To most people, Robin Hood was a hero. He stole from the rich and gave to the poor. What could be a more noble cause? To take from the greedy who possess so much and give that wealth to the poor. While this narrative may seem like a story of justice, it is this mentality that the rich need to give to the poor that has gotten us in such a massive financial mess.
Ironically, it is this idea that has created such a massive wealth gap between the rich and the poor. To understand this, we must examine the history of taxes. At one point in history there were no taxes. Occasionally, there would be temporary taxes levied in order to pay for Wars. The King or President would put the word out asking everyone to chip in. Taxes were levied in Britain for the fight against Napoleon from 1799 to 1816, and in America to pay for the Civil War from 1861 to 1865.
About 50 years later, in 1913, the idea of regular income tax was adopted. What history fails to reveal is that the early taxes were only imposed on the rich. The idea of taxes became popular and accepted by the majority, by telling the poor and middle class that taxes were created to punish the rich. This is how the masses voted taxes into law, and it became constitutionally legal. It is through the Robin Hood theory of economics that regular income taxes became legal, but instead of punishing the rich, taxes ended up punishing the very people who voted for it.
You see the government’s appetite for money grew and soon regular taxes were imposed on the middle class and from there and kept trickling down to the poor. However, the rich side taxes as an opportunity because they don’t play by the same set of rules. The rich knew about the power of corporations. This is the greatest secret of the rich. Corporations have allowed the rich to accumulate massive amounts of tax-free wealth at zero personal risk.
Corporations were originally created to fund voyages, a wealthy merchant would put money into a corporation to finance the voyage. The corporation would then hire a crew to set sail to the new world in search of treasure. If the boat sank and the crew lost their lives, the corporation would take a hit and the merchant would lose their investment. Today most people think a corporation requires a big group of people or a factory, but the reality is a corporation is nothing more than a few legal documents that form a legal body without a soul. So a corporation is not a real thing. It’s only real in the eyes of the government, but corporations enjoy massive benefits when it comes to paying taxes and accumulating wealth.
Here’s the difference between how an employee pays taxes and how our corporation pays taxes:
- An ordinary employee works for a paycheck. The government takes a chunk out of the paycheck usually 20 to 50 percent of the salary, and the employee gets to spend what’s left. The more an employee earns, the more they are taxed. If we were to look at taxes on an annual basis. An employee doesn’t earn a dime from January to May, 5 months salary goes directly to the government.
- A corporation on the other hand earns money spends money and pays taxes on what’s left. This difference in payment structure allows corporations to keep all the money they make. Corporate tax is already much lower than personal income tax. At the end of the fiscal year corporations have a choice. Pay taxes to the government or reinvest their money back into the corporation to make it grow.
So at the end of the year, after all expenses have been claimed, there is no money left and corporations pay little to no taxes. It’s because of this massive loophole in our tax system that rich people keep all of their money tied up in corporations. They have all the control over their money take none of the personal risk and their wealth grows.
So those who control corporations, leverage the system to control billions. They don’t have their cash just sitting in their bank account. It’s all tied up in corporations. Most billionaires keep less than a million dollars in their personal bank account, yet they have control over billions and can access the money through their corporations anytime they want.
Over the last century more and more legislation has been voted into law for higher taxes on the rich, and each time a new law passes, the rich just don’t sit there and accept it, they use their financial literacy power and resources to keep control of their money. The burden of the tax then falls on the upper middle class which in turn widens the gap between the rich and everyone else.
But here’s the good news, anyone can start a corporation yes anyone even if you don’t have a business idea create a corporation and you can control your money and spend it before the government takes it.
It is this knowledge that can get you out of financial stress and into a life of freedom. Don’t use ignorance as an excuse to not become wealthy.