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Tax LOOPHOLES The Rich Don't Want You To Know - Robert Kiyosaki and Tom Wheelwright - YouTube
Channel: The Rich Dad Channel
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(upbeat banjo music)
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(air whooshing)
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- Hey, guys, welcome
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to "Advanced Lessons in Millennial Money,"
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featuring Robert Kiyosaki.
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I'm Alexandra Gonzalez.
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In this two-part episode,
I got a chance to speak
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with Robert and his tax
advisor, Tom Wheelwright.
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Tom has been a CPA for 34 years,
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and has an extensive background
in accounting and education.
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We're lucky that he joined us
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for this important lesson on taxes.
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To all of our subscribers, keep an eye out
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for the release of part two,
coming in the next few weeks.
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And if you aren't a subscriber,
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click the button now to get notified.
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One of the things Robert and many
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of the wealthy talk about
is how they don't pay taxes,
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and I asked Robert and Tom
to clarify what they mean.
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(air whooshing)
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I want to know, and I'm sure
all our viewers wanna know,
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how is it that you guys don't pay taxes?
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- Legally.
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- Legally.
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- You can always do it as a crook,
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but we don't want you
to do that, right, Tom?
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- That's right.
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- So the question is, how
do the rich not pay taxes?
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Right?
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It's a multi-step process.
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Let's talk about this one
first, to keep it small,
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is here you have, you go to school,
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get a job, you become an employee,
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but you learn nothing about taxes.
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And then you become a little entrepreneur,
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you start your little
falafel shop business
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or whatever you start, right?
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So that you're self-employed,
small business.
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And then you have big business,
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500 employees or more, or I for investor.
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So, Tom, how much tax do employees pay?
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- Well, typically, if
they're making a good salary,
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and this is, by the way, the
same rates around the world,
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typically it's gonna be about 40%.
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- 40%.
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And after the Trump tax
cut, did that change much?
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- Not much, it didn't.
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- So if you're a, "Oh,
I'm gonna start my own
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"little business, I'm gonna
start my little pizza shop,
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"or my coffee shop," how
much do these guys pay?
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- Well, now it goes up,
because you're paying both
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your share of the taxes
plus the employer share
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of the taxes, because
you've got both sides.
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So now it goes up as high as 60%.
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- So when you hear a young
person, an old guy like me,
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saying, "I'm gonna start my own business,"
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they don't think about taxes, do they?
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- No, and in fact, this is the place
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where people get in trouble.
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Because over here, the money's being taken
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out of your paycheck.
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But here, you're
responsible for your taxes,
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and so what happens is that you go,
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let's say you're successful
with your pizza shop, right?
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All of a sudden, tax time comes around,
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"Oh no, I've spent all my money,
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"and I don't have money to pay the taxes."
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And people go out of
business real fast here.
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- Well, it is surprising,
'cause a lot of the millennials
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do wanna start up their own
small little business, right?
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And what they're not
aware of is that they're
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gonna be in the 60% tax bracket.
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- Because taxes are your
single largest expense.
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So if you're gonna
start your own business,
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you gotta be aware of taxes here.
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Now, big business, that's
500 employees or more,
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how much do they pay?
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- Typically, around the world, about 20%.
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- Now, why is it that
big-business people pay
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less than small business?
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- Well, basically, the government wants us
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to do certain things, and
they'll give us incentives
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if we do them.
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And what they want out
of a big business is,
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they want employment.
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So they wanna create employment,
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because that creates
stability in the country--
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- Jobs.
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- Jobs, right?
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And so, the more jobs you create,
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actually the more tax benefit you get.
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- Well, look at Amazon right now.
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They're looking at moving their company.
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How many tax benefits do
you think they're getting?
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- Oh my heavens, they pay
very, very little tax,
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Amazon does, and they pay,
you know, you're talking
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about all those different kinds of taxes?
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Not only do they pay
very little income tax,
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but they're also paying
very little sales tax,
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and unemployment taxes,
and all those others,
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because they're getting benefits
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from multiple types of government,
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the federal government,
the state government,
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the city government,
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the county government.
- Is that how Elon Musk
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started his battery factory in Nevada?
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- Well, yeah, I mean, Elon Musk,
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he gets huge research and
development tax benefits,
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which, by the way, that's a tax benefit
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that is available in most
countries more than the U.S.
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- Right.
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So if you're gonna stay small, I mean,
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it's a good place to start, but you gotta
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really wanna come over here eventually.
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And then the professional investors.
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See, these guys are passive.
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These guys invest in
stocks, bonds, mutual funds,
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they save money, they're passive guys.
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They pay the highest taxes.
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But how much does a professional investor,
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like "Shark Tank," how
much do these guys pay?
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- So they can pay as little as 0%.
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- Right.
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- They can actually completely
eliminate their tax.
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(air whooshing)
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- One of the biggest misconceptions
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out there regarding
taxes is that tax breaks
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are only given to the wealthy.
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Robert had a great answer for this.
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Let's take a listen.
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(air whooshing)
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Well, I think this is actually
a very interesting topic
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for our audience because of the fact that
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a lot of the people complain
that the only people
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who get tax benefits are the wealthy.
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And I think it's also
because, like you said,
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it's a series of incentives of what
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the government wants you to do.
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- And that's the mistake,
it's not the wealthy.
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You see a lot of wealthy people here.
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You know, if I, let's say
I'm a CEO of a company,
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I make a million dollars a
year, I still pay 40% tax.
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And I could be a doctor or a lawyer,
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and I could make a million dollars a year,
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and still pay 60% in tax.
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See, it's not what you
do, it's your mindset
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in the quadrant here.
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So this is my Poor Dad,
this is my Rich Dad.
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So which one do you wanna be, you know?
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(air whooshing)
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- In this clip, Tom goes on to explain
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the difference between
the rich and the poor.
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(air whooshing)
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- The difference between
the rich and the poor is,
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how do they use taxes to their benefit?
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You look over here, you
ask about the big business,
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well, that's employment, right?
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But investors, why do professional
investors get benefits?
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Well, because the
government wants housing,
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they want commercial projects built,
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they want energy done,
that's Elon Musk, right?
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- They want food.
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- They want technology,
they want food, agriculture.
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So all of those things
that the government's
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trying to incentivize people
to put their money someplace,
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they really want them to put it over here.
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And if you put it over here,
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these are pretty much consumers,
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these are consuming the money,
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and the government, what they really want
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is they want all the producers over here.
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- Yeah, I had a friend who started off,
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he never went to school, but
I think his grandma gave him
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10 chickens, and they were
producing 10 eggs a day.
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And by the time he
retired, he was producing
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10 million eggs a day.
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Did he get tax breaks for that?
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- Enormous tax breaks, because
every dollar you reinvest
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in your business, you
get a tax break for it.
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- Yeah.
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(air whooshing)
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- Robert then goes into another
lesson from his Rich Dad.
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And for all of you entrepreneurs,
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you might wanna pay attention.
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Let's see what he said.
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(air whooshing)
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- So the other thing that
my Rich Dad taught me,
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which is this here, is since
I was not a very good student
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in school, he just says,
"Remember the McDonald's formula."
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So the reason I talk about this
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McDonald's formula, this is Ray Kroc.
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If you saw the movie "The Founder,"
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he says it right in the movie.
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The purpose of McDonald's
business is not hamburgers.
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Everybody thinks it's hamburgers.
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McDonald's business is to buy real estate.
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You see, a hamburger stand
produces so much income,
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it can afford the real
estate, where the average guy,
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you know, graduated from
school with their MBA or Ph.D.,
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they go, "Well, how come I can't do that?"
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Well, 'cause you're over here.
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So McDonald's did this here,
so they had their business,
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which is hamburgers,
bought their real estate.
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So today, McDonald's owns more real estate
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than the Catholic Church.
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Does the Catholic Church
get tax breaks, too?
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- (laughs) Enormous tax breaks.
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They don't pay tax on any of their income.
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- Yeah, so McDonald's competed
with the Catholic Church
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by just building hamburgers
and buying real estate.
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Any comments on that, Tom?
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- Well, the great thing is,
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you don't have to be
huge to do this, right?
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I mean, you can do it with your
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startup business, your
online business, right?
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You guys are doing all
those online businesses--
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- You could do it from here to here.
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- The tax law is ultimately fair,
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because you don't have to be huge
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in order to take advantage.
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What you do have to have, though,
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is the financial
education, because you have
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to behave like these people.
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If you do what these people do,
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you get the same tax
benefits that they get.
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The challenge that most people have here
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is that they don't have
any financial education,
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and so they do everything
as if they were up here,
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and that just gets them in trouble.
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Because these guys, that's not
where the tax law is built.
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The tax law is built for
these guys over here.
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(air whooshing)
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- Next, Robert talks about
using debt to your advantage.
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Most people think all debt is bad.
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But little do they know, it
offers a huge tax benefit.
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Tom and Robert explain.
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(air whooshing)
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- So I'm gonna throw you one more thing.
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Again, this takes financial education.
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The number one asset I can use is debt.
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So the reason I like this place here,
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and get this, so let's say I have,
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this is the McDonald's
hamburger formula here.
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So I have $1 from my hamburger business,
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plus $5 of debt, so that gives me $6.
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What does that mean to you, Tom?
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- Well, it means you're not
gonna pay very much tax,
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and it also means you're
gonna make a lot more money.
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Because what debt does is it
accelerates on the plus side
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if you know what you're doing,
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if you got the financial education, right?
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On the plus side, it
accelerates both your income,
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but it also accelerates your tax benefit.
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- Yeah, so this is my formula here,
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it's the McDonald's formula,
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except, let's say I have Rich Dad Company,
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I have more than Rich Dad Company,
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but Kim and I buy real
estate with Ken McElroy
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and with Tom's guy, who
knows we do all this.
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Because we can leverage up with debt,
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but good debt, debt that
we don't have to pay for.
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These guys have bad
debt, like their house,
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their car payments, student
loans, really horrible debt.
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But there's good debt on this side.
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But you can do the same thing
this way, if you want to.
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(air whooshing)
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- Thank you guys so much for
joining us on this video,
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and I hope you guys loved
it just as much as I did.
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And if you did, give it a thumbs-up,
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comment if you have any questions,
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and subscribe to our channel.
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(speaks in foreign language)
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(upbeat banjo music)
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(beep)
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Oh my gosh, I almost fell asleep,
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but that was a very long (laughs) clip.
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(crew members laugh)
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(beep)
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Oh my gosh, I'm so awake,
that was a really (laughs)
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(crew members laugh)
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(beep) Thank you guys
so much for joining us
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on this episode, I spit. (laughs)
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(crew members laugh)
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(Alexandra laughs)
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(beep)
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The most important lesson of all--
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(crew member murmurs and laughs)
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(laughs) Whoa!
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(air whooshes)
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