HOW THE RICH HIDE THEIR MONEY AND PAY NO TAX

HOW THE RICH HIDE THEIR MONEY AND PAY NO TAX


would you believe me if I told you that
Warren Buffett pays less tax than his secretary you may wonder how a
billionaire pays fewer taxes than an average income earning secretary and the
answer is that there are two kinds of taxpayers those who accept taxes as a
natural part of life and pay whatever the government tells them to and there
were others who do everything in their power to avoid paying taxes let’s give
each of these types of people a name we will call the willful taxpayer Paul and
the tax avoider Jack to Paul when the government comes knocking at the end of
the year he doesn’t see it as a big deal earning $40,000 a year
Paul hands over his $15,000 worth of income taxes and moves on about his life
sure he would love to keep more of the $15,000 but he sees paying taxes as a
normal part of life jack on the other hand is a medium-sized business owner
who draws himself a salary from the tech company he owns and built from scratch
jack has over 50 employees working for him and has seen his business grow
year-over-year unlike Paul Jack despises tax he thinks to himself how can the
government who played no part in making his business’s success take such a huge
chunk of his money for nothing to make matters worse being taxed personally and
by being a business owner jack is subject to just about every tax
imaginable such as personal income tax sales tax excise tax property tax and
investment tax with all these potential taxes being applied to his income Jack
decided to look into how big corporations avoid paying taxes after
hearing that in 2018 Amazon paid zero income tax even though
they earned over two hundred billion dollars in revenues that year determined
to avoid losing a sizeable chunk of his earnings to tax Jack looked into ways he
could cut down on the amount of corporate tax his business pays and
reduce his own personal tax bill in his hunt for tax strategies Jack came across
the following techniques method number one riding off expenses given that most
rich individuals earn their fortunes through a business this gives them the
opportunity to write off expenses and their taxable income you see most
expenses you occur in your day-to-day business operations can be written off
against your income to lower your taxes payable for example let’s say you run a
digital marketing agency and are in $200,000 a year in revenues if you had
no expenses then the whole $200,000 would be subject to tax however as most
businesses incur expenses these costs will reduce what amount of profits will
be subject to tax for instance if you have $100,000 worth of legitimate
business expenses a year then this would make your annual profit $100,000 instead
of the $200,000 you earned in revenue which would cut your taxes paid on your
earnings by more than half eligible expenses can include things
like business meals office supplies new laptops internet connections etc
employee benefits staff training rent and leases car expenses etc as the owner
of the business if you decide to take a trip for a conference to develop your
skills in digital marketing you can decide to write that off as well
again this method of reducing your taxes is only enjoyed by people who own
businesses leaving little wonder as to why most people who own businesses seem
to be considerably richer than people who work as employees method number two
diverting income as of 2017 the United States corporate income tax rate was
reduced from thirty five percent to twenty one percent and while this
offered many companies Amazon included the opportunity to significantly reduce
their income tax payable many companies still elect to recognize their income in
countries with even lower tax rates for instance the Cayman Islands has no
income tax no corporate tax no estate or inheritance tax and no gift tax or
capital gains tax making it a pure tax haven in short whatever you earn you
keep of course without any calculations it is obvious that this is the
significant savings to any business who can realize their income overseas but
just how much would this save you if you had set up a tax haven in this country
let’s say your business earned five million dollars last year instead of
paying an income tax of thirty five percent for 1,750,000 dollars you would
instead pay nothing and keep that almost two million dollars for yourself besides
allowing you to realize income tax free the Kane
have very strict banking laws designed to protect banking privacy the country
does not have any tax treaties with other nations
thus guarding the finances of its offshore banking clients from the tax
authorities of other countries moreover offshore corporations in the
Caymans are not required to submit financial reports to any Caymans
government authority an incorporation in the Caymans is a very simple streamlined
process with all these benefits it’s no wonder companies are flocking to
these remote destinations to hide their earnings method number three netting
revenues against losses if you’ve ever looked at the stats in favor of starting
a business then you will know just how bleak they can be the numbers show that
20% of small businesses fail in their first year
30% of small businesses fail in their second year and 50% of small businesses
fail after five years in business finally 70% of small business owners
fail in their tenth year in business with the chance of success in business
being rather low there are still numerous companies that succeed and make
a fortune for which they need to protect and one
of the ways they do this is through the use of loss carryforwards you see most
businesses require a few years in operation before they start turning a
profit and in the years where business is not exactly booming losses are bound
to be incurred these losses while unfortunate at the time are excellent
tax avoidance tools for future periods you see like expenses loss carryforwards
can be netted against your earnings to reduce your overall taxes payable
meaning that less of your income is subject to tax method number for issuing
stock options another way businesses reduce their taxes is by issuing stock
options to its stake holders this method is particularly convenient for
businesses for two reasons number one it is booked is an expense which will
reduce profits and ultimately the amount of money that is subject to tax
and number two it does not result in a cash outflow for the business
you see when stocks are issued they are booked as an expense for accounting
purposes but no cash changes hands this means that the company can reduce its
profits through the expense and maintain a strong cash position
moreover companies that use this strategy gain the benefits realized by
incentivizing their shareholders to further increase the stock price if you
own stock in the company you worked for wouldn’t you put an extra effort in
order to make the company’s stock value rise so that you could cash out your
options for more money with these four corporate tax strategies in mind jack is
starting to feel more confident that he can reduce or eliminate his corporate
tax bill but he knows that he needs to withdraw some income from his business
in order to live and once that cash to be minimally taxed so he decides to
switch gears and look into ways he can reduce his personal tax owing method
number five leveraging geographical tax laws for the past 20 years jack has
grown his business in the heart of Silicon Valley however his patience with
living in the state with the highest income tax rate in the United States has
finally reached a tipping point with the state income tax rate of 13.3% for the
highest income earners Jack is seeing a large chunk of his income being handed
over to his state government with even more being passed along at the federal
level while federal taxes can’t be avoided
Jack wonders what he can do to avoid some of the other taxes he is being
subject to that are eroding his personal wealth
Jack began researching other states with lower income tax rates and was surprised
to see that 7 states were income tax free such as Texas Nevada and Florida
meaning that he could save the 13.3% tax he was currently paying and still enjoy
the warmth of the Sun all year long as Jack began looking into housing options
in each of these three states he wondered if there were other ways he
could further reduce his personal tax bill method number 6 investing in real
estate part of the reason the rich continue to get richer is that they make
their money work for them and one of the ways they do this is through real estate
you see not only does owning real estate increase your wealth by generating
income but it also allows for the reduction in taxes payable when you buy
a property you are requiring a depreciable asset and because the asset
reduces in value over time from an accounting perspective you are able to
deduct depreciation and reduce the amount of income that is subject to tax
common deductible expenses include repairs to the property and mortgage
interest and the more money you spend on expenses the more you can reduce your
tax selling however once a property is fully depreciated what do you do you
sell that property and buy a new one while selling property usually triggers
tax there is such a thing as a 1031 exchange which allows you to defer the
tax you paid on selling the property if you buy
a new property within 60 days of sale in essence you can continue to depreciate
your properties and then sell them in perpetuity and never pay the tax while
still being able to use the assets to generate rental income method number
seven deferring income while Jack has looked into moving states and using real
estate to reduce his taxable income he still feels as though some of his income
will need to be sheltered for tax and another way he can do this is by
deferring his income the most common tax deferral vehicle is an individual
retirement account or an IRA which allows you to move your income into a
fund and subject your earnings to tax at a later date if you’re an employee you
probably use this type of account to hold your savings and allow them to grow
over time however they also double as a solid tax
avoidance strategy you see income earned from employment is subject to tax unless
that is you contribute the funds to your IRA account in the year you contribute
money into your IRA you will receive a deduction from your taxable income or
the amount you contributed this strategy is particularly effective for
high-income earners because it reduces their tax bill during their highest
earning years for instance if you earn five hundred thousand dollars a year and
are in the highest tax bracket your income is probably being subjected to
tax of up to 40% but what if you could avoid the 40% tax and instead have part
of your income only be taxed to 20% well you can do just that using an IRA
you see when you contribute to your IRA you do not pay any tax in the year you
contribute and instead pay tax when you withdraw all the funds which is
typically during retirement however during retirement
you’ll probably be earning much less than $500,000 meaning that the money you
withdraw will be taxed at a lower rate and the difference in tax rates is how
much you would have saved by using this income deferral technique with all these
tax avoidance techniques in your financial toolbox
you only have one question left to answer which type of tax payer will you
be from here on out a Paul or a jack thanks for watching

24 thoughts on “HOW THE RICH HIDE THEIR MONEY AND PAY NO TAX

  1. What a load of crap … you don’t know all the burden of self employment! Sure some abuse the system, like everywhere in any situation. This does NOT relate to the majority to self employed and business owners!

  2. Best video good illustration
    Here is my SUMMARY

    1. WRITING OFF TAXES: By writing Daily Expenses on business operations against income can lower taxes payable. This scheme is very favorable to the business owners.

    2. DIVERTING INCOME: By realising the incomes overseas where there is very less tax payable schemes.

    3. NETTING REVENUES AGAINST LOSSES: By making use of loss carry forwards. They are excellent tools to avoid paying high taxes in the future.

    4. ISSUING STOCK OPTIONS: By issuing stock options to share holders of business.
    – As it is booked as an expense, it will reduce profit and also the amount of money of tax payable
    – It does not result in a cash outflow. This way business also has a strong cash position.
    – This method gain the business benefits of incentivizing the share holders.

    5. LEVERAGING GEOGRAPHICAL TAX LAWS: By having property in countries with lower income tax rates to lower personal taxes.

    6. INVESTING IN REAL ESTATE: By Investing in real estate that can help reduce tax payable. Continue depreciation of properties lower taxes as more expenses take place. After fully depreciated, selling the old and buying new properties within 60 days can also cuts off the tax payable.

    7. DEFERRING INCOME: By building Individual retirement account which allows moving the income into the fund and subject earnings to tax a later date. This scheme helps in deducting from taxable income.

    My passion is to share notes like Started doing it on my channel with PDF summaries.🙌
    This reminds me I need to file my taxes soon😝

  3. I love this, great examples used for instances of tax avoidance! Keep up to good work!

  4. What is the function of billionaire? They are like monopolies of the wealth. Government should not give incentives to this people like trump taxe reform.

  5. Having a bit of a problem with this video, for example confusing gross sales with net income. Expenses such as employee benefits are a way to evade taxes? So if, in order to generate your digital income of 200.000 you need to pay your employees 150.000, you are evading tax on that 150.000? Come on dude, you should know better than that. Second, compensating losses. So if in the first five years i had losses of up to 500.000 (and did not have any income but lived of savings from the past or an inheritance) and then in the next three years I earn an income of 500.000 and do not pay taxes on that income I am evading taxes? Or can we conclude that over a period of 8 years I did effectively not earn any income: -500.000 plus +500.000 is zero, right? Once again, dude, you should know better. There are indeed ways to evade taxes such as moving to a state (or country) with less taxes, but some of your examples are really incorrect.

  6. I'm definitely going to do all of this as my business grows. I believe it is the DUTY of every moral citizen to avoid paying taxes to the United States as much as possible. This government takes our tax dollars and uses it to buy bombs and drones to kill people for oil. It funds and trains terrorist outfits like Al-Queda and ISIS. It pays for the salaries of political pedophiles and friends of Epstein. Dennis Hastert, Anthony Weiner, Rick Storey, Bill Clinton, on and on. It pays for the salaries of cops who abuse and shoot us, and target us for tickets, fines and bail for the state coffers while violating our constitutional rights.

    Meanwhile, our infrastructure is corroding, education is declining, homelessness and poverty are rising, diseases are increasing, all the things our tax dollars should be going towards are getting worse and worse. I'm not paying for any more of the 1% oil wars and corruption.

  7. I love not paying taxes at all. I don't worry about schools, hospitals, public safety and all that big waste of money. I hate all those who need subsidies to keep them alive. In general, all those poor people who don't know how to avoid taxes. Shame on them!

  8. As a small corporation owner we haven’t paid taxes in 2 years. We write off all of our expenses including our employees incomes. It’s easy for a corporation not to pay taxes but it’s hard for someone that works a 9-5 and gets paid form W2.

  9. How can you say government has no part in your success? You are oblivious to everything you see and take things for granted! Who will pay all the army and the police to keep your country safe and secure? Who will pay for the roads and bridges that you use every single day. Who will pay the billions of dollars worth of water infrastructure that you drink every single day. Etc. etc.

  10. Yes, Amazon did make over 200 billion in revenue back in 2018, but they only kept 19 billion of it… watch Minority Mindset to get a much better understanding of money.

  11. Step 1: Pay a guy 5,000 dollars to make a mark on a painting canvas
    Step 2: Higher a “Professional” art evaluator to say that “this painting is worth 1,000,000 dollars”
    Step 3: Donate the painting to a museum
    Step 4: Get 1,000,000$ tax right off
    Step 5: Tell everyone how generous you are

  12. Well according to the Grace Commission Report:

    "100% of what is collected is absorbed solely by interest on the Federal Debt … all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government."

  13. Living in Canada we pay almost 50% tax it’s crazy. The best thing to do is work for cash and support the underground economy. Our government is completely corrupt so I do not fell guilty at all.

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