(upbeat banjo music) (air whooshing) – Hey, guys, welcome to "Advanced Lessons in Millennial Money," featuring Robert Kiyosaki. I'm Alexandra Gonzalez. In this two-part episode,
I got a chance to speak with Robert and his tax
advisor, Tom Wheelwright. Tom has been a CPA for 34 years, and has an extensive background
in accounting and education. We're lucky that he joined us for this important lesson on taxes. To all of our subscribers, keep an eye out for the release of part two,
coming in the next few weeks. And if you aren't a subscriber, click the button now to get notified.
One of the things Robert and many of the wealthy talk about
is how they don't pay taxes, and I asked Robert and Tom
to clarify what they mean. (air whooshing) I want to know, and I'm sure
all our viewers wanna know, how is it that you guys don't pay taxes? – Legally. – Legally. – You can always do it as a crook, but we don't want you
to do that, right, Tom? – That's right. – So the question is, how
do the rich not pay taxes? Right? It's a multi-step process. Let's talk about this one
first, to keep it small, is here you have, you go to school, get a job, you become an employee, but you learn nothing about taxes.
And then you become a little entrepreneur, you start your little
falafel shop business or whatever you start, right? So that you're self-employed,
small business. And then you have big business, 500 employees or more, or I for investor. So, Tom, how much tax do employees pay? – Well, typically, if
they're making a good salary, and this is, by the way, the
same rates around the world, typically it's gonna be about 40%. – 40%. And after the Trump tax
cut, did that change much? – Not much, it didn't. – So if you're a, "Oh,
I'm gonna start my own "little business, I'm gonna
start my little pizza shop, "or my coffee shop," how
much do these guys pay? – Well, now it goes up,
because you're paying both your share of the taxes
plus the employer share of the taxes, because
you've got both sides. So now it goes up as high as 60%. – So when you hear a young
person, an old guy like me, saying, "I'm gonna start my own business," they don't think about taxes, do they? – No, and in fact, this is the place where people get in trouble.
Because over here, the money's being taken out of your paycheck. But here, you're
responsible for your taxes, and so what happens is that you go, let's say you're successful
with your pizza shop, right? All of a sudden, tax time comes around, "Oh no, I've spent all my money, "and I don't have money to pay the taxes." And people go out of
business real fast here. – Well, it is surprising,
'cause a lot of the millennials do wanna start up their own
small little business, right? And what they're not
aware of is that they're gonna be in the 60% tax bracket. – Because taxes are your
single largest expense. So if you're gonna
start your own business, you gotta be aware of taxes here.
Now, big business, that's
500 employees or more, how much do they pay? – Typically, around the world, about 20%. – Now, why is it that
big-business people pay less than small business? – Well, basically, the government wants us to do certain things, and
they'll give us incentives if we do them. And what they want out
of a big business is, they want employment. So they wanna create employment, because that creates
stability in the country– – Jobs. – Jobs, right? And so, the more jobs you create, actually the more tax benefit you get. – Well, look at Amazon right now. They're looking at moving their company. How many tax benefits do
you think they're getting? – Oh my heavens, they pay
very, very little tax, Amazon does, and they pay,
you know, you're talking about all those different kinds of taxes? Not only do they pay
very little income tax, but they're also paying
very little sales tax, and unemployment taxes,
and all those others, because they're getting benefits from multiple types of government, the federal government,
the state government, the city government, the county government.
– Is that how Elon Musk started his battery factory in Nevada? – Well, yeah, I mean, Elon Musk, he gets huge research and
development tax benefits, which, by the way, that's a tax benefit that is available in most
countries more than the U.S.
– Right. So if you're gonna stay small, I mean, it's a good place to start, but you gotta really wanna come over here eventually. And then the professional investors. See, these guys are passive. These guys invest in
stocks, bonds, mutual funds, they save money, they're passive guys. They pay the highest taxes. But how much does a professional investor, like "Shark Tank," how
much do these guys pay? – So they can pay as little as 0%. – Right. – They can actually completely
eliminate their tax. (air whooshing) – One of the biggest misconceptions out there regarding
taxes is that tax breaks are only given to the wealthy. Robert had a great answer for this.
Let's take a listen. (air whooshing) Well, I think this is actually
a very interesting topic for our audience because of the fact that a lot of the people complain
that the only people who get tax benefits are the wealthy. And I think it's also
because, like you said, it's a series of incentives of what the government wants you to do. – And that's the mistake,
it's not the wealthy.
You see a lot of wealthy people here. You know, if I, let's say
I'm a CEO of a company, I make a million dollars a
year, I still pay 40% tax. And I could be a doctor or a lawyer, and I could make a million dollars a year, and still pay 60% in tax. See, it's not what you
do, it's your mindset in the quadrant here.
So this is my Poor Dad,
this is my Rich Dad. So which one do you wanna be, you know? (air whooshing) – In this clip, Tom goes on to explain the difference between
the rich and the poor. (air whooshing) – The difference between
the rich and the poor is, how do they use taxes to their benefit? You look over here, you
ask about the big business, well, that's employment, right? But investors, why do professional
investors get benefits? Well, because the
government wants housing, they want commercial projects built, they want energy done,
that's Elon Musk, right? – They want food. – They want technology,
they want food, agriculture. So all of those things
that the government's trying to incentivize people
to put their money someplace, they really want them to put it over here.
And if you put it over here, these are pretty much consumers, these are consuming the money, and the government, what they really want is they want all the producers over here. – Yeah, I had a friend who started off, he never went to school, but
I think his grandma gave him 10 chickens, and they were
producing 10 eggs a day. And by the time he
retired, he was producing 10 million eggs a day. Did he get tax breaks for that? – Enormous tax breaks, because
every dollar you reinvest in your business, you
get a tax break for it. – Yeah. (air whooshing) – Robert then goes into another
lesson from his Rich Dad.
And for all of you entrepreneurs, you might wanna pay attention. Let's see what he said. (air whooshing) – So the other thing that
my Rich Dad taught me, which is this here, is since
I was not a very good student in school, he just says,
"Remember the McDonald's formula." So the reason I talk about this McDonald's formula, this is Ray Kroc. If you saw the movie "The Founder," he says it right in the movie.
The purpose of McDonald's
business is not hamburgers. Everybody thinks it's hamburgers. McDonald's business is to buy real estate. You see, a hamburger stand
produces so much income, it can afford the real
estate, where the average guy, you know, graduated from
school with their MBA or Ph.D., they go, "Well, how come I can't do that?" Well, 'cause you're over here. So McDonald's did this here,
so they had their business, which is hamburgers,
bought their real estate. So today, McDonald's owns more real estate than the Catholic Church.
Does the Catholic Church
get tax breaks, too? – (laughs) Enormous tax breaks. They don't pay tax on any of their income. – Yeah, so McDonald's competed
with the Catholic Church by just building hamburgers
and buying real estate. Any comments on that, Tom? – Well, the great thing is, you don't have to be
huge to do this, right? I mean, you can do it with your startup business, your
online business, right? You guys are doing all
those online businesses– – You could do it from here to here. – The tax law is ultimately fair, because you don't have to be huge in order to take advantage. What you do have to have, though, is the financial
education, because you have to behave like these people. If you do what these people do, you get the same tax
benefits that they get. The challenge that most people have here is that they don't have
any financial education, and so they do everything
as if they were up here, and that just gets them in trouble.
Because these guys, that's not
where the tax law is built. The tax law is built for
these guys over here. (air whooshing) – Next, Robert talks about
using debt to your advantage. Most people think all debt is bad. But little do they know, it
offers a huge tax benefit. Tom and Robert explain. (air whooshing) – So I'm gonna throw you one more thing. Again, this takes financial education. The number one asset I can use is debt. So the reason I like this place here, and get this, so let's say I have, this is the McDonald's
hamburger formula here.
So I have $1 from my hamburger business, plus $5 of debt, so that gives me $6. What does that mean to you, Tom? – Well, it means you're not
gonna pay very much tax, and it also means you're
gonna make a lot more money. Because what debt does is it
accelerates on the plus side if you know what you're doing, if you got the financial education, right? On the plus side, it
accelerates both your income, but it also accelerates your tax benefit.
– Yeah, so this is my formula here, it's the McDonald's formula, except, let's say I have Rich Dad Company, I have more than Rich Dad Company, but Kim and I buy real
estate with Ken McElroy and with Tom's guy, who
knows we do all this. Because we can leverage up with debt, but good debt, debt that
we don't have to pay for. These guys have bad
debt, like their house, their car payments, student
loans, really horrible debt. But there's good debt on this side. But you can do the same thing
this way, if you want to. (air whooshing) – Thank you guys so much for
joining us on this video, and I hope you guys loved
it just as much as I did. And if you did, give it a thumbs-up, comment if you have any questions, and subscribe to our channel. (speaks in foreign language) (upbeat banjo music) (beep) Oh my gosh, I almost fell asleep, but that was a very long (laughs) clip.
(crew members laugh) (beep) Oh my gosh, I'm so awake,
that was a really (laughs) (crew members laugh) (beep) Thank you guys
so much for joining us on this episode, I spit. (laughs) (crew members laugh) (Alexandra laughs) (beep) The most important lesson of all– (crew member murmurs and laughs) (laughs) Whoa! (air whooshes).