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Questions and Answers
What did the author's rich dad think about Robin Hood?
Why do the rich not pay taxes?
What was the purpose of the temporary taxes levied in England and America in the past?
Who, according to the author, pays the most in taxes?
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What did the author's rich dad consider himself an expert on?
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What was the initial intention behind the introduction of income tax?
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Why do the rich find ways to minimize their tax burden?
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What is the main reason why the author's rich dad encouraged him to own his own corporation?
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What does 'financial intelligence' or 'financial IQ' consist of?
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What was the result of the 'take from the rich' idea?
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What is the main difference between an employee and a corporation when it comes to paying taxes?
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What is one benefit of owning a corporation, according to the text?
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Why do the rich use corporations and trusts to protect their assets?
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What is the recommended approach to financial strategy, according to the text?
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What is the main advantage of having a corporation, according to the text?
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The rich pay more taxes than the middle class.
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In the past, temporary taxes were levied in England and America to pay for:
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What was the initial intention behind the introduction of income tax?
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True or False: The rich always comply with the government's tax policies.
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What is a major advantage of owning a corporation, according to the text?
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The rich use corporations and trusts to hide their wealth from the government.
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Study Notes
The History of Taxes and the Power of Corporations
- Originally, there were no taxes in England and America, but temporary taxes were levied to pay for wars.
- In 1799-1816, taxes were levied in Britain to fight against Napoleon, and in America to pay for the Civil War from 1861 to 1865.
- In 1874, England made income tax a permanent levy on its citizens, and in 1913, an income tax became permanent in the United States with the adoption of the 16th Amendment to the U.S. Constitution.
The Robin Hood Fantasy
- The idea of taxes was made popular by telling the poor and middle class that taxes were created to punish the rich.
- This idea was used to get the majority to vote for the law, but in reality, it wound up punishing the poor and middle class.
- The government's appetite for money grew, and taxes soon needed to be levied on the middle class.
The Power of Corporations
- The rich created corporations as a vehicle to limit their risk to the assets of each voyage.
- The rich put their money into a corporation to finance a voyage, and the corporation would hire a crew to sail to the new world to look for treasure.
- If the ship was lost, the crew lost their lives, but the loss to the rich was limited only to the money they invested for that particular voyage.
- A corporation is merely a legal document that creates a legal body without a soul, and it is not a big building or a factory or a group of people.
Tax Strategies of the Rich
- The rich knew about corporations and used them to limit their risk and minimize their tax burden.
- They hired smart attorneys and accountants to find legal loopholes and persuade politicians to change laws.
- The rich used their resources to affect change and didn't just sit there and voluntarily pay more taxes.
- They used their financial knowledge to escape the tax system and build their asset columns.
Financial Intelligence
-
Financial intelligence (or financial IQ) is made up of knowledge from four broad areas of expertise: accounting, investing, understanding markets, and law.
-
Accounting is financial literacy or the ability to read numbers, and it is a vital skill if you want to build an empire.
-
Investing is the science of making money, and it involves strategies and formulas that use the creative right-brain side.
-
Understanding markets is the science of supply and demand, and you need to know the technical aspects of the market, which are emotion-driven, in addition to the fundamental or economic aspects of an investment.### The Power of Corporations
-
A corporation can contribute to explosive growth and wealth creation due to the tax advantages and protections it provides.
-
Understanding the benefits of a corporation can help an individual get rich faster than an employee or small business owner.
Tax Advantages
- A corporation can pay expenses before paying taxes, providing a significant tax advantage.
- An employee earns, gets taxed, and then tries to live on what's left, whereas a corporation earns, spends, and is taxed on what's left.
Legal Tax Loopholes
- Owning a corporation can provide legal tax loopholes, allowing for the deduction of expenses such as vacations, car payments, insurance, repairs, and health club memberships.
- These expenses can be claimed with pre-tax dollars, reducing taxable income.
Protection from Lawsuits
- Corporations provide protection from lawsuits by creating a legal barrier between personal and business assets.
- The rich often use corporations and trusts to hide their wealth and protect their assets from creditors.
Financial Intelligence
- Financial IQ is the combination of technical skills, including accounting, investing, and markets, which can greatly amplify financial intelligence.
- Business owners with corporations have a significant advantage over employees, as they can earn, spend, and then pay taxes, resulting in greater financial flexibility.
Recommendations
- It is recommended to learn about the protection that legal entities can provide for businesses and assets.
- Garrett Sutton's books on corporations are a valuable resource for understanding the benefits and setup process.
The History of Taxes and the Power of Corporations
- Originally, there were no taxes in England and America, but temporary taxes were levied to pay for wars.
- In 1799-1816, taxes were levied in Britain to fight against Napoleon, and in America to pay for the Civil War from 1861 to 1865.
- In 1874, England made income tax a permanent levy on its citizens, and in 1913, an income tax became permanent in the United States with the adoption of the 16th Amendment to the U.S. Constitution.
The Robin Hood Fantasy
- The idea of taxes was made popular by telling the poor and middle class that taxes were created to punish the rich.
- This idea was used to get the majority to vote for the law, but in reality, it wound up punishing the poor and middle class.
- The government's appetite for money grew, and taxes soon needed to be levied on the middle class.
The Power of Corporations
- The rich created corporations as a vehicle to limit their risk to the assets of each voyage.
- The rich put their money into a corporation to finance a voyage, and the corporation would hire a crew to sail to the new world to look for treasure.
- If the ship was lost, the crew lost their lives, but the loss to the rich was limited only to the money they invested for that particular voyage.
- A corporation is merely a legal document that creates a legal body without a soul, and it is not a big building or a factory or a group of people.
Tax Strategies of the Rich
- The rich knew about corporations and used them to limit their risk and minimize their tax burden.
- They hired smart attorneys and accountants to find legal loopholes and persuade politicians to change laws.
- The rich used their resources to affect change and didn't just sit there and voluntarily pay more taxes.
- They used their financial knowledge to escape the tax system and build their asset columns.
Financial Intelligence
-
Financial intelligence (or financial IQ) is made up of knowledge from four broad areas of expertise: accounting, investing, understanding markets, and law.
-
Accounting is financial literacy or the ability to read numbers, and it is a vital skill if you want to build an empire.
-
Investing is the science of making money, and it involves strategies and formulas that use the creative right-brain side.
-
Understanding markets is the science of supply and demand, and you need to know the technical aspects of the market, which are emotion-driven, in addition to the fundamental or economic aspects of an investment.### The Power of Corporations
-
A corporation can contribute to explosive growth and wealth creation due to the tax advantages and protections it provides.
-
Understanding the benefits of a corporation can help an individual get rich faster than an employee or small business owner.
Tax Advantages
- A corporation can pay expenses before paying taxes, providing a significant tax advantage.
- An employee earns, gets taxed, and then tries to live on what's left, whereas a corporation earns, spends, and is taxed on what's left.
Legal Tax Loopholes
- Owning a corporation can provide legal tax loopholes, allowing for the deduction of expenses such as vacations, car payments, insurance, repairs, and health club memberships.
- These expenses can be claimed with pre-tax dollars, reducing taxable income.
Protection from Lawsuits
- Corporations provide protection from lawsuits by creating a legal barrier between personal and business assets.
- The rich often use corporations and trusts to hide their wealth and protect their assets from creditors.
Financial Intelligence
- Financial IQ is the combination of technical skills, including accounting, investing, and markets, which can greatly amplify financial intelligence.
- Business owners with corporations have a significant advantage over employees, as they can earn, spend, and then pay taxes, resulting in greater financial flexibility.
Recommendations
- It is recommended to learn about the protection that legal entities can provide for businesses and assets.
- Garrett Sutton's books on corporations are a valuable resource for understanding the benefits and setup process.
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Description
This quiz is based on Chapter 4 of Rich Dad, which discusses the history of taxes and the power of corporations. It also touches on the concept of Robin Hood and how the rich play by different rules.
