From: alexhormozi
The Paradox of High Taxes and High Wealth
The presence of numerous individuals on the Forbes list in California, despite the state’s high taxes, initially posed a paradox to the speaker [00:00:00]. This observation led to the realization that these wealthy individuals possessed an understanding of wealth creation that was not immediately apparent [00:00:07].
Understanding Wealth Alchemy
This inquiry led to a deep dive into a specific level of wealth creation, now referred to as Wealth Alchemy [00:00:11].
Consider a scenario in a high-tax state where a 50% tax rate applies, resulting in 3 million before taxes [00:00:17]. The frustration from the government taking half of one’s earnings is a common sentiment [00:00:25].
A New Approach to Tax Efficiency and Growth
Instead of focusing solely on cash flow, a different strategy emerges:
- By adding 120 million can be achieved [00:00:31].
- If a total of 120 million in business growth and 1.5 million in taxes is paid, the effective tax rate can be as low as 1.5% [00:00:42].
- Crucially, this growth remains tax-free and compounds, provided the wealth continues to be built within the business and is not cashed out [00:00:54].
This realization fundamentally shifted the speaker’s approach to wealth building [00:01:01].