Why the Middle Class Is Screwed

Why the Middle Class Is Screwed by Robert Kiyosaki – Daily Reckoning

Last December, Congress passed the largest U.S. tax system overhaul in more than 30 years—a $1.5 trillion tax cut, but America’s middle class will see less than a quarter of the savings under the legislation.

In 2018, middle-income households—those earning $20,000-$100,000—will see a tax cut of about $930 on average. Just about half of American adults live in middle-class households, down from 61% in 1971 according to the Pew Research Center. For a while now, I’ve been predicting that the middle class would disappear and that we would have only two classes of people in the U.S., the poor and the ultra-rich.

The middle class is made up of people who work for a living, earning wages doing carpentry, plumbing, factory work, and all types of services. They live paycheck to paycheck with very little in savings or investing in retirement.

Those earning more than $500,000 a year will get $61 billion in cuts in 2019. This includes income earned by pass-through businesses such as partnerships and S-corporations that pay taxes on individual returns. This is because tax cuts for small businesses will help boost the economy—helping job growth.

This isn’t a story of economic gloom, it’s a financial education that you won’t hear through mainstream media. There are four financial forces that cause most people to work hard and yet struggle financially:

1. Taxes

2. Debt

3. Inflation

4. Retirement

Which one of these four affects you personally?

If he were alive today, my poor dad would have struggled financially even without his bad investments. He most likely would not have been comfortable. Today, the middle class is quickly disappearing. But it’s a different sort of disappearance than people think. As Jim Rickards writes, “The middle-class numbers are not necessarily getting smaller. The problem is that middle class doesn’t mean what it used to mean.” I believe the population is actually dwindling, but this is an important understanding. There is still a population living and breathing in the 40-60% mid range of earnings. But because all the ways my poor dad achieved a level of financial comfort no longer work in today’s economy, that distinction doesn’t entitle you to the security you would have had even twenty years ago.

Today, savers are losers, houses are worth less and less, there are no pensions, and essential goods for life are more and more expensive. Today, inequality is higher than it’s ever been.

How the Rich Get Richer

Here’s the kicker. The rich know how to use these forces to make more money rather than have them steal their wealth.

The rich know how to make investments and run businesses that allow them to pay little to no taxes.

The rich know how to use debt and other people’s money to make investments that provide constant cash flow while paying that debt off.

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