facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Don't Get Mad at Bezos, Learn From Him Thumbnail

Don't Get Mad at Bezos, Learn From Him

Investing Insights

Ever since these articles have come out talking about how Bezos and others pay very little to no taxes the backlash has been extreme. If you’re a business owner or executive instead of being mad you should be learning.  The goal isn’t to make them pay more taxes, if they wrote a check for $10 billion today would there be any impact on your life? Not at all, you wouldn't see any of that money.  The goal is to learn how not to pay so much in taxes yourself. 


Bezos, Musk and so many more are simply using leverage to bypass the American tax system.  Instead of taking a salary or large bonuses typically they are getting stock options and buying stock at a discount.  Then to create income they are going to the bank and taking out a loan against the value of their stock.  Loans are tax free, therefore they are not paying taxes on that money.


This is how the wealthy work.  They keep their money working for them and use OPM, other peoples money, at discounted interest rates.  Lets face it banks like to lend money to people who are rich as they have a much higher probability of recouping those funds.  This allows them to get loans at extremely low interest rates because they are 100% collateralized.  If you can keep your money invested and borrow at sub 2.5% you are not only getting tax free income but also making money on the positive arbitrage over returns vs interest rates over time.


There was just a great article in the Wall Street Journal, going into detail more about how this works.




The dilemma most business owners face is that they don’t have large stock portfolios and taking out massive loans against their business doesn’t sound enticing, and rightfully so.


So where do they turn?


Cash Value Life Insurance.


But Life Insurance is expensive Keith.  You’re right that’s why we have the bank pay for it.




We borrow the money from the bank, at competitive rates to fund the life insurance premiums.  We then collateralize or pay the interest until the life policy has outperformed the loan. (By the way historically this has always happened).  This frees up their cash flow for them to expand or make critical business decisions to drive growth for their company.   Then we do what Bezos and so many others are doing, and we use the life policy to take out loans, which are tax free to create income for us.


That seems complex.


At first glance yes it does, that is why you need a premium finance specialist to help you with it.  But if you believe markets work, and you want to start acting and investing like a wealth creator, instead of a taxpayer, then you need to start doing what the wealthy are doing.


Biden has been clear on where he wants the American tax system going and it is straight up.  Corporate, Personal, Capital Gain, Estate he isn’t leaving anything untouched.


If you aren’t looking for opportunities to protect yourself, your business, and your employees then you are going to be left behind.


Who qualifies?


Great question.   That depends on several factors, age, income, assets, use of policy.  Typically, income of $400k+ or net worth of $5M can get the conversation started.  For business owners though, there are many ways to qualify, call us and let's see if it makes sense.