The IRS’s 3 Buckets APP
The IRS’s 3 Buckets APP: The Application and Process They Use to Keep You Stuck
If you’ve never read The Creature from Jekyll Island by G. Edward Griffin, I highly recommend it. It lays out how, back in 1913, a group of bankers met at J.P. Morgan’s estate on Jekyll Island and devised two powerful forces: the Federal Reserve and the IRS. Since then, these institutions have steadily transferred wealth from us to them—using a system that 1) taxes away our income and 2) inflates away our purchasing power.
And they have a process for this wealth transfer—I call it their “3 Buckets APP“
This “A.P.P.” is how they classify your income for taxation:
? A – Active Income (W-2, Business, Self-Employed)
?? Taxed at 40-50% (federal, state, local).
?? The worst way to earn money because it’s taxed the most.
? P – Portfolio Income (Stocks, Bonds, Capital Gains)
?? Taxed at 20% (lower, but still costly).
?? This is where most people think wealth is built—until they realize taxes eat away at gains.
? P – Passive Income (Real Estate, Businesses You Don’t Actively Work In)
?? Taxed at potentially 0% thanks to depreciation and other tax advantages.
?? The best way to generate income while minimizing taxes and maximizing wealth.
If You’ve Ever Heard “Don’t Fight the Fed,” Here’s What It Actually Means…
The Federal Reserve prints money out of thin air, fuels inflation, and devalues the dollar. That means every dollar you earn in the Active or Portfolio buckets is worth less over time.
So, if you can’t fight the Fed, you must align with it by moving your wealth into assets that benefit from inflation:
? Own real assets—Real estate, businesses, and cash-flowing investments.
? Shift income into the Passive bucket—Stop paying the highest tax rates.
? Use depreciation and tax strategies—Why pay 50% in taxes when you could pay 0%?
When I bought my first rental in 1999, I thought passive income actually meant that is was “passive.” It’s not—it takes work to build and maintain. But the real work is understanding how the system operates so you’re not stuck in the wrong bucket.
The wealthy don’t work harder—they work smarter by using the same APP the IRS does, but in reverse. Doing your taxes this year should help you get a handle on which bucket you are in!
Are you still letting the IRS’s 3 Buckets APP transfer your wealth away? Or are you taking control of where your income flows?
Where are you on this wealth-building journey? Do you have more Active, Portfolio, or Passive income? Which bucket will you choose to fill up this year??
