“The single most important key to my business success is a working knowledge of the tax code.”

Can you guess who quoted the above?

When I heard it for the first time, it really caught me by surprise because I was expecting something very different from this billionaire.

Perhaps something related to marketing, technological innovation, etc.

But, no. This is what this person said he thought the single most important key to business success is. “The working knowledge of the tax code”

This is one of the richest men in the world talking.

Well, you probably guessed it right. It is a quote from Bill Gates, the founder & chairman of Microsoft.

If this is something that’s coming from Bill Gates who knows a thing or two about business success and wealth building, I think you should take note of it and apply it for yourself.

Here’s why.

Billionaires and millionaires alike, they are most likely to be the ones paying less than 10% of their income in taxes. Yes, single digit… when the average population is paying anywhere from 25% to more than 50% in income taxes.

What do they know that you don’t?

The best-selling authors of the book The Millionaire Next Door said that most of those who reached the millionaire status didn’t do so by inheriting a lot of money, hitting it big on Wall Street, or picking up a winning lotto.

They were, mostly, average persons who consistently saved up, little by little, year after year.

With diligent saving habits and solid financial planning, they invested their savings in average investments (e.g. mutual funds) for the long-term.

Ok. Let’s say you invest $4,000 per year (e.g. with the cash from your tax savings) in an average mutual fund with an average annual rate of return of 11.5% for the next 30 years. After those 30 years, you would have $1,048,745.68!

So here’s the very simple and powerful, yet commonly overlooked principle that most wealthy people understand and apply:

It’s not how much money you make that counts. It’s how much you keep.

Yes. It is simple and common sense. But understanding AND applying the principle is the key.

No matter what your business is, taxes are by far the largest expense for most people. As a matter of fact, with federal, state and local, and FICA taxes combined, many people are paying in excess of 50% of what they make on taxes as shown in the table below.

Yes. Over 50%! And this is just income taxes. You don’t want to know what you’ll be looking at when you start considering how much you pay on other taxes e.g. property taxes, sales taxes, luxury taxes…

If you don’t think tax planning is important, think again!

So, why is it that you, a hard working, dedicated employee and/or business owner, might be paying over 50% of your earnings in taxes when many of the millionaires and billionaires are paying less than 10%?

Are they doing anything illegal or unethical?

Absolutely not. They’ve got absolutely nothing to hide.

Here’s the thing.

The quality of questions you ask yourself combined with a positive, let’s-get-it-done attitude is what you must have if you are really driven to succeed in keeping more of what you make and building your wealth.

Ask yourself this question: “How can you also pay less than 10% in taxes just like these millionaires and billionaires?”

You are always going to have to pay taxes in one form or another (even if Ron Paul gets elected in the future and implements what he had long advocated to end the federal income tax – which is highly unlikely in itself – but even if… you’ll still be facing FICA taxes, state and local taxes, etc.). This will never change.

So a smart thing for you to do is not to blame the current taxation system for it, but to face the situation as it is and ask yourself, “what can I do to pay less in taxes?”