Taxes: the savior that is killing
In Britain taxes were levied to fight against Napoleon and in the USA taxes were levied during the civil war. Taxes were first made permanent in Britain in 1874 and it was first made permanent in the US in 1913. With the adoption of the 16th amendment of the Constitution.
The Americans were initially anti-tax, the Boston Tea Party was a result of the tax on tea. However, taxes were maid permanent by the propaganda of the collection of taxes only from the rich for the benefit of the poor.
Initially, it was so but as the government got the taste of money, its appetite grew, the higher-income earning middle class was also included in the taxpayer’s list. It is the cause of pain for the people who voted for it but the rich escaped every time the laws changed against them because they are financially educated and influential.
How did the rich escape from being taxed?
The rich include entrepreneurs and businessmen, they escaped by the device of Corporation. A group of businessmen came together formed a corporation. A corporation is basically some legal documents in the office of an attorney or lawyer and registered with a Government agency. It is a legal body without a soul and it protected the rich from the income tax.
The government earns from taxes, and it distributes its income in the forms of jobs and pension to the poor and in the form of contracts of production to the rich. The rich before starting the production invest all their money in a corporation and then channelize their investment. After the production process is completed and the government buys the output the corporation gets its revenue, and it is a large sum of money.
The corporation then pays the factors of production and dividends to its shareholders, the leftover money is termed as profit, the corporation is taxed on its profits and on its revenue. Moreover the rich are clever enough to hire expert accountants who prepare the balance sheet so cleverly that the rich are shown to virtually own nothing. The rich at times use their influence and money to influence politicians too.
What should the tax victim do?
In India, the high-earning middle class has to give about 10-15 % in taxes, i.e. a month of work with no salary and that is a lot. The middle class has a great option of investing in real estate as the government gives some tax benefits on home loans. The investment in the real estate must generate revenue, i.e. they should put their properties on rent, this would have a double way benefit, they will have some extra income – the rent and they will also get tax benefits. The rent that is earned can be invested in some other productive activities such as buying stocks, bonds, cash certificates or invest in mutual funds. A strong asset column will be built and there will be multiple sources of income.
In this way the middle class will also follow what the rich do, the rich do not work for money but makes money work for them, they follow the saying, “ Money is a good servant, but not a good master”. The middle class who aspire to be rich must ensure that every penny in their asset column must be the hardest worker and must generate another hardest worker.
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Analysis by Soujashh Singha
Research source: A Book Rich dad poor dad by By Robert Kiyosaki and His wife Kim Kiyosaki