- [Narrator] This is
the Rich Dad Radio Show, the good news and bad news about money. Here's Robert Kiyosaki. - [Robert] Hello, hello,
hello, it's Robert Kiyosaki of the Rich Dad Radio Show, the good news and bad news
about taxes and your money. My question is to you, it's approximately tax time in America but there's the different tax days for different people in America, but anyway let's call it taxes. How many of you would
rather not pay taxes? How many of you are tired of paying taxes? How many are criminals and not
paying your taxes illegally? And how many want to find out how the rich do not pay taxes legally? So once again taxes are
your single largest expense. When I wrote "Rich Dad Poor Dad," I wrote about how the rich
legally minimize their taxes. So this is something that
everybody should learn about. It's called taxes because for all of us, taxes are our single largest expense. Even if you don't pay income tax, everything you do is taxed. You go to the food
store, things are taxed, real estate, taxed, everything is taxed, and it is a serious serious
serious growing problem simply because as the debt, or the national debts of
different countries grow, the only way they can
actually pay that debt off is not by, is via taxes. And so if you sit there, and I don't know why people don't learn anything about taxes. It's your single largest expense. I think there's like 74 different taxes in America outside of income tax, but do people learn about taxes? No, but you as an individual need to know how to legally pay less taxes. So that's our program today. It's a timely program. Lots going on in America and
all around the world right now because you know there's a song by Barry, I think it was Barry Sadler, we're on the "Eve of Destruction." We can't keep our GDP,
our gross domestic product is not keeping up with
the rate of deficit. I mean our debt keeps going, so that means they're gonna
have to raise taxes somehow and you and I will pay for it if you don't have good
financial education. So Kim is not with us
today, she is in California, but our special guest today
on taxes is my dear friend, Rich Dad advisor and a man who has made me a very very rich man, not because I made more money with him but because he taught me how to make money and pay less taxes, and I've saved so much money by making money and paying less taxes. I mean it's counterintuitive. You would think that if you
made money you should pay taxes. That's not true. If you have what's called like
a real financial education, not that BS stuff they,
stock brokers tell you about or real estate agents tell you about, with a real financial education you can make more money
and pay less taxes legally. So our guest today is again a
dear friend, Rich Dad advisor, he's the author of the
book "Tax-Free Wealth," it's a second edition simply
because tax laws keep changing, and he's one of the most
important individuals and one important books you
can keep in your library, again "Tax-Free Wealth"
by Tom Wheelwright CPA, because taxes are your
single largest expense, and if you can find a
way to make more money and pay less taxes, that's priceless. So welcome to the program Tom. - [Tom] Hello, thanks Robert, always good being on
the show, always good. - [Robert] Well it's also fun traveling with you all over the world you know, because you know when
people say, well you know, you know, "You have to pay taxes," and when you and I tell them or you especially you tell them how you don't have to pay those taxes, I mean people go a little
psychotic, don't they? - [Tom] They do. They can't believe that that's possible. Their paradigm is such that they just can't
imagine not paying taxes. - [Robert] Right, and what you talk about is basically true throughout
the world, correct? - [Tom] It is. What the governments do with the tax law is pretty consistent. That's what's amazing
when we travel Robert, is just how consistent the tax law is from country to country, even down to the tax rates
and who pays the taxes and who gets the tax breaks. - [Robert] Right, and
every time we go I mean, I mean Tom and I have been in as remote places like Kazakhstan, or South Africa, or Japan,
or Singapore, or Australia, and people will always say, after we explain to them
how they can make more money and pay less taxes, what's their favorite line Tom? - [Tom] "It's great, you
just can't do that here." (Robert laughs) - [Robert] Doesn't that make you sick? - [Tom] Of course this is
my mission in life, right, is to educate people on the
tax side of financial education because people just do not understand that the tax law is fundamentally
a series of incentives and you just have to get on the right side of those incentives. - [Robert] Right, and if
you do the right things, like one of the best ones is real estate, you can make a lot more money
and pay almost zero in taxes, sometimes zero right? - [Tom] Absolutely, you're just doing what the government wants you to do and what they're incentivizing you to do, and you do those things and
you legally pay less tax, and it's just that those people
who are paying a lot of tax either don't understand
how to pay less tax or they're just not doing the things the government wants them to do. - [Robert] A lot of them
can't do what they need to do because to do what they need to do does require some degree of financial education or sophistication. Would you say that's true also? - [Tom] No question, I mean it's all about financial education. If you don't understand how to do it, how would you ever do it? And the thing that, I ran this really recently just last week, people say, "Well I've
got a great tax guy," and I'm going, "Well if
you got a great tax guy, "why are you paying high taxes?" I mean that your tax guy can't do it. If they're not educating
you, something's wrong, because it's the education
that makes all the difference. - [Robert] And there's
one more point about taxes is I would say 96% of all people are terrified of the tax man. - [Tom] And that includes the tax advisors and the tax preparers. They're even more scared
than the tax payers. - [Robert] Right, so your
accountant or your CPA, your tax advisor oftentimes
recommends you pay taxes so they don't get in trouble, not that you don't get in trouble, but they don't want to get in trouble. They don't want to answer
to the IRS or the tax man. - [Tom] That's exactly right. - [Robert] So ladies and gentlemen, if you're sitting there right now saying, "Well you can't do that
here," you're right. You can't do that here because the number one reason
people cannot pay taxes, or pay taxes even though
they hate paying taxes, is they can't do what it takes to do what it takes to pay no taxes, and then they have an advisor
who's terrified, you know, who, I don't know what they do when they get up in the morning, but they're terrified of the tax man so they want you to pay taxes, so not that you don't get in trouble, so they don't get in trouble. So really this is the issue today. So Tom, his book again is "Tax-Free Wealth" the second edition. Tom's website is wealthability.com, and of any investment you can make, you know there's stocks,
there's like mutual funds, there's real estate. No, buy this book. You know, how much does
your book cost Tom? - [Tom] It's less than $20 bucks so it's a pretty good deal there for all that advice. - [Robert] Yeah it's one
of the best investments you can make because
you'll make more money by making money and paying less taxes. It's that simple, but
of course some people are so afraid of the tax man or they're so lazy they'd
rather just put their money in a 401k or their retirement
plan and pay huge taxes, and that's not our problem. So they'd rather just tell Tom and I, "You can't do that here." So before we go on into that, so Tom, what does this President Trump
do with taxes for America, because it goes into effect
now, right, this year, 2019? - [Tom] It does. This is, so we're right now
just going to be beginning to file tax returns under
the new Trump tax law and it changes the landscape completely. I mean the landscape, you know in 1986 when we had the last big tax
change under Ronald Reagan, real estate got hit hard. I mean they lost a lot
of their tax benefits. In 2017 the new law reverses
that, I mean to an extreme. So real estate becomes now a
even more favored investment and how you do it, how you
deal with it during tax time is going to have a big impact. I've been dealing with it now
for the last couple of months where you know, let's say
you invest in a syndication, you invest in some real estate, how you, how they deal with that, the syndicators on their tax
return that they're preparing and then how you deal with
it on your tax return, it's going to be the
difference between paying tax and getting a big refund. - [Robert] So let's go back
into it again because you and I often discuss the '86
Tax Reform Act under Reagan because that crashed real estate. I mean there were so
many bankruptcies in 1986 because many of these doctors
and lawyers and professionals in the cash flow quadrant,
E,S,B, and the I and the S's, were taking advantage of real estate and actually having losses
and still paying no taxes. I mean it was a complete sham, so when the government, the tax department they just
sort of shut down real estate, many doctors and lawyers or the S quadrant people got hammered, and what you're saying now for 2019, I don't know how many years that is apart, but now the real estate
guys are winning again. Well surprise surprise because
Trump's a real estate guy. Is that correct? - [Tom] (laughs) That's, exactly. Surprise, surprise, and the wins are much bigger than we've ever had. I mean, you know Reagan in 1981
and 1982 added significant, made the depreciation a lot
faster, but not like this year. Now we've got, some depreciation's
100% the first year, so the magnitude, the
benefit's for real estate but only if you have
the financial education to take advantage of it, because those '86, the laws
from '86 didn't go away. They didn't go away. What we have instead is for those who are doing it the right way, who are truly professional
real estate investors, the magnitude of the tax benefits have just been amplified
many many times over. - [Robert] So one more thing I want to say is please don't rush out buy
real estate for tax reasons. You never do that. It's always your intent, your intent must be I'm going to buy, I'm going to invest in real estate, not your personal residence, not your little condo for
your grandma in Florida, you know this is a business transaction. You're buying a house,
commercial property, or a condo because you
intend to make money, not dodge taxes. Is that correct Tom? - [Tom] That's exactly right, and you know it really, don't let, like we say don't let
the tax tail wag the dog. It, you're looking for a
cash flowing investment. It's like you always say Robert, it's all about the cash flow,
so what we really want though is we want that cash flow to be magnified, by A, not paying taxes on the cash flow from the real estate, and B, if we really get financial educated then actually use the excess tax benefits from the real estate that we don't use against
the real estate cash flow, against other income, and
that's what you've been, we've been so successful
on with you Robert. - [Robert] Right, so you
know my favorite game is called cash flow because
Kim and I created it, but for most people cash is flowing out, it's not flowing in. So financial IQ is the ability to get cash flowing in and pay less taxes. Now in one of my favorite
countries in the world, this is, they have what's called negative cash flow or negative gearing. So what they do in Australia, and they used to to it
in America prior to 1986, the Tax Reform Act, they'd go out there and they'd actually buy a piece
of property to lose money. So it's called, they
call it negative gearing or negative cash flow, and Americans were doing
it too prior to 1986. So they'd go out there and they'd say, "Hey I'm going to buy
this office building, "and guess what, I'm going
to lose a lot of money," and I would say, "But that's nuts." Yes, but I get tax
breaks for losing money. That's what changed in 1986 but it hasn't changed in Australia yet. Any comments on that insanity Tom? - [Tom] Yeah, actually I
think we're going to see some of that insanity
here in the US Robert because the tax benefits are so great. For example, you put $200,000 down on a million dollar piece of real estate, you might end up with a $300,000
deduction the first year, so you might see people who go, "Well geeze the tax benefit's so high." It's no different than, you know, people for years have, you know, we talk about oil and gas, and you go, "Well I get the straight
tax benefit from oil and gas "so I'm investing that." Well, but you still need
to make money from it and so the temptation is the
tax benefits are so great that you look at, "Well geeze maybe it's worth
having a loss on the property," but it's never worth that because our tax rates are
still at the worst only 50% so, in the US, so why would you spend a dollar to get 50 cents back? It makes no sense. - [Robert] Well this is why
it's so important right now because Kenny McElroy
was one of my partners in some of the real estate I have, is that we're actually
selling real estate now because these private equity
companies are coming in to buyer real estate and
it's not bad real estate but what we're selling
our worst real estate and these guys are buying
it for the tax purposes, and I'm sitting there watching this going, "You guys are crazy," and that's the trouble with
these private equity guys, they're not real investors. They just have a lot of money to burn and it always causes problems. So anyway this is a big point of this. The reason I suggest you get
Tom's, Tom Wheelwright's book, "Tax-Free Wealth" second edition, especially now with the new Trump tax law, but I would also get Kenny McElroy's book, "The ABCs of Real Estate Investing," and that "Advanced Guide to Real Estate," and all this because the
reason I love real estate, and Tom's going to talk
about this as well, the last investments where
you can make a lot of money and pay no taxes, but that you can't do that with your 401k or your mutual funds. So I don't know why anybody's
in 401k's and mutual funds but they should be simply because they have no financial education. You have no real financial
education or experience, you haven't taken a real
estate investment course, you haven't invested in anything, stick with your 401k, your IRA, your Roth IRA, and your ETFs. I mean that's what they are
made for, is people like you, but when we come back
we'll be talking to Tom about what questions you
need to ask your tax advisor you know, before you file your return but also more important, what do you have to do to earn more money and pay less taxes? To just sit there and
complain about your tax bill is really really limp. It's just weak. So when we
come back we'll have Tom. We're talking more about
what you have to do to make more money and pay
less taxes all over the world. - [Narrator] You're listening
to the Rich Dad Radio Show with Robert Kiyosaki. - [Advertiser] Don't be like Charlie. Charlie is that do it
yourselfer who does himself in. Do it yourself is good for tile and grout. It is not good for asset protection. Charlie thought he'd save a few dollars forming his LLC online. With no guidance, he did it wrong. When he sold the property, he lost thousands and
thousands of dollars. He did himself in by
trying to do it himself. Don't burn yourself. Use Corporate Direct to setup and maintain your LLC's incorporations. Corporate Direct is owned and operated by attorney and Rich Dad
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or call 800-600-1760. Mention Rich Dad and receive
$100 off your formation fee. That's corporatedirect.com,
corporatedirect.com. - [Narrator] Financial freedom begins with financial education. Now back to Robert Kiyosaki
and The Rich Dad Radio Show. - [Robert] Welcome back, Robert Kiyosaki, The Rich Dad Radio Show, the good news and bad news about money, and today our special
guest is Tom Wheelwright, Rich Dad advisor, author
of "Tax-Free Wealth," the second edition, and Tom's
website is wealthability.com. And we're talking about taxes, your single largest expense, but we're also talking
about how you can actually and legally make more
money and pay less taxes, but once again we'll remind you that you can listen to the
Rich Dad Radio program anytime, anywhere on iTunes or Android, and you can listen to this
podcast again at richdadradio.com because we believe in education and repetition is one of the best ways to be better educated. So if you want to learn more about taxes, go to richdadradio.com, listen to this podcast one
more time with Tom and myself, and you will learn even more because you'll retain
more the second time. You know you hear it a second time, well I didn't hear that before. But most important if
you have friends, family, and business associates
who hate paying taxes, or believe in paying taxes, you should have them
listen to this program because the number one
reason people pay taxes, it's actually two reasons, is they have no financial education because they went to school, and second they're
terrified of the tax man. So you don't have to be
terrified of the tax man because as Tom writes about
in his book "Tax-Free Wealth," the tax laws are incentives. You're just doing what the
government wants you to do. For example, if you donate to charity, they give you a tax break for that. They do a lot of things because they want you
to do certain things. So the reason they give tax
breaks for real estate guys who invest in rental properties,
not private residences, is because the government
needs you to provide housing, and I get tax breaks for oil and gas because without those tax breaks, America would be buying more
oil and gas from Saudi Arabia. So there's reasons the tax
laws are written as incentives. They're not punishment, and that's what Tom covers in
his book "Tax-Free Wealth." So Tom, one more thing that's important is that you know the tax laws
will probably have to go up, I mean the tax rates have to go up, because interest rates have been low but also because the
national debt keeps going up. So why, what's the correlation
between the national debt and why the government
is shut down right now as we talk, and taxes? - [Tom] Well, I mean
obviously the only way to pay off that debt, okay, there's really only two ways. One is through inflation, and
the other is through taxes. Ultimately it's going to be tax inflation that pays for the government debt because, you know, we're at
historically low tax rates in the US right now. We have lowest the corporate
tax rates we've ever had, 21%, and we have extraordinarily low income, personal income tax rate. When you compare to what we
see when we travel abroad, Robert, the tax rates
in the US are way low, and so what you're doing is, is you know, for those of you in a 401k, you're actually taking a
tax deduction at a low rate and then you're going to
pay it back at the rates that are there you know
10, 20 years from now when they raise, when they
inevitably have to raise rates to pay for the debt, because eventually that
does have to get paid. So it's really a losing, it's a losing battle if you're thinking, "Well I'm going to get
this great tax break," when you don't really get a tax break, you just postpone the inevitable but you postpone it to a later
year when you're going to, literally unless you're going to retire and live under a park bench, you're going to pay much higher taxes. So very important to be
looking at real tax planning which is real financial education. - [Robert] Very very good. As a man named Vladimir Lenin said, the best way to crush the proletariat, or the bourgeoisie which
is the middle class is via inflation and taxes, and that's what's happening right now. The middle class is
disappearing in America, the poor are getting poorer, and the rich are not paying taxes legally. So as Lenin said, and that's why I think
most school teachers are actually kind of
leaning on the Lenin side, you know, of life here, which is communism,
socialism, and fascism, is that the reason they're that way is they really don't know
anything about money, and most school teachers
are teaching people that the rich are the problem, that the capitalists are the bad guys. The really bad guys
are the school teachers because they don't teach you
anything about this stuff. So that's why if you be careful when you send your kid to a school, or you went to school and your school teacher has a hammer and circle on their lapel button you know, you know they're teaching
you to pay, and that you, and Lenin said taxes and inflation will crush the bourgeoisie. Bourgeoisie is the middle class. So Rich Dad doesn't want
you to be middle class. That's why guys like Tom
come on and talk to you. So as Tom was talking about your 401k, your IRA, your Roth IRA, there's better ways of paying less taxes. Is that what you're saying Tom? - [Tom] No, exactly. Instead of looking at the easy way out, which is you know, like
you're always saying, you save money, you know, and buy a well-diversified
portfolio mutual fund, you get a little financial education, you learn that, you know, the government, I mean this new tax law,
businesses have never been better. So even a home-based business is a terrific tax opportunity. I mean when we talked about real estate, by the way that includes your home office, that is real estate so that
gets those tax benefits from real estate that, you know, you could go out and
invest in rental property, you could also have a home office if you have a home-based business. So you don't have to be big,
you just have to understand that the laws were written
for business and investing, and that's what they were. So there's real estate,
there's oil and gas, there's all sorts of clean
energy type tax benefits. So the benefits are out there,
you just have to find them. - [Robert] I get into a lot of trouble because a lot of my friends have kids that are going on to college, and I say, "You know going to
school is a waste of time," and they just go nuts on me, and that's an education spat. I'm saying they're not
learning about money and that what they don't
learn about is taxes, and what they're taught to
do which is as Tom says, go to school, get a job,
work hard, save money, get out of debt and invest
in the stock market, is the worst thing you
can do for tax purposes. Is that correct Tom? - [Tom] Well there's no question. You know it's just a matter of do you want to not pay taxes ever, or do you want to just
not pay taxes today? You know if you want to
just not pay tax today and you don't care about tomorrow, then 401k's just fine, but if you want to not pay taxes ever then you have to start looking at really becoming a professional investor and a business owner because that's where, and this is true throughout
the world by the way, this is not just the US, that if you look at the
tax benefits worldwide, then you're going to find that business owners and
professional investors, this is real investors, not those who, you know, put their money in the stock market, but those who actually invest in actual investment
activities like real estate, energy, et cetera, they're the ones who are getting the tax breaks because they're doing what the government, the government's saying, "Look we need more
investment in real estate "and we've seen the huge
housing boom here in the US "from a rental standpoint." Well that's, you know, the
government wants that to happen because there's been such
a lack of rental property. So there's that encouragement, you know, or the opportunity zones
that we have now in the US under this new tax law
where we have, you know, really difficult parts,
pockets in the country, and every city has them, we have them here in Phoenix, you have difficult parts where, you know you'd really
like to redevelop it, you'd like to improve that area, but in order to do so the government now is giving you tax benefits. So just look at, okay, what do I want, what does the government want me to do and just go do it, you know. You'll pay much less tax. - [Robert] So let me, you
know I always ask those, you know when Tom and I are
on stage for help the world, and it's just true for
all of you listening from all over the world. If you have a job, if you're an employee in the cash flow quadrant, E, S, B, and I. E stands for employee, S
stands for small business, self employed, or a specialist, and B stands for big business,
500 employees or more, or I stands for investor, professional investor or inside investor, if you have a job is there much you can do for that person as far as taxes Tom? - [Tom] There's not. If that's all you do, if you're not out you know
learning how to be an investor, or starting a business, there's just very little
available in any country. I mean that's where you invest
in the 401k or a pension plan or in Canada an RSP, or a
superannuation in Australia which actually is kind of a
cool opportunity in Australia. So if you're Australian, you've got one of the
better opportunities there, but really there's not a whole lot, no there's not a whole lot you can do if that's all you're doing, but with the right
education, I mean anybody can do the same things that the rich do. - [Robert] Yep, and so that's why I was, you know in my vacation
home and over Christmas, and I was talking to my friend
who has three kids in school and she just went nuts. She says, I said, "What are
your kids learning about taxes?" (Robert grunts) "I just want them to get through school." I said, "And then what happens? "They still learn nothing about taxes." (Robert groans) It's really interesting
their minds are closed to their single largest expense. Doesn't this shock you Tom? - [Tom] It's always shocking. What's even more shocking is when I have, you know we're out there speaking and I ask people how many
people have been told by a tax professional to not take a tax benefit
they were entitled to, and 90% of the hands go up. I'm going, (Tom exhales)
so not only don't, do we not only not have
financial education in the public schools, but we don't have financial education among the tax preparers
and the tax advisors for the most part. It's shocking. - [Robert] It's so, and they're terrified. I mean they're either lazy,
terrified, or all of the above. You know I don't want to buy real estate. You know I talked to, I was
over Christmas dinner this year, I almost got into a fight
because I was saying, "God I love crashes." You know they say, "Yeah, you were on television
saying you love crashes." Now these poor guys are my
age, they're baby boomers, and they're getting hammered because the stock market is crashing, so they're selling to avoid,
you know losing anymore money. So Tom what happens when
they sell those stocks if they have huge gains? - [Tom] So they sell and
then they end up paying taxes on those gains of course. - [Robert] So they lose more money. - [Tom] Right, or even worse, they sell, it's in their IRA or
their 401k or their RSP, they pull the money out and they pay tax at ordinary income rates. They're not even paying
capital gains rates. So they pay these huge taxes in order to deal with, you
know the market fluctuations, which is a real challenge. - [Robert] Well the whole
thing is fear, you know. They're just panicking. They say, "How can you
say you love crashes?" and I say, "Well it's like safe, "you know it's like
Walmart having a sale." If Walmart, you know in
their food department say, "Well T-bone steaks
used to be $10 a pound. "Today they're $1 a pound." You know most people would
run in and buy T-bone steaks but if Apple is let's say $100 a share and today it's $50 a share, most people run away. You know, I would be
running in and buying, if I liked Apple, I'd be buying Apple shares or
Amazon shares, I'll buy this, because the market crashed, but the average person
without financial education, so they panic. Apple has made huge capital, you know because of the whole
stock market's manipulated, but Apple has gained, has
made so huge, many huge gains, Amazon also, you know the FANG source, was it Facebook, Apple,
Netflix and Google, they made so much money
because it's all goosed, it's all manipulated, so they panic and they
sold all those stocks, and they have capital gains. Is that correct Tom? - [Tom] Yeah for most of them because they, you know, they bought, I mean they bought at a much lower price and now they're selling. Well what's even worse is
some of the mutual funds, so some of the mutual funds sold. You may even have a loss economically but because the mutual funds had a gain in their purchase price of the stock, you end up with a taxable gain even though you had an economic loss. That's even worse. - [Robert] It's called a pass-through. They pass on the taxes to you, you know. - [Tom] Right. - [Robert] Its so bad I mean, but let me say before we go to break here, if you have no financial education, get a job, work hard, save money, get out of debt, buy a house, and invest for the long
term in the stock market because that's all you can do
without a financial education. So we come back, we're going to the next
favorite part of our program, is Ask Robert, and Tom has stayed, has agreed to stay on to answer
your specific tax questions. - [Narrator] You're listening
to the Rich Dad Radio Show with Robert Kiyosaki. (electric guitar music) - [Robert] What is your
number one expense in life, your number one expense? It's taxes and I'll go ask the question, is how come there's no
financial education in school, but why isn't there
education on taxes either? You know they tell you to
save money which is stupid. They tell you invest in the
stock market which is stupid. But what they teach you about taxes? So here we have Rich Dad
advisor Tom Wheelwright. We're talking about his revision for his book "Tax-Free Wealth." Welcome Tom. - [Tom] Thanks Robert. - [Robert] So what's the
"Tax-Free Wealth" about? What's different this time,
so with that revised edition? - [Tom] Well, so what
we did was is we had, this is the first major tax reform we've had in 30 years, 2017. - [Robert] Was '86 was the last one? - [Tom] '86 was last one back when I was in Washington DC. - [Robert] So many guys got wiped out because of that tax change. - [Tom] (laughs) They did. They did. It wiped out an entire
industry, savings and loans. This new tax law is just as big
but in a very different way. It affects different industries. You know the tax law's
always a series of incentives and the question is
always which incentives and which ones apply to me, and so the key to
revising "Tax-Free Wealth" was what is a, what changed
so much in this new tax law, that we can absolutely
take advantage of and, I mean seriously the amazing incentives. For example, I mean the bonus depreciation for example for real
estate is unbelievable. You buy a million dollar apartment, get a $300,000 deduction or
more the very first year. - [Robert] So if you
want to make more money and pay less taxes like
Donald Trump and myself, get Tom's book "Tax-Free Wealth." - [Advertiser] Don't be like Charlie. Charlie is that do it
yourselfer who does himself in. Do it yourself is good for tile and grout, it is not good for asset protection. Charlie thought he'd save a few dollars forming his LLC online. With no guidance he did it wrong. When he sold the property, he lost thousands and
thousands of dollars. He did himself in by
trying to do it himself. Don't burn yourself. Use Corporate Direct to setup and maintain your LLC's incorporations. Corporate Direct is owned and operated by attorney and Rich Dad
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corporatedirect.com. (electric guitar music) - [Narrator] It pays to listen. Now back to Robert Kiyosaki
and The Rich Dad Radio Show. - [Robert] Welcome back, Robert Kiyosaki, The Rich Dad Radio Show, the good news and bad
news about your taxes. It's getting around tax time and once again taxes are
your single largest expense, but most people know jack about taxes. It's really disgusting and it's, you know as Vladimir Lenin said the best way to grind the bourgeoisie, which is the middle class, and the proletariat, which are the poor, is to grind them between
taxes and inflation, and that's what's happening as we speak. Once again you can listen to the Rich Dad Radio program anytime, anywhere on iTunes or Android
and all of our programs are archived at richdadradio.com. So you can listen to this program again. You listen to this
program two, three times, and you share it with your friends, family, and business associates, you'll learn lot more because repetition is one
of the best ways to learn. So go to richdadradio.com and you can listen to this
program with Tom Wheelwright, Rich Dad advisor, author
of "Tax-Free Wealth," and his website, Tom's website is wealthability.com,
wealthability.com. And now here come the most
favorite part of our program is Ask Robert where you get
to submit your questions. So you want to submit your questions to askrobert@richdadradio.com. And Tom has agreed to stay with us to answer your questions
because I know jack about taxes. So Melissa, what's the first
question for Ask Robert, and Tom, because I'm not
going to answer the question? - [Melissa] Our first question today comes from Kristi in Los Angeles, favorite book "Rich Dad Poor Dad." Representative Alexandria Ocasio-Cortez is proposing a 70% marginal tax rate on earnings above 10 million, what she refers to as the
tippy-top of the income scale. First, do you think this is plausible and second, if so, what would the wealthy
do in that scenario? - [Robert] That's a great question and she's a very powerful force. You know I think she's, you know they portray her as a bartender and she's young and attractive,
think she's under 30, and she's kicking butt out there, and she makes a lot of sense. I listened to her on 60 minutes,
you know she made sense. She says, "Why are we spending
so much money on the military "but ignoring our own people?" and I can't fault her
for her logic system, but I don't think she knows
jack about taxes either. So if you're making $10 million, and you're an employee,
you're really an idiot because there's other things you can do. So what, I think it's best, so I'm not against her
or pro her and all this, I'm just saying she doesn't
know anything about taxes. That's all I'm saying. So Tom what would you say to that? - [Tom] Well it's an interesting
proposal in the first place because it is the tippy-top of tax payers. What's so interesting though is Robert as you know with the
right financial education, you can make $100 million a year and have less than $10
million of taxable income. So those-- - [Robert] We must say that again. You can earn 100 million a year but-- - [Tom] You could earn $100 million a year and have less than $10
million of taxable income. - [Robert] Which is good. - [Tom] So, which is great, okay. So for those people, you know I was, as I hear this question I'm going, "Well this is not going to
affect my clients at all," because I've, clients make a lot of money, but they're going to show less
than $10 million of income. You're exactly right. It's the CEOs, the corporate executives, the entertainers, the athletes, it's these people that make a lot of money in the E and the S quadrant. They're the ones who would
be subject to this tax, those with the good tax
advisors, good tax education, and who are investing their
money and building businesses. I don't think they're going
to be subject to that tax. So, is it plausible? I mean the answer is yeah, absolutely, and it's, you know I don't
frankly care one way or the other because my clients aren't
going to be affected. - [Robert] Yeah, I mean Tom's answer is exactly exactly correct. It's not how much money you make but it's how you make your money. If you make your money as
an employee at $10 million, you're really an idiot, you know. I would be talking to
your board of directors to figure out how I can take
that money in different ways, not as income, not on a W-2
or a taxable income statement. Is that correct Tom? - [Tom] Yeah for sure. I think what you'd end up with is you certainly would end up
with a lot more stock options and money being made that way, and, because hopefully capital gains, they would not include capital gains, which I think that would be
an important distinction, but yeah I think, you know you would
change people's behavior. And the reality is what
she doesn't understand is that the very rich can
afford really good tax advice, and they can afford good
investment advisors, and frankly if they're
showing taxable income over $10 million, then you
know it's kind of a stupid tax is what it would be, so. - [Robert] Yeah, and that's my point. So she's getting political votes, you know, so everybody goes, "Yeah, let's tax those
guys making $10 million," but hey, sports fans, anybody making $10 million
is not that stupid, and she's very smart, she's very bright, very attractive, but she
knows jack about taxes. And that thing about
what Tom is talking about is why the stock market is crashing today, is because most of those CEOs, they didn't take their money in salaries, they took it in stock options, because exactly as Tom says, if they took it as salary they
would paying ordinary income, but the CEOs of the major
companies like General Electric which is toast and Chipotle which is toast and all these companies which are toast, is because the CEOs borrowed
money from the company to buy back their stock. So instead of growing the company, the CEOs just bought back their stocks which goosed the stock price, and then they sell and
they take their capital, they get their capital gains tax. They pay less taxes than ordinary income. Is that, so Tom what is the tax rate on capital gains versus ordinary income? - [Tom] Right so the tax on capital gains, really the maximum tax rate
is 24% on capital gains whereas ordinary income you
know the tax rate's 37%. So there's already a big differential. So if you make that differential bigger by going 24 versus 70%,
imagine what, you know, imagine what behaviors
you're going to change. - [Robert] Right so she sounds good but she's only talking to idiots. Next question there Melissa. - [Melissa] Our next
question comes from Thomas. How can one move money
from an IRA 401k account which isn't providing
cash flow as you advocate into assets that do provide cash flow? How can you minimize taxes
and penalties when doing this? - [Robert] Well let me
first say something. It's providing cash flow but not to you. Understand that. It's providing a lot of cash flow but none if it's going into your pockets. So I have a new book coming out called "Fake: Fake Money, Fake
Teachers, and Fake Assets." Most people in these mutual funds and ETFs and things like that, the assets are not your assets, the assets are Wall Street's assets. So like, there's a lot of cash flow but it's flowing into
Wall Street's pockets, not your pockets. That's how silly people are. So that's really number one. So the question is a
very important question because Tom will give you some ideas how you can change your thinking and reverse which direction the
cash is flowing to and from. Right now it's your cash flowing
to the ETF or mutual fund and then it flows into
Wall Street's pockets. That's why your IRA, your mutual funds and ETFs are Wall Street's
assets but not your assets. Comments Tom. - [Tom] Yeah, so first of all, you know people get really hung up on if I pull it out I'll pay tax. Well you already owe the tax. You know it's kind of
like back in 2008, 2009 when people said, "Well if I sell my
property I have a loss." No, you already had a loss, it's just if you sell it then you're actually going
to recognize that loss, but the property had gone down in value, so you still owe that tax, it's just that are you going to pay it now or you going to pay it later, but you're going to pay
it when you use the money, so you really kind of have
to ignore the tax part of it. There is a penalty, so if
you're under 59 and a half in the US there's a 10% penalty. Okay, so then what you have to do is when you pull that money out, make sure that you have a plan for investing that money
that is a tax-wise plan because the tax benefits of investing, like we've been talking about
whether it's real estate, oil and gas, energy, business, the tax benefits are so great
that they'll more than offset, actually they'll actually more than offset both the taxes and the
penalties if you do it right. So it's a matter of sitting
down with a tax advisor and saying, "Okay, what are you
going to use this money for? "How can I partner with the
government to use this money "in such a way that I'm
not going to get hit "with big taxes and
penalties because the money, "I'm going to offset that with
my investment tax benefits?" - [Robert] Right, and then
what, the people get hammered because they pull that money
out then they spend it, now they have more tax problems. So anyway it's, that's
why you know I thank you for your questions for Ask Robert. I trust that I kind of enlightened you but the real answer is ask Tom. You know, I would buy his
book "Tax-Free Wealth," $20 bucks, second edition. If you really want to
educate your children, don't send them to school,
buy them Tom's book and they'll understand why
the rich are getting richer and why Vladimir Lenin says the best way to grind the poor and the middle class, the bourgeoisie and the proletariat, is via inflation and taxes, and that's what's happening today because our school system's basically run by people who are Lenin followers, they follow Lenin to the T, but they don't know it. That's the problem,
without financial education you do not know whose financial philosophy
you are following. So Tom, thanks again, look forward to traveling
on the road again. We'll get together soon, and you can submit your questions to askrobert@richdadradio.com. Thank you all for listening.
