Not Doing a Good Job of Taxing the Rich


I always find it amusing when a politician speaks of “Taxing the Rich” that raising taxes on incomes are then proposed.  The latest article on this comes from CNN. “States Look to Hike Taxes on Millionaires“.  Per usual, the proposals are to raise taxes on those making high incomes – perhaps above $500,000 per year.

Even more ludicrous is when individual like Warren Buffett, who definitely knows better, come out saying that taxes should be raised on “people like him”, and then supporting increases in income taxes.  The fact is that raises in none of those taxes would affect people like Warren Buffett and he knows it.  The reason is that he creates wealth using the tactics of a rich person, not as a high earner.  The difference is important to understand if you ever wish to become wealthy as Buffett (or even 1/1000’s as wealthy as Buffett).

Individuals who become and stay wealthy typically have very little in regular earnings that are subject to the income tax.  They tend to have most of their net worth in stock and other tax deferred gains.  Even the earnings they have are typically sheltered through charitable contributions or other gimmicks.

Individuals who  have high incomes tend to also spend every dime they have each month and then some.  Find one of those households making $500,000 in New York of California, and you are likely to find that they are tens of thousands of dollars in credit card debt.  They will also probably be living in a big house and have fancy cars in the driveway, but they will owe far more on the house than it is worth.  The cars will be upside down or- even worse – leased.

Those who become wealthy know the power of capital gains and reinvestment for both reducing taxes and growing wealth.  They don’t get wealthy from their jobs – they get wealthy from their investments.  Once they become wealthy, they stay that way by taking out only what they need and letting the rest ride.  Before they die, they create a trust that will provide lifelong work for their children and grandchildren that probably involves travelling the world and staying in posh hotels at the expense of the trust.

If you wish to be wealthy too, don’t worry about your income.  Worry about your wealth.

Please send investment questions to vtsioriginal@yahoo.com or leave them in a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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