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Is there lesser or no tax on assets?
US federal tax law distinguishes many types of income. For most people, most of their income is "earned income", money you were paid to do a job. Another category of income is "capital gains", money you made from the sale of an asset. For a variety of reasons, capital gains tax rates are lower than earned income tax rates. (For example, it is common that much of the gain is not real profit but inflation. If you buy an asset for $10,000 and sell it for $15,000, you pay capital gains tax on the $5,000 profit. But what if prices in general since you bought the asset have gone up 50%? Then your entire profit is really inflation, you didn't actually make any money -- but you still have to pay a tax on the paper gain.) So if you make your money by investing in assets -- buying and selling at a profit -- you will pay lower taxes than if you made the same amount of money by receiving a salary from a job, or by running a business where you sell your time and expertise rather than an asset. But money made from assets -- capital gains -- is not tax free. It's just a lower tax. It MIGHT be that when combined with other deductions and tax credits this would result in you paying no taxes in a particular year. Maybe you could avoid paying taxes forever if you can take advantage of tax loopholes. But for most people, making money from capital gains could result in lower taxes per dollar of income than someone doing more ordinary work. Or it could result in higher taxes, if you factor in inflation, net present value of money, and so on. BTW Warren Buffet's "secretary" is not a typist. She apparently makes at least $200,000 a year. http://www.forbes.com/sites/paulroderickgregory/2012/01/25/warren-buffetts-secretary-likely-makes-between-200000-and-500000year/#ab91f3718b8a. And side note: if Warren Buffet thinks he isn't paying enough in taxes, why doesn't he voluntarily pay more? The government has a web site where citizens can voluntarily pay additional taxes. In 2015 they received $3.9 million in such contributions. http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm