It’s been reported that ProPublica, a political news organization is holding in their possession, the tax returns of hundreds of billionaires including Elon Musk, Warren Buffet and Jeff Bezos. Over the next few months they are planning on releasing this information in some form that will unveil exactly how these people pay less tax as a percentage of their wealth than everyone else. We are going to share with you how billionaires like Musk, Buffet, and Bezos do it.
Interestingly, when you look at the strategies of the billionaires what they do to eliminate taxes is relatively simple, at least on the surface. In this article we will not try to dig into the details of the tax code. That would make most readers eyes just glaze over. Our goal is to get you to understand the big picture.
To begin, billionaires don’t follow mainstream financial planning advice. These people think differently about money, taxes and their freedom. They don’t follow Government ideas about where to put money, and they certainly don’t invest in 401ks, IRAs and other Government sponsored retirement accounts. Not even when they started out. Quite simply, all of those accounts lock up your money, which locks up your freedom and the ability to become wealthy.
The Beginnings – Capital Formation
One of the key understandings of becoming a billionaire is that to become wealthy, you must build a business that attracts money aka capital. How you make money from the business is determined by what you know, and the business you want to build. Bezos started with Amazon. Musk started with an online game, then PayPal. Buffet started building a business selling gum to the neighbors when he was 6 years old.
The point to this, is that all these billionaires understood the value of building a savings, or capital. Having capital is the foundation of building a business, acquiring equipment and eventually acquiring more assets, which then become more capital, as you will see.
Understanding The Tax Laws
The main reason the 99 percent pay such high tax rates relative to billionaires is because of where they get their advice. Most people have a limited understanding of tax laws. What they do know comes influenced by Wall Street management firms who sponsor 401k and IRA accounts.
The entire retirement planning industry exists because of the lure of income tax laws to get you to invest money in 401ks and IRAs. With the ability to collect the money at the paycheck level, it’s a system that is making Wall Street billionaires richer every day. America’s 401k system is like a giant Walmart of finance. There are even financial credential organizations that proclaim that you should seek out advisors with certain credentials because they are “fiduciaries.”
Retirement planning is mass marketed by the financial industry who is making massive profits because of it. As a result, the knowledge about building TAXINVISIBLE wealth is extremely limited. Not withstanding that retirement is a socialistic idea, billionaires like Buffet are still working late in their life.
The irony of retirement planning is that the money management firms are held by billionaires, those same billionaires don’t hold 401ks and IRAs. They do something completely different. THEY know the tax laws.
The Free Space In The Tax Code
Billionaires like Bezos, Musk, and Buffet seek out the knowledge of what you can do with money. It’s not just about investing in a new company, although Buffet has great expertise in that, it’s more about what he does with that money after it’s made.
The game is to not just avoid taxes, but to eliminate them completely. To do that, you must consider all the possible financial strategies of buying, selling, borrowing, and more, then apply the income tax laws to each. There are thousands of pages of tax law written around the transfer of assets from one entity to another. When money changes hands, the IRS has written laws around those transactions, or at least MOST of those transactions. And that is the operative word, MOST.
Billionaires know where the free space is in the tax code. It’s the area where money can transfer and move where there is NO taxable transaction. It’s where the “free air” is in the tax code. This is what the billionaires use to create their wealth. It’s how they eliminate taxes on their assets.
It’s how they make their money TAXINVISIBLE.
Think about where your financial advice comes from right now. If your advisors are not working with billionaires, you probably have never been introduced to ways to Retire TAXINVISIBLE.
In part 2 of How Billionaires like Musk, Buffet and Bezos Eliminate Taxes, we will share the billionaire formula that that builds wealth while eliminating income taxes.