Remember that ordinary business expenses are write-offs, so a married doctor at $350k is not paying 32% on most and if clever, ANY business operations.
So lets say total deductable biz expenses are $100,000 out of the $350,000 gross.
Does that mean doctor nets $250,000? No.
1) $350000 at 32% = $112000 taxes, $238000 take home. This is of course not how it works in total but it’s for illustration:
2) $350000 – $100000 tax deductible biz expenses:
a) $250000 at 24% = $60,000 taxes, $190,000 take home.
b) The $100,000 is all for the business and only for the business.
Take home difference is only $48,000 and not $100,000.
Reality allows for far more free tax shelters than this but at its face this is an example of how running a business results in free money that otherwise would go to taxes.
Important note: WITHIN ordinary biz expenses are magical things which allow you to supplement your lifestyle tax free which FURTHER narrows the gap between two net incomes as you no longer have to pay personal income tax, so long as you can justify it as ordinary biz expenses.
Of the 5 standard ways to get rich in the USA:
b) stocks / bonds / commodities / etc
c) rental income (real estate), tax free for good historical reasons
d) owning/running a business
e) buying and selling multiple businesses
d) is probably the most accessible. American Dream accessible.
and it works, not by the “magic of compounding interest” or by the “invisible hand of the markets”. No no, scratch that out of your head.
It works by avoiding taxes.
Of dishonorable ways, I’d say not “paying your debts” up to and including bankruptcy protections is the #1 dishonorable road to wealth creation in the USA.
d) and e) are excellent large corporate ways towards wealth REGARDLESS of current tax rates. Remember our most prosperous period is ALSO the time big corporations paid THE MOST in taxes. But they also worked for the government far more significantly, so i dunno