Russell and Duenes

Mr. Buffet’s Tax Secrets

with 2 comments

Ever since hearing Warren Buffet claim that his secretary pays a higher tax rate than he does, I’ve thought that his claim doesn’t pass the smell test. And indeed it doesn’t. Finally some light was shed on my intuitions by The Wall Street Journal. In their editorial todayMr. Buffet’s Tax Secret – they make it pretty clear that, if we’re going to take Mr. Buffet at his word, we’re going to need to see some documentary evidence from the man. To date, none has been forthcoming. The editorial states,

The Omaha stock-picker has every right to do so (i.e., forcefully inject himself into the tax debate), and his foray may even do some good. His tax claim has already had the educational benefit of prompting the press to report that, as a general matter, the Buffett-Obama premise is false. CEOs don’t typically pay lower rates than middle-class secretaries. As data from the Internal Revenue Service make clear, the vast majority of those earning more than $1 million per year typically pay tax rates two to three times higher than people making less than $100,000. In 2008, the average tax rate for millionaires and above was 23.3% and for those earning between $30,000 and $50,000 it was 7.2%.

These facts alone give me reason to think Buffet is blowing snow, but the piece helpfully goes on…

Mr. Buffett also wrote in the New York Times that none of the other people in his office paid less than a 33% rate, and at least one colleague paid 41%. This suggests that Mr. Buffett’s Berkshire Hathaway staff are the kind of folks the President would consider “rich.” Mr. Obama might even call them “millionaires and billionaires” if some of them have annual incomes of more than $200,000. We wouldn’t want to violate their individual privacy, but since Mr. Buffett is using them to make a political point, perhaps he’d be willing to disclose the most important lines on their returns without disclosing their names. This too would be instructive.

Uh, yeah. If none of his “secretaries” are paying less than a 33% rate, then they are taking in quite a haul. In fact, the whole thing sounds ludicrous, and I’m just going to say that I flat out don’t believe Buffet, and won’t until or unless I see some of the evidence. I don’t imagine any of it will be forthcoming, but certainly the editorial is right in saying that we shouldn’t be basing our tax policy on his unverified rantings, no matter how much he and other billionaires are adored by the American public. If Mr. Buffet thinks it’s such a good idea to give more of his money to the government, then he, Soros, and other billionaires are welcome to pony up out of their own free will. But let’s not kid ourselves about Mr. Buffet’s poor secretaries being soaked by high tax rates. I’m not taking his word for it.

-D

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Written by Michael Duenes

September 27, 2011 at 3:05 pm

Posted in Duenes, Economics

2 Responses

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  1. I don’t know if this is a “clarification” or ad hoc backpedaling, but Buffett: “What I’m talking about would not apply to someone that made $5 million a year as a baseball player or $10 million a year on media,” Buffett said on Fox Business Network. “It would apply only to probably 50,000 people out of 309 million who have huge incomes, pay very low taxes. There should be a policy that applies to people with money who earn lots of money and pay very low rates. If they earn it by normal jobs what I say would not hit them at all.” http://thehill.com/blogs/blog-briefing-room/news/184761-warren-buffett-my-plan-was-not-the-buffett-rule

    amac44

    October 3, 2011 at 11:26 am

    • Thanks for the tip, A.L.. That’s a good clarification, and perhaps I’ve not been paying enough attention to have heard it, but it sure has seemed to me from listening to NPR that Buffet’s comments that I alluded to in the piece have become gospel.

      -D

      russell and duenes

      October 3, 2011 at 2:45 pm


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