Tax the Rich image

Tax the Rich?

It’s that time again—election time. And in true form, politicians are willing to say and do just about anything to get elected. Generally, the things that politicians say during an election year are contradiory at best and downright idiotic at worst. But this time around, the Republicans are doing their very best to sound like socialists by attacking one another for being rich and not paying enough taxes.

The reality is that the rich are easy to pick on right now because everyone is hurting financially. But it’s important to define what you mean when you say rich—because there are many different types of rich people in the world.

One of the very first lessons I learned from my rich dad was the CASHFLOW Quadrant.

  • E stands for employees. Whether they are a janitor or a CEO, they are an employee of a business.
  • S stands for small business or self-employed. These are small business owners and specialists. Many highly educated professionals such as doctors and lawyers fall into this category.
  • B stands for big business. These are companies with 500 or more employees.
  • I stands for investor. These people are always looking for other people’s money to fund their business projects.

In each category of the CASHFLOW Quadrant, there are many people who would be considered rich because they make a lot of money. However, the real dividing line between the true rich and those who simply make a lot of money is how much money they actually keep in their pockets. Those with high financial intelligence can make a lot of money but also keep that money come tax time.

As my tax advisor, and author of Tax-Free Wealth, Tom Wheelwright, teaches, the tax code is simply a tool for governments to get you to do what they want you to do. If the government wants cheap housing, they’ll give you a tax break to build it. If they want oil discovery, they’ll give you a tax break to do oil exploration. If they want to encourage debt, they’ll give you a tax break for debt. In this election year, there will be a lot of talk about taxing the rich. This is funny and depressing because the only rich who pay lower taxes are those who do what the government wants—stimulate the economy by creating housing, industry, jobs, and more.

Those with a high financial IQ—those on the B and I side of the CASHFLOW Quadrant—have a lower tax rate because they’re rewarded for doing activities that the government needs to help the economy. There are many rich who already pay extremely high taxes—in fact, for those on the E and S side of the CASHFLOW Quadrant, the more they make the higher their percentage in taxes paid—sometimes up to 40 percent of their income.

Again, it’s only the rich who build the economy and provide jobs who are rewarded with tax breaks. But that’s an inconvenient truth in an election year when rhetoric gets you further than facts.

This election year, focus on the facts and not the rhetoric. As you get rich for all the right reasons, you shouldn’t be punished for it. You should be rewarded. And my hope is that all of you will experience the benefits of building a better world through financial intelligence.

Original publish date: March 06, 2012