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What Tax Rate Will You Pay


DETERMINING YOUR TAXES

I’m sure you are aware there are differing tax rates. Some people pay a higher tax rate than others! Is this fair? Robert Kiyosaki states in his book, SECOND CHANCE the Government gives favor to those that do what the Government wants them to do. In his book, he talks about the purpose of the tax code is NOT about collecting taxes but to guide the direction of the economy. He included a quote from Judge Learned Hand that I feel everyone should be aware of:

Judge Learned Hand

“Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one’s taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone
does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands.”

What does this mean for you? For most people, it is meaningless. It is meaningless because they only see themselves under the scrutiny of their own small environment. Let me explain with this example.

First, it is imperative to understand this quote from Ronald Reagan, “You can’t tax business. Business doesn’t pay taxes. It collects taxes.”

Think of it this way. Businesses really do not have to pay expenses. They just pass this cost over to their customers. This is the same with taxes on businesses. They don’t pay taxes. They collect taxes and pass this on to the Government agency that is responsible for collecting it. (This would be similar to saying the Business pays taxes for their employees! In reality, they route those funds to the taxing authority on your behave after taking it out of your paycheck.)

WHAT TAX RATE WILL YOU PAY

In Tom Wheelwright’s book, Tax-Free Wealth, the author talks about lowering (or eliminating) your taxes. He uses some of the information from Robert Kiyosaki regarding choosing your career in regards to the taxes you will have to pay. 

I heard this a long time ago, “those that produce the jobs will pay the least tax rates and those that work the job will pay the higher tax rates”.

If you follow Robert Kiyoskai’s books, you will find he talks about the Cash flow quadrant. Without taking too much time on the subject, basically those that hold jobs pay higher tax rates. Those that employ or invest pay lower tax rates. This fits in with what Tom Wheelwright discusses about the tax code being written to guide investors through tax incentives in the process of guiding the economy.

If you want to lower your taxable income, then you will have to structure how you earn that income. Determining WHAT TAX RATE WILL YOU PAY is a product of your Financial Education.

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