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Why Does the Rich Pay Lesser Taxes than the Poor and Middle Class?

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Why Does the Rich Pay Lesser Taxes than the Poor and Middle Class
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Have you ever cared about knowing how the tax laws operate, who pays the least taxes, could the poor and middle class be paying lesser taxes or does the rich pay lesser taxes? This is one interesting finance aspect you’ll want to know.

Originally, taxes were temporarily levied in order to pay for wars and damages from unfortunate experiences.

The presidents and kings would kindly let the people know what is at hand so taxes should be paid as a way of relieving the nation from financial losses.

According to Robert Kiyosaki, England made income taxes a permanent levy on its citizens in 1874 and so did it make its way into law in the United states in 1913.

Taxes were initially levied only on the rich, so the middle class and the poor had no reason not to support taxes with their votes and full support

The idea of taxes were made popular by the government as a way of taking from the rich to punish the rich.

Hence, the middle class and the poor accepted taxes should be passed to law to take from the rich.

With the Robben Hood theory of economic, take from the rich and give to everyone else. It was wrongly seen as a way to close the gap between the rich and the poor.

Well, once the government got a taste of the money, their appetite grew, soon they needed more money and sooner the law was rolled down to the middle class and the poor.

Hence, it totally backfired on the same set of people who voted it into law

The Rich Pay Lesser Taxes Because they Understand Tax Payment Laws Knows the Rules of Taxes:

The rich saw taxes as an opportunity so they play by another set of rules.

They understand how a corporation works so they use their money to hire the middle class and the poor who works hard for money and pay the taxes from them.

The knowledge of a legal corporate structure gives the rich a vast advantage over the poor and the middle class.

Rich people always found a way to outsmart the poor, the middle class and the intellectuals because they understood the power of money which wasn’t taught in school.

According to Robert Kiyosaki, best selling finance author of rich dad poor dad, an average American works 5 to 6 months yearly for the government to cover up for their taxes.

In other words, the harder you work the more you pay in taxes, hence the idea of take from the rich bounced back to punish the same class of people who voted for it.

The rich have the money, power and intellect to change things.

Instead of just accepting the taxes, they hire smart attorneys and accountants to find out how to minimize tax burdens to the very best.

The real estate sector has great tax advantages, because you’re solving a problem for the government so they reward you with huge tax breaks for providing housing facilities to citizens.

In the real estate sector, as long as you don’t liquidate and keep trading up in value, you will not be taxed.

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Three (3) Money Rules that Makes the Rich Pay Lesser Taxes than the Poor and Middle Class:

1. The Harder You Work For Money, The More Taxes You Pay:

The poor and middle class work for money, they trade time, energy and resources to work for money. This explains why the tax law backfired on them.

They work for ordinary income, which carries the greatest tax payment burdens.

2. The Harder Your Money Works For You, The Lesser Taxes You Pay:

Rich people know the tax laws so they use it to their favor, they make their money work for them so they pay lesser taxes.

Hence, rich people work for portfolio and passive income.

ALSO READ: 6 Most Painful Ways People Lose Money Without Knowing.

3. The Harder Other People’s Money Works For You, You Pay Even Lesser Taxes:

Rich people work with OPM (other people’s money), this is because in the tax laws when you work with other peoples money you pay far lesser taxes, which could be close to paying even zero taxes.

However, it takes the highest level of financial education to deal in this zone.

The rich work for passive income.

Four (4) Income Class that Affects How Much People Pay in Taxes.

why does the rich pay lesser taxes than the poor and middle class
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4 Income Class that Affects How Much People Pay in Taxes.

According to finance teacher and and best selling author of richdad, taxes are levied on people according to their income quadrants, which is as a results of the cash flows in each quadrant.

So lets talk about them.

1. Employees:

The employees pay higher taxes because of their sense of job security. “Oh I want a safe secured job with benefits, I want a steady paycheck” – Employees.

Hence, they pay even higher taxes than the entrepreneurs and investors because they work hard for money.

According to Robert Kiyosaki, in his rich dad poor dad book, he said it makes no sense working 5 months for the government every year on tax payment.

Unfortunately, nobody tells them this.

Well, this is because they aim for job security, they don’t care about how much taxes they pay because all they want is a steady paycheck.

In general, employees are those that work 8 hours per day for a paycheck.

They don’t own businesses, they aren’t investors and have little or no knowledge about finance, business or marketing management.

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2. Self Employed / Small Business Owners:

The self employed believe they can always do it themselves. They believe no body does it as good as them, so they believe in their own ways.

However, the problem with the self employed is that they can’t take a break from work and keep making money.

When they stop working, their income also stops because they do all the works themselves.

Hence, people in this quadrant think they own businesses, however they only own a job.

A person here could be an engineer, doctor, lawyer, accountant, movie star or athlete.

They are mainly specialist.

Well, they could also make a lot of money, however they pay the highest amount of income taxes and nobody tells them that.

RELATED ARTICLE: Difference between Assets and Liabilities that Makes the Rich Richer.

3. Big Business Owners

These are the entrepreneurs, these are the people who run businesses and have people working for them. These people don’t work for money, they have people working for them.

Hence, they always want to get the best people in their working team.

Success here demands team leadership skills, technical skills and human resource (HR ) or people’s skills.

They pick up ideas and turn them into massive business empires that creates jobs and build wealth.

This is why they pay lesser taxes than the employees and self employed because they are solving a problem for the government.

The tax laws rewards people who create jobs and helps to reduce the burdens on the government. Now you see why the rich pay lesser taxes than the poor.

The rich know the law so they play it to their favour.

One sector that gives a huge tax break is the Real estate business industry. The government compensates real estate business personnel for providing shelter the citizens.

Entrepreneurs like Bill Gates, Jeff Bezos, Elon Musk, Henry Fold, Walk Disney, Thomas Edison, Bernald Arnault provide jobs for people and help the government tackle unemployment.

4. Investors:

Investors know how to build wealth with others people money.

The investors pays the least amount of taxes, they pay almost zero taxes for assets that yields huge amount of money which could last from generation to generation.

Investors use OPM (other peoples money) and literally get a huge tax break on their investments.

They earn passive income.

For instance, the real estate industry is a great way to take tax benefits on other peoples money.

This is because you’ll get a deduction not just for the portion of the real estate you paid for with your own money, but you also get a depreciation deduction for the portion paid for with the bank’s money.

One of the world’s most successful investors today is Warren Buffett.

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Brief Summary:

Good knowledge on tax payment is important because taxes could be the largest expenses on our income.

Taxes operate by quadrant, so if you really what to pay lesser or zero taxes, move over to the “B” or “I” quadrant.

However, choose the quadrant that gives you fulfillment and try to earn more money.

Well, which ever quadrant you are, just be at your best finance version, what do you think about this?

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