d hire people。 The more he spends and the more people he hires； the larger his organization bees。 In the government； the larger his organization； the more he is respected。 On the other hand； within my organization； the fewer people I hire and the less money I spend； the more I am respected by my investors。 That's why I don't like government people。 They have different objectives from most business people。 As the government grows； more and more tax dollars will be needed to support it。〃
My educated dad sincerely believed that government should help
people。 He loved John F。 Kennedy and especially the idea of the Peace Corps。 He loved the idea so much that both he and my mom worked for the Peace Corps training volunteers to go to Malaysia； Thailand and the Philippines。 He always strived for additional grants and increases in his budget so he could hire more people； both in his job with the Education Department and in the Peace Corps。 That was his job。
From the time I was about 10 years old； I would hear from my rich dad that government workers were a pack of lazy thieves； and from my poor dad I would hear how the rich were greedy crooks who should be made to pay more taxes。 Both sides have valid points。 It was difficult to go to work for one of the biggest capitalists in town and e home to a father who was a prominent government leader。 It was not easy knowing who to believe。
Yet； when you study the history of taxes； an interesting perspective emerges。 As I said； the passage of taxes was only possible because the masses believed in the Robin Hood theory of economics； which was to take from the rich and give to everyone else。 The problem was that the government's appetite for money was so great that taxes soon needed to be levied on the middle class； and from there it kept 〃trickling down。〃
The rich； on the other hand； saw an opportunity。 They do not play by the same set of rules。 As I've stated； the rich already knew about corporations； which became popular in the days of sailing ships。 The rich created the corporation as a vehicle to limit their risk to the assets of each voyage。 The rich put their money into a corporation to finance the voyage。 The corporation would then hire a crew to sail to the New World to look for treasures。 If the ship was lost； the crew lost their lives； but the loss to the rich would be limited only to the money they invested for that particular voyage。 The diagram that follows shows how the corporate structure sits outside your personal ine statement and balance sheet。
How the Rich Play the Game
Is reduced/diminished by expenses
Assets 》 Ine
（through personal corporation）
It is the knowledge of the power of the legal structure of the corporation that really gives the rich a vast advantage over the poor and the middle class。 Having two fathers teaching me； one a socialist and the other a capitalist； I quickly began to realize that the philosophy of the capitalist made more financial sense to me。 It seemed to me that the socialists ultimately penalized themselves； due to their lack of financial education。 No matter what the 〃Take from the rich〃 crowd came up with； the rich always found a way to outsmart them。 That is how taxes were eventually levied on the middle class。 The rich outsmarted the intellectuals； solely because they understood the power of money； a subject not taught in schools。
How did the rich outsmart the intellectuals？ Once the 〃Take from the rich〃 tax was passed； cash started flowing into government coffers。 Initially； people were happy。 Money was handed out to government workers and the rich。 It went to government workers in the form of jobs and pensions。 It went to the rich via their factories receiving government contracts。 The government became a large pool of money； but the problem was the fiscal management of that money。 There really is no recirculation。 In other words； the government policy； if you were a government bureaucrat； was to avoid having excess money。 If you failed to spend your allotted funding； you risked losing it in the next budget。
You would certainly not be recognized for being efficient。 Business people； on the other hand； are rewarded for having excess money and are recognized for their efficiency。
As this cycle of growing government spending continued； the demand for money increased and the 〃Tax the rich〃 idea was now being adjusted to include lower…ine levels； down to the very people who voted it in； the poor and the middle class。
True capitalists used their financial knowledge to simply find a way to escape。 They headed back to the protection of a corporation。 A corporation protects the rich。 But what many people who have never formed a corporation do not know is that a corporation is not really a thing。 A corporation is merely a file folder with some legal documents in it； sitting in some attorney's office registered with a state government agency。 It's not a big building with the name of the corporation on it。 It's not a factory or a group of people。 A corporation is merely a legal document that creates a legal body without a soul。 The wealth of the rich was once again protected。 Once again； the use of corporations became popular…once the permanent ine laws were passed… because the ine…tax rate of the corporation was less than the individual ine…tax rates。 In addition； as described earlier； certain expenses could be paid with pre…tax dollars within the corporation。
This war between the haves and have…nots has been going on for hundreds of years。 It is the 〃Take from the rich〃 crowd versus the rich。 The battle is waged whenever and wherever laws are made。 The battle will go on forever。 The problem is； the people who lose are the uninformed。 The ones who get up every day and diligently go to work and pay taxes。 If they only understood the way the rich play the game； they could play it too。 Then； they would be on their way to their own financial independence。 This is why I cringe every time I hear a parent advise their children to go to school； so they can find a safe； secure job。 An employee with a safe； secure job； without financial aptitude； has no escape。
Average Americans today work five to six months for the government before they make enough to cover their taxes。 In my opinion； that is a long time。 The harder you work； the more you pay the government。 That is why I believe that the idea of 〃Take from the rich〃 backfired on the very people who voted it in。
Every time people try to punish the rich； the rich don't simply
ply； they react。 They have the money； power and intent to change things。 They do not just sit there and voluntarily pay more taxes。 They search for ways to minimize their tax burden。 They hire smart attorneys j and accountants； and persuade politicians to change laws or create legal loopholes。 They have the resources to effect change。
The Tax Code of the United States also allows other ways to save on taxes。 Most of these vehicles are available to anyone； but it is the rich who usually look for them because they are minding their own business。 For example； 〃1031〃 is jargon for Section 1031 of the Internal Revenue Code； which allows a seller to delay paying taxes on a piece of real estate； that is sold for a capital gain through an exchange for a more expensive piece of real estate。 Real estate is one investment vehicle that allows such a great tax advantage。 As long as you keep trading up in value； you I will not be taxed on the gains； until you liquidate。 People who do not take advantage of these tax savings offered legally are missing a great opportunity to build their asset columns。
The poor and middle class do not have the same resources。 They sit there and let the government's needles enter their arm and allow the blood donation to begin。 Today； I am constantly shocked at the number of people who pay more taxes； or take fewer deductions； simply because they are afraid of the government。 And I do know how frightening and intimidating a government tax agent can be。 I have had friends who have had their businesses shut down and destroyed； only to find out it was a mistake on the part of the government。 I realize all that。 But the price of working from January to mid…May is a high price to pay for that intimidation。 My poor dad never fought back。 My rich dad didn't either。 He just played the game smarter； and he did it through corporations…the biggest secret of the rich。
You may remember the first lesson I learned from my rich dad。 I was a little boy of 9 who had to sit and wait for him to choose to talk to me。 I often sat in his office waiting for him to 〃get to me。〃 He was ignoring me on purpose。 He wanted me to recognize his power and desire to have that power for myself one day。 For all the years I studied J and learned from him； he always reminded me that knowledge was power。 And with money es great power that requires the right knowledge to keep it and make it multiply。 Without that knowledge； the world pushes you around。 Rich dad constantly reminded Mike and me that the biggest bully was not the boss or the supervisor； but the tax man。 The tax man will always take more if you let him。
The first lesson of having money work for me； as opposed to working for money； is really all a