The Win-Win Wealth Strategy: 7 Investments the Government Will Pay You to Make
On September 26, 2016, in a nationally televised debate between the two major party candidates for U.S. President, Hillary Clinton accused Donald Trump of not paying taxes. In response, Donald Trump famously said, “That’s because I’m smart.” On September 27, 2020, almost exactly four years later, The New York Times printed a story claiming that President Trump had not paid taxes in 10 out of 15 years. In two of those years, he only paid $750 in taxes. People were outraged, but President Trump is not alone in paying next to nothing in taxes. In fact, it’s common for the rich.
For years, the richest people and companies in the world have paid little to nothing in taxes. Amazon, one of the largest companies in the world, paid nothing in federal income tax for 2017 or 2018 despite reporting pre-tax income of $3.8 billion and $11.2 billion,1 respectively. In fact, they received refunds of $137 million in 2017 and $129 million in 2018! In 2019, they only paid $162 million2 of federal income tax despite reporting pre-tax income of $13.9 billion. Through the end of 2020, Tesla, the leader in the electric car revolution, has never paid U.S. Federal income tax, despite a valuation as one of the largest companies in the world.3
This begs two questions. First, is it legal to pay little to nothing in taxes? Second, if it is legal, how can it be so? Are the rich simply finding inadvertent loopholes? Are lobbyists paying off the politicians for these tax benefits?
It turns out that these tax benefits are actually incentives — intentional policy decisions designed to encourage investments. All developed countries with income tax laws provide similar incentives, and knowledgeable business owners and investors, like former President Trump, Amazon, and Tesla, use these incentives to reduce or eliminate their taxes legally.
This book analyzes these tax policies from a practical perspective. This will not be an academic analysis. I do have a Bachelor of Arts in Accounting and a Masters of Professional Accounting with an emphasis in tax, and I was an adjunct professor in the Masters of Tax program at Arizona State University for 14 years, and spent three years in the National Tax Department of Ernst & Young. But I’ve spent most of my career as an advisor to companies and individuals related to their tax obligations and wealth creation. In short, I help people and companies pay little to nothing in taxes. And that’s as practical as it gets.
As I wrote in my first book, Tax-Free Wealth, governments have long used the tax laws to incentivize certain behaviors. Using the tax laws in this way has come under severe scrutiny by many, including the European Union, Senator Bernie Sanders, Senator Ted Cruz, and others. The arguments against using the tax code as incentives generally range from including a broad-based flat tax or a global minimum tax to ensuring wealthy individuals and companies pay at least some tax. Ironically, some of the most vocal critics, including President Joe Biden, continue using the tax laws as incentives. Many of those who complain about the current tax structure just want to change which activities are incentivized, such as moving from primarily economic incentives to environmental and social incentives. They really don’t want to eliminate tax incentives. There is a reason for this: tax incentives work. And governments get as much out of tax incentives as the wealthy who take advantage of them.
Human nature hasn’t changed. People will rail against others (read: the rich) getting tax incentives but get even more up in arms when their own incentives are yanked away. Just look at the uproar over Americans losing their deduction for state income taxes. (The Democrats in the U.S. Congress, while excoriating the rich and their tax breaks, continue to fight to restore this deduction.)4 I’ve never met anyone who enjoys paying taxes. And very few governments are willing to give up the power and control that come with high marginal tax rates and correspondingly large tax incentives.
This book will teach you that the tax law is the best roadmap to wealth ever devised. This is not a book about tax loopholes for the rich. It’s about the investments and activities the government wants you to engage in and the tax incentives they provide in exchange. My goal is to raise the level of consciousness and literacy around the biggest expense to individuals and corporations, and the largest source of revenue to most governments — income tax.
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|Epub, PDF||July 16, 2022|