How the Rich Legally Reduce Taxes and Build Wealth

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0:58Hello, this is Robert Kiyosaki, and a very important part about money is a subject called taxes. And since we don't study money at school, if you really studied it, you would find out that for money to exist, taxes have got to exist. and I'm going to say some things today that'll disturb some of your true blue patriots out there who think that paying taxes is patriotic. That is the biggest lie told to people, that when people look at the real formation of the United States of America, it was really founded in 1773 with the Boston Tea Party, which was a tax revolt. And if you look at it from that point of view, what I'll say, what I'm going to say, and my advisor and my educator on taxes, my mentor is Tom Wheelwright.

1:58So if you have real red, white, and blue blood cursing through your veins and you think paying taxes is patriotic, your blood may turn cold right now because you've been lied to. So anyway, a quick history here. Taxes can only exist unless there's debt and the U.S. dollar is debt. And the way they pay, get the money back is via taxes. And so it's going to be an interesting program. We don't want you to do anything illegal because you don't. because you don't if you know what you're talking about. But as you know, I'll say it again, and I say it again. Our school system teaches us nothing about money.

2:45And if you really want to understand money, you must understand debt and taxes. Because in 1913, the Federal Reserve Bank was created. The Federal Reserve Bank is not federal. It has no reserves, and it's not a bank. and also what was created was the 16th Amendment, and the 16th Amendment allowed there to be taxation. So when you look at history, you'll see 1913 was a pivotal year. So if you really want to have an education about money and finance and financial education, it's about debt and taxes. So with that, my guest today is my personal tax advisor. He's my educator. He's my mentor. And he's my go-to guy before I do anything because I refuse to pay taxes legally.

3:42And you don't have to pay taxes if you have a great advisor like Tom Wheelwright, who is my advisor. So, Tom, welcome to the program. Thanks, Robert. It's always good to be here, always good to be with you, and always good to be talking about taxes and how to be patriotic and not pay taxes instead of being patriotic and paying taxes. It's interesting, isn't it? You know, it really is because the reality is for some people to be patriotic, they have to pay taxes. You know, the E and the S, pretty much they have to pay taxes if you're an employee, self-employed, superstar. If you're going to be patriotic, you do have to pay taxes.

4:22But you're just being a silent partner with the government, basically. Whereas if you're, you know, like the rich, like you, Robert, if you're really contributing the most to the economy and the most to what the government wants done, you actually end up paying little to no tax because the tax incentives overwhelm the amount of tax that you'd pay otherwise. Right. So let me show you this. This here is book number two in the Rich Dad series. It's called The Cash Flow Quadrant. so E stands for employees. So you go to school, they tell you to go to school, get a job. But if you're really smart like Tom, you become, S stands for super smart.

5:05You become accountants, attorneys, and doctors. So, Tom, who pays the most taxes of these characters here? Oh, definitely the S, definitely the super smart. The more degrees you have, the more tax you pay. Thank God most of your friends, Tom, are like me. students. We didn't qualify for this one here. That's for sure. You educate all of us. That as a general rule, this is worldwide too. This is not just US. Right. And so Tom and I have traveled the world and employees pay about 40 % in taxes. That's right. I can say about that. And that's worldwide. That is, that's a, that's a pretty standard rate worldwide.

5:49It's going to be anywhere from 30 to 50%, but on average 40%. If you make any kind of decent wage, you're going to be up in that 40 % range. Correct. And if you're a doctor, a lawyer, self-employed, or like somebody says, I'm going to quit my job and start my own business, you become a small business owner or a specialist. I'm going to be a web designer. How much of these guys pay in taxes here? They can get all the way up to 60 % in tax because they're paying not just the employee's share, They're paying the employer's share as well. So they pay two taxes, employer and employee. So that's what happens when people quit their job and start their own business without talking to Tom first.

6:34Okay, so B stands for big business, which is, according to the tax code, 500 employees. But B also stands for brand. And most people don't build a brand here. So big business, like the big corporations, how much do they pay? Typically around 20%. 20%. And again, what Tom instructs people, advises people, it's because we're doing what the government wants done. So why would the government give a tax break to big business? Well, because that's where the jobs are, right? So one of the government's primary goals is to create jobs and employment. And so the big business doesn't pay the taxes. in the B quadrant, it's the E people who work for the big business who pay the taxes.

7:21Right. The government needs people to hire these people here. Correct. And so if you hire a lot of people, they'll give you a tax break for that. And then I stands for investor, but it's an inside investor. In other words, over here, a lot of people invest, but they invest in a 401k or an IRA. They invest in public market, like stocks, bonds, mutual funds, ETFs, which I don't have any of those things. I don't want them. But over here as an insider or investor, how much do they pay? Well, they're the ones who get down to zero and pay zero tax. So if you enjoy being over here, you can tune out right now.

8:09But if you want to find out how to get over here, this is your program, especially here. Witchesworld, and they'll explain to you how you can get over to this site here. Because you can do it legally. And this is a funny thing that Tom and I talk about. Who cheats the most on taxes, Tom? Oh, absolutely the S. These guys are the biggest crooks. Every time I go into a small, you know, a sole proprietor or something like this, and they said, if you pay cash, we'll give you a break. When they say, well, you pay cash, what does that mean, Tom? They're saying they're not going to report that to the government.

8:51How else do these guys cheat? Well, you know, they take deductions for their personal expenses. They don't record their information properly on their books. Some of them have two sets of books, one for the taxman and one for themselves. So it's just, you know, that's what they do because they don't know any better. And that's what Al Capone did, didn't he? That's how he got caught.

9:24So the biggest crux are on this side here. No, this side. And the legal guys are on this side here. So, Tom, would you mind giving us a little your background? What qualifies you to say such blasphemous things? Sure. So after growing up in Salt Lake City, Utah and being a Mormon missionary in Paris, learning how to get rejected in French, I spent a couple of years at the University of Utah to get my undergraduate degree in accounting and another couple of years at the University of Texas to get my master's degree in accounting, specializing in tax. And I spent seven years with Ernst & Young, one of the largest CPA firms in the world, three years in their national tax department.

10:05I spent four years as the in-house tax advisor for a Fortune 1000 company, 14 years as an adjunct professor in the Master's of Tax program at Arizona State University, 25 years buying, building, selling CPA firms, and now run a network of CPA firms around the world. So I've been around the block a few times, Robert. And you and I have been around the block a few times together, frankly. And it's really funny because we travel all over Asia, America, Europe, Africa, and everybody comes up to us, no matter which country we're in. And this is pretty universal. These guys are capitalists and these guys work for money here.

10:53Right. You know, I'll give you a definition for a capitalist. A capitalist commodifies labor. I'll say it again. A capitalist commodifies labor. So a capitalist will hire employees or hire accountants and attorneys and make money off of them. That's right. And that's why they get the tax breaks. But no matter where we are in the world, at the end of every event, people come up to you and say, what? you can't it's great information you just can't do that here no matter where we are we'll be in california and they say you can't do that here we'll be in south africa and they'll say you can't do that here we're in uh moscow what do they say you can't do that here it's funny and tom breaks out because tom's an a student i'm a c student tom breaks out the code and shows them in russia this is where it says you can do it But I just can't believe it.

11:59The funniest one was when we were in Russia with all of those really rich, really rich entrepreneurs. And they're all going along around saying how they cheated until the one guy goes, yeah, I don't pay any tax. I don't cheat at all. This is how I do it. And it's completely legal. And so we're going, yeah, exactly. That's how you do it here. Yeah. it was it's really interesting it's i hear that wherever we are in the world people come up with thomas say well that'll work there but it won't work here right and the place it doesn't work is inside the brains here you're going to be finding out how you can legally come on to this side here legally you don't have to cheat these are the tax cheats here this is al capone and gang here.

12:55This is the guy that's stuffing cash in his pocket. This is the guy at the swap meet dealing only in cash. It's the guy doing the cryptocurrency and not reporting it. Yep. Yeah. Learn how to come over here legally. And actually, once I understand this side, it's more fun. Oh, yeah. It's so much more fun. I mean, I look at investments completely differently. Or if I get something new, I'll ask Tom first so I can see what Tom sees. Is that true, Tom? And there's so many different ways the government wants you to not pay tax. Well, for sure, anything the government wants done, there's a tax incentive for it.

13:35So if they want solar energy, there's a tax incentive. They want electric cars, there's a tax incentive. They want agriculture. I've never yet met a farmer who paid taxes. It's just all tax incentives. So you just have to look at where do I want to invest and how do I do it in such a way that I don't pay taxes because I'm doing it the way the government wants me to do and not doing it the way I want to do it. Now, on the bright side, though, Tom, Maselli just hit two oil wells. I was being paid$50 a barrel, and he hit two oil wells, one in Louisiana, one in North Dakota, the Bakken, pumping out 800 ,000 barrels of oil.

14:17And oil went from$50 to$100 a barrel. The rich got richer, didn't they? For sure. For sure. And when you invested in that, you got tax breaks. Yeah, and I pay no tax on that. So understand that's why Tom is valuable. So everybody's crying. I feel sorry for the poor and middle class because the first thing that happens is food prices go up because oil provides fertilizer and trucks to carry things to market and gasoline. I just can't believe what's happening to this country. On the other side, though, I'm making more money and paying less taxes. So, Tom, how am I paying less taxes and making more money if I drill for oil versus if I invest in an oil company?

15:09Let's say I invest in Exxon versus I drill for oil as an entrepreneur. What's the difference in taxes? Well, it's really looking at what does the government want. So if you invest in Exxon, you're not doing anything to produce additional oil. You're just trading in a paper asset, right? Just trading in security. So you're not actually drilling for oil when you invest in Exxon. But if you actually drill for oil like you do with Mike, then the government says, well, if you actually drill for oil, then we're going to let you write off 100 % of your investment in the year that you drill for the oil.

15:44So we're going to contribute 40 % to 50 % of the initial investment. And what's even great in oil is, and we're not even going to take 40 % or 50 % when it produces. We're going to take only 85 % of that. So you get actually, oil is the only place you get a benefit both going in and coming out. We'll be right back.

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19:03So when President Biden took office and cut off the Keystone XL pipeline, but America's getting met the capitalist. You know, these guys here, the people on the B and the I side are getting richer and richer and richer and richer and richer. But these guys here or 401k cannot. I think it's kind of funny. Is that true, Don? No, it is. They actually are not even allowed to invest in some of the oil deals because the oil deals require a certain level of income or a certain level of wealth. So the rich get richer. And so to understand debt and taxes as being a capitalist. Right, Tom? No, for sure.

19:50For sure. Well, what's great about what you do, Robert, is that the more the fewer taxes you pay, the more money you make. And not just because you don't pay taxes, because because what you're investing in produces more more wealth, more revenue, more cash flow than anything you can invest in in the stock market. Yeah. And my friend Dave Ramsey also says live debt free. Tom, am I deeply in debt? Very deeply in debt. Why? Taxes. Tax free money. And not only is it tax free money, but you're not just leveraging up your investment returns, you're leveraging up your tax benefits. So you get you get all the tax benefits that the bank doesn't get.

20:36You get to use the bank's money for tax benefits. It's awesome. And what's really interesting because I invest with Kenny McElroy in real estate. So let's say he buys a building for a million to keep the numbers simple. He increases the rent so that he refinances the building at 2 million. So we have a million in debt. He borrows out another million. We now have 2 million in debt. And he and I get the million dollars extra. How much in tax do we pay for that extra million? Zero. Zero. And who pays the debt? The tenants. The tenants. So I'll read you something because this comes from this book here, The Capitalist Manifesto, because years ago, 1965, I read this book here, The Communist Manifesto by Marx.

21:23And Marx was just like my poor dad, an academic. And the trouble with academics is they're poor. They have no idea how capitalism works. So stay tuned at this program to find out how capitalism works. So once you understood this, I understood my rich dad, why he did things the way he did. And my poor dad hated my rich dad. My rich dad's my best friend's father. And rich dad had all these houses, and he paid no taxes, and he owned hotels. He was playing monopoly and rich dad paid no taxes. And my poor dad being a communist, but didn't know it, he hated the rich. And that's what Marx did. Marx hated the rich.

22:13But I want to read you a quote from Marx. So all of you who believe that paying taxes is patriotic, this comes from this book here, the capitalist metal festival and this book here the communist metal festival it says here a heavy or progressive or graduated income tax is necessary for the proper development of communism i may read it again to you this is marx's words if you want to verify this read this book here, okay? It says, a heavy or progressive or graduated income tax is necessary for the proper development of communism. And that's what's happening in America. So if you want to be a communist, you stay on this side here.

23:13You want to be a capitalist, you come to this side here. So anyway, that's why Tom is one of my go-to guys, because the less tax I pay, the more capitalistic I become, the freer I become. Any comments on that, Tom? Well, yeah, because part of freedom is being free from the government, right? Being free from doing what the government requires you to do. So you can invest in a 401k and pay lower taxes, but you're subject to all the restrictions on how you invest, when you invest, how much you invest, when you take the money out, how you're being taxed. All of that is subject to restrictions. What you do, Robert, doesn't have any restrictions.

23:53So you can invest the way you want to invest, when you want to invest. You can use the money the way you want to. And as long as you, again, follow the pattern that's in the tax law, you're never going to pay tax. Right. And do I have a 401k or IRA, Tom? No. Would you advise me to have one? No, it would make absolutely no sense for you. Yeah. Because I'm a capitalist. So anyway, with that said, you can still fight back by getting rich and not paying any taxes legally. So, Tom, what are tax codes? You call them incentives, but what do you mean by incentives? Well, so really there's only one line in the tax law that raises revenue.

24:37It says all income is taxable unless we say it isn't. And there's another line that says nothing's deductible unless we say it is. And then there's charts and tables to tell you how much tax to pay. But there's 6 ,000 pages of tax law, and 99.9 % is an instruction guide, a roadmap, if you will, to reducing your taxes, saying, look, if you do this, then you get this tax benefit. If you invest in oil, you get this tax benefit. If you invest in solar, you get this tax benefit. If you invest in housing, you get this tax benefit. If you invest in jobs, you get this tax benefit. So it's all these tax benefits.

25:13The reality is, so here's another thing interesting, Robert, is that the government actually makes really good money on these incentives. So this isn't a one-way street. It's not just the taxpayer who does well with these incentives. The government gives the incentives not just for social policy, but also because they actually make a return on investment. I mean, they are your partner. So they do get revenue back, okay, and they do really well. Robert, I actually, in my new book, I talk about what happens with an IRA or 401k. The only investment that the government supports that it doesn't get a good return on is an IRA or 401k.

25:54Yeah. And that's because Wall Street gets rich. That's right. And if you remember something, the Federal Reserve Bank is there to do one thing, protect the banks. And in 1965, when I went to the academy, I read this book here. It was eye-opening. So anyway, that's why I speak and I teach. The way to fight back against Marxism is financial education, because that's what Marx did not understand. When I read Marx's background, he was just like my poor dad. very intelligent man, highly academic, hated the rich, just like my poor dad hated our rich dad. It's a classic case of Marxist versus or communist versus a capitalist.

26:45So what Tom and I are, are capitalists. Would you say that's true, Tom? Absolutely. And just remember this one definition of a capitalist, a capitalist will teach somebody to fish. A Marxist will give people fish. Very, very big difference there. You can become a capitalist, make more money, and pay less taxes legally. And the good thing is, as I started this whole program, this is not just in America. It's all over the world, right, Tom? Everywhere. Everywhere we've been, Robert. Everywhere. But they'll never teach you that. And if your friends are academic types, they'll say, well, you're a crook.

27:24You can't do that. Is that right, Tom? No, that's exactly what they say, that to not pay tax means that you're bad. It means that you're cheating. It means you're doing, no, it just means that you're doing what the government wants done and you understand how the tax law really works and is meant to work. Yeah, and this is book number two, the cash flow quadrant. These are the guys. Do they have much escape, Tom? Well, the E quadrant has no escape. They have no escape. IRA, 401k, that's the best they're going to do. The S quadrant, they do. Actually, if they were to learn to do what the B quadrant did, they can do everything the B quadrant does.

27:59They just choose. That's a financial education issue. So being in the S and acting like an S is a financial education issue. You can be a small business and act like a big business and you get the same benefits. Yeah. Interesting thing is these guys here can do this. They can. If they have a good attorney also, right? Right. Right. So that's why I have Garrett Sutton and he is our attorney. But you have to act like these people. You can't act like these people. Right. Is that correct? No, it's exactly true. If you behave like the bee in the eye, you get the same benefits as the bee in the eye.

28:37You don't have to be huge to do it. You can shift your thinking over to this side here and do it legally.