Warren Buffet On Regressive Taxation

By Justin Gardner | Related entries in Economy

There’s a reason a lot of Democrats want to raise taxes on the rich. Because Republicans are right, it is class warfare, but the rich are paying LESS than the middle class and even one of the richest people in the world acknowledges it.

From the Wash Post:

NEW YORK, June 26 — Warren E. Buffett was his usual folksy self Tuesday night at a fundraiser for Sen. Hillary Rodham Clinton (D-N.Y.) as he slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.

Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

Buffett said that was despite the fact that he was not trying to avoid paying higher taxes. “I don’t have a tax shelter,” he said. And he challenged Congress and his audience to see what the people who “clean our offices” are taxed, to loud applause.

And still, Democrats are going to be painted as being tax and spend, when all they’re really asking is for everybody to pay their fair share.

Also, it looks like Buffett may be endorsing Hillary…

“We have a wonderful economy. . . . Our problem is how we conduct ourselves in the world.” Buffett, the chairman and chief executive of Berkshire Hathaway in Omaha, has not endorsed Clinton for the Democratic presidential nomination.

But he has already donated the maximum $4,600 allowed by an individual to Clinton’s presidential campaign. Buffett called Clinton “the person to run the country.” He has not donated to any other candidate, according to public records, although he has said he would also support Sen. Barack Obama (D-Ill.) in a similar event.

If he throws his credibility behind Hill, it’s going to be very hard for another Democratic candidate to match it.


This entry was posted on Wednesday, June 27th, 2007 and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

18 Responses to “Warren Buffet On Regressive Taxation”

  1. Jimmy the Dhimmi Says:

    His 17.7% tax rate on 46 million taxable income must be after deductions, or else Warren Buffet is guilty of a felony.

    By the way, Justin I suggest you read this post at the skeptical optimist, if you dare. I warn you that it will use hard core statistics to completely debunk your argument here. Pay attention to the charts, they provide the following infoirmation:

    1) The Bush tax cuts resulted in every quintile paying a smaller percentage in total tax, not just income tax.

    2)The top quintile is still paying more than half of all taxes, not just income tax�and the system in total is still as steeply progressive as before.

    3)Taxation is disproportionately more progressive as you move up in income.

    4)Not only do we tax more heavily away from the higher income groups, we also spend more heavily towards the lower income groups.

    After studying that post, do you dispute any of the Tax Foundation’s numbers, how they are graphed here, or any of the conclusions proposed by the author that I summarized above?

  2. Jimmy the Dhimmi Says:

    His 17.7% tax rate on 46 million taxable income must be after deductions, or else Warren Buffet is guilty of a felony.

    Scratch that, ive re-read the article and it appears Buffet is talking about his capitol gains. I seriously doubt that his secratary paid 30% of her salary in taxes. I’d like to hear more specifics on what he meant.

    Oh, and here is another graph by the skeptical optimist. So I will add another conclusion to the list:

    5)The rich are shouldering a larger share of the income tax burden than they have in any year since 1994.

    My question remains – do you dispute any of the numbers or conclusions made by this author?

  3. Warren Buffett: Self-Made Billionaire, Philanthropist, &…. Tax Reform Advocate Says:

    [...] However it’s Justin Gardner of Donklephant that puts this into it’s best perspective: There’s a reason a lot of Democrats want to raise taxes on the rich. Because Republicans are right, it is class warfare, but the rich are paying LESS than the middle class and even one of the richest people in the world acknowledges it. [...]

  4. SKG Says:

    And if you nose around, you’ll notice that while most everyone’s tax rates went down, the total share of income-after-taxes went up for the top 1% of earners, and down for everyone else:

    http://www.taxpolicycenter.org/TaxFacts/Tfdb/TFTemplate.cfm?DocID=220&Topic2id=20&Topic3id=22

    If taxes had been reduced across the board equally, everyone would have kept the same share of the after-tax pie. Instead, it was designed to benefit the top 1%.

    And in 2006, the rates on the top income bracket dropped 2.6% while the rates for everyone else dropped 1%. The effects of the tax cuts are even more pronounced today (although I don’t have a nice table handy.)

  5. rachel Says:

    And yet the rich guy complained that he is being taxed at an unfairly low rate. Hmmm… Who’s math am I going to trust, Jimmy the Dhimmi’s or Warren Buffet’s? (Hint: Mr. Buffet didn’t become incredibly wealthy by not being able to do math.)

  6. sleipner Says:

    Capitol gains *is* income and should be taxed as such. It is completely ridiculous that money earned by no effort of your own, merely by having money already, should be taxed at half the rate of regular income you *earn* via actual work. Even beyond that, the capitol gains tax code provide additional exemptions and loopholes that can be used to lower your total tax debt, which are of course unavailable to those who actually work for their money.

    Secondly, even though the top quintile may pay half the taxes, they make far more than half the income, and own somewhere around 90% of the wealth in America, if I’m remembering correctly. So even though the rich may be shouldering a larger share of the income tax, they also are shouldering a far greater share of the wealth and the benefits of our society, as the disparity between rich and poor continues to accelerate in this country.

    Third, taxation is only progressive up until the tier BELOW the top income tier, at which point it regresses back to a lower percentage for some unjustifiable reason. Furthermore, since a larger and larger percentage of income is via capitol gains as you go up the wealth ladder, the actual percentage paid in taxes ends up far lower because of the criminally low tax rate on that capitol gains.

    Finally, tax loopholes and shelters that were specifically written into the arcane bowels of the tax code with subtle nudges towards rich people’s accountants ensure that they rarely pay the full tax they owe, even though that number is far lower than what they *should* owe.

    Warren is a rarity in that he seems to not play the “get out of tax free” card given to most people once they reach a certain income plateau, and I applaud him for that. If the rest of (rich) America was willing to pay for what they get out of government and society our country would be a far better place.

  7. Jimmy the Dhimmi Says:

    Rachel, Justin just posted something about, “Ad Hominem.” you should read the definition.

    Besides, that isn’t my math. I didn’t do the research that I linked to, the Tax Foundation did. I didn’t present those 5 conclusions, an ex fortune-50 executive did.

    Hmmm….who’s judgement should I trust on this issue, rachel’s or a fortune-50 executive (Hint: fortune-50 means the top 50 wealthiest companies in the world)

  8. Paul E. Says:

    >> Jimmy the Dhimmi Says:
    June 27th, 2007 at 12:30 pm

    By the way, Justin I suggest you read this post at the skeptical optimist, if you dare.> rachel Says:
    June 27th, 2007 at 9:43 pm

    And yet the rich guy complained that he is being taxed at an unfairly low rate.

  9. Paul E. Says:

    Paul E. Says: Your comment is awaiting moderation.
    June 28th, 2007 at 8:58 am

    :: Jimmy the Dhimmi Says:
    June 27th, 2007 at 12:30 pm

    By the way, Justin I suggest you read this post at the skeptical optimist, if you dare. ::

    thanks for including link.

    :: rachel Says:
    June 27th, 2007 at 9:43 pm

    And yet the rich guy complained that he is being taxed at an unfairly low rate. ::

    Hi rachel!

    You don’t wonder who forces the rich guy to pay less than he believes he should? ;-)

  10. Justin Gardner Says:

    After studying that post, do you dispute any of the Tax Foundation’s numbers, how they are graphed here, or any of the conclusions proposed by the author that I summarized above?

    I’m not disputing those graphs, but they ultimately don’t show the full picture. Why?

    Well, it’s all about FICA. Since people are not taxed on Social Security over 98K, the rich pay ultimately pay a smaller percentage of their income than the middle class. The federal income tax rate doesn’t matter at this point, because if you’re in the top 20% you’re making over 200K a year, you don’t get taxed the 6.2% on 100K+ of it. Obviously the richer your salary becomes, the bigger the disparty between you and somebody who makes a ton of money.

    Also, as Buffett points out, if you’re wealthy you’re most likely making money off of investments. And that investment income drives down your overall taxable percentage. That’s just how it goes, but there’s still a disparity. It’s still “income”, so why is it being taxed at a smaller rate than somebody who goes to a 9 to 5?

    Last, I didn’t write the Ann “Hominem” Coulter post. mw did.

  11. rachel Says:

    Jimmy, it is not an ad hominem attack to suggest that Warren Buffet is a more relevant authority regarding finance in general–and his his own tax situation in particular—than Jimmy the Dhimmi. It is the simple truth.

  12. wj Says:

    A big part of Buffet’s low tax rate may be the fact that his receptionist is probably paying Social Security taxes on 100% of her income, while he is paying them only on the first $100K or so (I’ve lost track of what the cut-off is exactly) — a miniscule fraction of his total. And, of course, he only pays that much if he’s taking a salary; capital gains don’t get charged for FICA at all.

  13. Ziusudra Says:

    And still, Democrats are going to be painted as being tax and spend, when all they’re really asking is for everybody to pay their fair share.

    Well, if they raise the tax on the rich rather than lower it for everyone else, then they deserve the label.

    Of course then they’d have to eliminate some of the many “wars” we are losing.

  14. DosPeros Says:

    Here you guys go! It is so lame hearing this stuff come from second hand sources of resentment. I say, if you want the good stuff, go straight to the horse mouth.

    http://www.youtube.com/watch?v=T7r4zpUEpog
    http://www.youtube.com/watch?v=AZ7IZcw1fNQ
    http://www.youtube.com/watch?v=_7t0OaEyZvk
    http://www.youtube.com/watch?v=yLJHXrNuycg
    http://www.youtube.com/watch?v=94-n5zM8W5Q

  15. Jimmy the Dhimmi Says:

    Well, it’s all about FICA

    Actually, social security payments in the form of payroll taxes per household, as well as social security and medicare benefits are both counted in this study. Read Appendix B of the Tax Foundation’s study. In short, the value of benefits have to be counted in the total income per household in order to subtract payrol taxes. The authors write:

    First, the amount of federal, state and local government transfer payments [i.e. Medicare, Social Security, veterans benefits -ed] received is added to each household’s market income. Second, to avoid double counting transfer incomes the cost of those transfer payments is subtracted from household incomes based on the distribution of the tax burden at the level of government at which the transfers are made.

    This is included in the 3rd Graph of the Skeptical Optimist’s post, “Share of Income and Federal Taxes.” which shows disproportionately unequal tax burden that does not favor the rich.

    Because people earning over 90K are not eligible for Medicare, and Social Security payments max out around 50-60K, The rich pay much more in to the system than they ever (if ever) get out. Remember, transfer payments are not the same as Roads, Police, Defense…ect, in that they are not public entities that everybody shares. They are cash payments to individuals. Means testing for Social Security would be akin to Bolshevism which is why it doesn’t go over well here.

    Jimmy, it is not an ad hominem attack to suggest that Warren Buffet is a more relevant authority regarding finance in general–and his his own tax situation in particular�than Jimmy the Dhimmi. It is the simple truth.

    Saying that my arguments are always wrong because I am a less relevant authority on finance is an Ad Hominem attack. If a PhD in mathematics says 2+2=6, he is wrong – it doesn’t matter who the messanger is. Besides…I’M MERELY RECITING OTHER PEOPLE’S MATH! (and agreeing with them!) It’s not my math, its Andrew Chamberlain, Gerald Prante, and Steve Conover’s math. If you disagree with me, then you disagree with them too.

    Rachel: Hmmm…who’s math are you going to trust: Warren Buffet’s, or Andrew Chamberlain, Gerald Prante, and Steve Conover’s ? (Hint: math is self-evident, it doesn’t matter who does it if its correct).

  16. rachel Says:

    Jimmy: 1, You keep saying that I’m arguing “ad hominem” when I say I do not accept you as a relevant authority. To quote Inigo Montoya, “I do not think it means what you think it means.” Appeal to Relevant Authority is a standard accepted method for supporting an argument, and–like it or not–Buffet IS an authority. You might be an authority too, but you might also just be some guy on the web with an axe to grind. I have no way of knowing, but I have to say your accusing tone does not give a good impression. 2, If a PhD in mathematics claimed 2+2=6, I wouldn’t belive him either. But then such a person is not likely to say anything so silly. 3, You seem to think that I should be overawed by Messrs’s Andrew Chamberlain, Gerald Prante, and Steve Conover, and take their “math” over Mr. Buffet’s, but I don’t see why I should because 4, I don’t see where their numbers rebut Justin Garner or Sleipner’s comments. (Your link in the previous post doesn’t work when I click on it. Where can I find Appendix B, again?)

  17. Jimmy the Dhimmi Says:

    http://www.taxfoundation.org/files/wp1.pdf

  18. Justin Gardner Says:

    Jimmy, fair enough. If the FICA is already factored in then I stand corrected. However, you still haven’t taken captial gains into account, which were the basis of Buffett’s comments.

    And Bolshevism? Really?

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