not paying taxes.”

For Robert, The Green New Deal represents more tax breaks. And Tom agrees, saying there will be unbelievable opportunities that come with it.

“This is the biggest thing since the internet, in my mind. Just a whole different economy, a whole different set of incentives, a whole different set of opportunities.”—Tom

For Robert, he sees average people that think saving money is smart, 401k’s are smart, earning more money is smart. “But that’s not it, is it Tom?” Not if you want to get rich and pay less taxes.

Tom agrees and adds, “people who pay high taxes also get the lowest returns on their investment.” Why? Because the type of things that do get the highest returns, are the things that give back the biggest tax incentives/breaks. It’s a combination of understanding that and understanding the tax law.

Tom’s book, “Tax-Free Wealth”, is the basis of capitalism, says Robert. It is a bible as to how to become a capitalist.

Tom says if you literally want to make more money and pay LESS tax, then read his book. It’s about how he does things the government wants him to do (with his money) that are more productive, that give higher returns, and give him control of his life. NOT 401k’s and profit sharing pensions that you have no control over.

The ordinary income earner is always going to pay the highest taxes, and the rich will always get the tax breaks…they’ll always be there.

“Debt is tax free money.”—Robert

They don’t teach you this in school, reminds Robert, but the school/job/save/401k/no debt way is NOT the way to reduce your taxes and earn more money.

Visit Tom Wheelwright’s website at wealthability.com and check out his book, “Tax-Free Wealth” for more information.