The rich don't pay taxes": busting the myth that's costing you money
If you've spent even 10 minutes on TikTok or Instagram Reels lately, you've definitely seen this take: "The rich don't pay taxes. The system is rigged against you. That's why you'll never get ahead."
If you've spent even 10 minutes on TikTok or Instagram Reels lately, you've definitely seen this take: "The rich don't pay taxes. The system is rigged against you. That's why you'll never get ahead."
There's a grain of truth in it. Billionaires really do pay a lower percentage of their income in taxes than your average teacher or software developer. But the conclusions people draw from this fact are usually wildly wrong — and those wrong conclusions cost people real money, career opportunities, and sometimes legal trouble.
Let's unpack this.
What's true and what's not
Warren Buffett — one of the richest humans on Earth — publicly stated years ago that he pays a lower tax percentage than his secretary. That's true. His effective tax rate was around 17%, hers was around 30%.
But here's what he said next: "It's not because I'm dodging taxes. It's because the tax code is written this way — and it's written on paper anyone can read."
The secret is in the structure of income.
Most of a billionaire's wealth isn't salary. It's capital gains: appreciation of stocks, companies, real estate. In most countries, capital gains tax is lower than income tax. Plus: if you don't sell the asset, you pay zero tax — you just hold it.
For the average person it's the opposite: 95% of your income is salary, taxed immediately at the full rate.
Why this isn't tax evasion
Tax evasion is a crime. It gets you fined, audited, and in serious cases — prison. Someone worth billions is the last person who wants trouble with the tax authority.
What rich people do is called tax planning. Using legal tools that are literally written into the tax code and available to anyone. The difference is like driving within the speed limit versus running red lights. Both involve a car. One is legal.
Here's a real example, EU-scale.
If you're a freelance graphic designer in Germany earning €40,000/year as a regular employee (Angestellter), you pay roughly 25–30% in income tax plus social contributions — around €10,000–12,000 to the state.
The same person registered as a self-employed freelancer (Freiberufler) with the same €40,000 can use the Kleinunternehmerregelung (small business regulation) and various deductions — reducing their effective tax burden significantly, often to 15–20%.
That's not a shady scheme. It's two different legal structures for the same income. But 90% of people don't know the options exist. They just get whatever their employer sets up.
[🖼 INLINE ILLUSTRATION 1]:
Wide horizontal illustration 16:9 ratio. Dark background #0a0a0a. Split composition: left side shows a 3D translucent glass person with a large glass chunk of coins labeled with a red-orange percentage symbol above — visual metaphor for "salary income". Right side shows the same glass person with a smaller green (#22C55E) percentage symbol, but the chunks of coins flow through a stylized glass document/path before reaching them — visualizing tax planning. Both sides legal and clear. Glassmorphism, volumetric lighting, clean educational mood. No text. 4K.
What you can actually apply
Even if you earn €1,500/month and have no interest in becoming a billionaire, there are tools available to you right now.
Tax deductions. Almost every EU country allows deductions for education costs, health expenses, work equipment, home office, professional training. Most people never file for them — either they don't know they exist, or they think it's complicated. In reality, it takes one afternoon once a year.
Freelance / self-employment status. If you side-hustle (tutoring, freelance design, content creation, small services), registering as self-employed often gives you lower effective tax rates than getting "under the table" payments or staying fully employed. Plus you can legally invoice companies, build a credit history, and show income for a mortgage.
Long-term investing accounts. Most countries have tax-advantaged accounts for long-term investing — ISA in the UK, PEA in France, Depot with tax-free thresholds in Germany, 401(k) and Roth IRA in the US. Using them reduces your lifetime tax bill by thousands. Most Gen Z never opens one.
None of these require being wealthy. An 18-year-old freelancer can use all three.
The mental trap
The real danger of "the rich don't pay taxes" isn't that it's half-wrong. It's that it leads people to two mistakes.
Mistake 1: learned helplessness. You watch TikTok, hear "the system is against you," give up, and never learn about taxes. You don't file for deductions (losing hundreds of euros a year). You don't consider freelance status. You stay in cash-in-hand work, risking fines and never being able to show income to the bank.
Mistake 2: copying without understanding. You see an online "scheme" — offshore accounts, fake LLCs, "gifts from parents" — and try to copy it without context. The wealthy use these tools through lawyers and accountants who watch every comma. A regular person copying blindly ends up with fines and legal problems.
The right takeaway from "the rich pay a lower percentage" is: tax literacy is a skill available to everyone. It's just never taught in school.
The bottom line
Taxes aren't a conspiracy. They're rules written on paper and published on government websites. Anyone can read them. But 95% of people don't — and then wonder why they're losing money.
You can read. It's not harder than a 9th-grade history textbook. The difference between "knowing" and "not knowing" adds up to thousands of euros over a career. Minimum.
Want to actually understand how taxes work in your country?
Monetika has a free course "How Taxes Work" — we break down income tax, self-employment options, deductions, filing deadlines. 25 minutes, quizzes after each lesson, zero corporate BS.