FBC – 209 – How Do The Rich Get Richer

How Do The Rich Get Richer?

If you have been wondering how rich people get richer and why poor people get poorer, you need to listen to this episode.

If you are looking for a way to get ahead financially, this episode might just change your perspective.

All the answers and more in today's episode.

So today I want to talk about taxes and how the rich use the system legally to their advantage. This is not a conspiracy theory. This is how the tax code actually works.

Here is the basic concept. If you are an employee, you earn a salary. Your employer deducts taxes from your paycheck before you even see the money. You get what is left. Then if you want to invest or save, you invest from your after-tax income.

Now here is what is different for a business owner. A business owner has expenses. Those expenses reduce taxable income before taxes are calculated. So if a business earns $100,000 and has $40,000 in legitimate business expenses, the owner only pays tax on $60,000. Not $100,000.

This means the business owner is investing and growing wealth using pre-tax dollars. The employee is doing it with post-tax dollars. Over time, that difference is massive.

How Do The Rich Get Richer

Now I want to be clear. I am not a tax expert. What I am describing is the basic principle and it is legal. How exactly you structure this depends on your country and your situation. You need a qualified accountant or tax advisor to do this properly.

But the key insight is this. Wealthy people are not just earning more. They are keeping more of what they earn by understanding the rules of the game. The tax code in most countries gives significant advantages to business owners and investors compared to employees.

This is why starting a business, even a small one, changes your financial situation in ways beyond just the extra income. You gain access to deductions, write-offs, and structures that employees simply do not have.

There are perfectly legal ways to structure your business, your investments, and your income to minimize the tax you pay and maximize the wealth you keep. These are perfectly legal.

So if there's something of interest for you, obviously I'm not the best person to talk to. Find someone professional who specializes in that stuff to explain how it works.

The rich get richer because they invest pre-tax dollars. A business owner can deduct expenses before paying tax. An employee pays tax first and invests what is left. That structural difference, compounded over decades, explains most of the wealth gap.

Frequently Asked Questions

How do the rich get richer through taxes?

Business owners and investors use legal tax structures to invest before paying tax. When you run a business, many of your expenses reduce your taxable income before the government takes its share. An employee has no such leverage. They earn a salary, pay income tax on the full amount, then invest whatever remains. The rich are not always smarter or working harder. They are operating in a different tax structure that multiplies wealth faster.

What is the difference between pre-tax and post-tax investing?

Pre-tax investing means you invest money before income tax is applied to it. If you earn $10,000 and invest $3,000 pre-tax, you only pay tax on $7,000. Post-tax investing means you earn $10,000, pay tax on all of it, then invest whatever is left. Over time, pre-tax investing creates significantly more wealth because more of your money is compounding rather than going to the government first.

Can a solopreneur legally pay less tax than an employee?

Yes. When you run a business, tools, software, home office space, travel related to work, and many other expenses can be deducted from your income before you calculate tax. This is completely legal and is the same mechanism wealthy people use. The difference is scale and knowledge. Most employees never learn this because the tax code is built around employment, not ownership.

What is the first step to making taxes work in your favor?

Start a business, even a small one. Once you have legitimate business income and expenses, you gain access to deductions that employees do not have. Work with an accountant who understands business taxation. Most people overpay taxes simply because they never shifted from employee tax thinking to business owner tax thinking. That shift is the first step.

About the Author

Martin Ebongue is the founder of martinebongue.com, an online business and lifestyle design blog focused on helping aspiring entrepreneurs build location-independent businesses. Since 2014, he has been creating and scaling online ventures across multiple niches, from digital products and affiliate marketing to SaaS and content platforms, while traveling the world. He shares the real-world strategies, tools, and systems that work, with a particular focus on AI-powered automation for solopreneurs. Follow him on YouTube, X (Twitter), and Instagram.

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