Ethics of paying no taxes on your income

My previous two blog posts were about how to never pay taxes on your income from real estate investing as well as on your profits from selling your investments. Many people feel that getting rich while not paying a penny in taxes along the way is somehow unethical. I too was one of these people, believing that not giving the government its “fair share” was wrong. But then I read Tax-Free Wealth by Tom Wheelwright and it shifted my perspective on this moral issue. Tom Wheelwright points out that the tax code is structured in such a way as to motivate entrepreneurs to act in a certain way and encourage them to stimulate our economy. What does the government feel very strongly about? Affordable housing. The government is willing to forego billions of dollars in taxes from real estate entrepreneurs in order to incentivize their activities. If the government were to remove the plethora of tax advantages of real estate investing, entrepreneurs would shift their focus to other, more lucrative sectors. This simple idea completely shifted my paradigm and I no longer feel guilty about setting up a wealth plan which includes paying hardly any taxes.

I would highly encourage anyone working as a W2 employee or thinking about going into a specialized field to read Tax-Free Wealth by Tom Wheelwright in order to learn how to keep more of what you earn. Saving money on your taxes is one of the easiest ways to make more money. The average person works 2,000 hours per year but how many hours do they spend on effective tax planning? I’m not sure but I’m willing to argue that the time people are saving is not worth the 30%-40% they are paying in taxes.

I will end with an interesting side note regarding taxes. There is something called the “silent tax” which the vast majority of people are oblivious to. This “silent tax” of course is called inflation. If you ever thought that the government could run out of money if they did not collect enough in taxes, here is their solution. The Federal Reserve prints money and the US government buys it, creating debt, and effectively reducing the purchasing power of each and every American. If you find this conspiracy type of research about money, I recommend checking out the book The Creature from Jekyll Island. To relate this back to investing, real estate is axiomatically known as one of best inflation hedges in finance. So as the government continues its quantitative easing or attempts to stimulate the economy through fiscal policy, real estate will be right there as a great beneficiary. To learn more about inflation and how to make it your friend, read this investopedia article: How To Profit From Inflation.