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Warren Buffett's real tax rate

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Warren Buffett wrote an editorial in The New York Times arguing that because he, a billionaire, is taxed at only 17%, the 35% top tax rate on millionaires should be increased.

But what is Buffett's real tax rate? Well, in the editorial, he says he paid taxes of just under $7 million last year. Let's suppose he's paid as much in every year since he was a baby - 80 years. That's $560 million in taxes.

Now, how much money has he made in that time? Various sources, including the wikipedia article on Warren Buffett, say his net worth is $50,000 million (50 billion). He wasn't born with much of that, so virtually all of it is income.

Divide $560 million by $50,000 million, and we have Buffett's real tax rate to date - not 17%, but just over 1%.

1%. That's roughly what Buffett pays in income taxes - with other estimates as low at 0.06%. Even if we raised the tax rate on all those other millionaires to 100%, the real tax rate on Buffett's increase in wealth would still be only about 3% at most. No wonder he likes this idea!

The truth is, if we want to figure out a way to raise taxes on the super rich like Buffett, we need to figure out a way to tax all that money that doesn't even show up on Buffett's tax return as income. It just sits there on his personal balance sheet as unrealized capital gains until he dies and it goes to some nonprofit, never ever getting taxed. That's what needs to get fixed, not the tax rates that Buffett largely isn't paying anyway.

In the meantime, Buffett's article should be seen for what it is - an attempt by him to raise taxes on people who have a lot less money than he does, so as to avoid such consequences for himself.

Economist Arthur Laffer estimates Buffett's 2010 income tax rate at 0.06%:
http://online.wsj.com/article/SB10001424052970203462304577138961587258988.html?mod=WSJ_Opinion_LEADTop
And Buffett's company owes 9 years of back taxes:
http://www.huffingtonpost.com/2011/08/29/warren-buffett-taxes-berkshire-hathaway_n_941099.html
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On August 18th, 2011 04:05 am (UTC), harrock commented:
According to my reading of the Op-ed, the main point is about the problems caused by preferential treatment for capital gains. Yes, he says at the end that both rates should go up for millionaires, but most of the verbiage was about capital gains rates. My read of the article is that he would prioritize raising capital gains taxes over raising income taxes.

I'd agree that his perspective is surely rose-colored by virtue of having stashed huge amounts of money out of the government's reach, but your original last paragraph looks a bit over the top to me. Are you sure that Buffett would object to weakening the tax protections of charities, and if so, do you know how strenuously he would fight it relative to other priorities? (Feel free to point out anything that would suggest an answer; I admit that I'm answering this without first doing hours of research on the subject.) Imputing a sinister motivation distracts me from the perfectly good points that you're making. Just sayin'.

Obviously his position frustrates you, and I can't argue against venting as a personal privilege, but as I think we both should know from tangling with each other, it's hard to persuade anyone who doesn't already agree with oneself while venting.

What would you advocate on the charity front? I'm guessing that you'd axe tax-exempt status entirely. (No value statement about that; I'm just curious.)
[User Picture]
On August 18th, 2011 04:48 am (UTC), psychohist replied:
"Imputing a sinister motivation distracts me from the perfectly good points that you're making."

If imputing a sinister motivation distracts you, you could always try simply not doing it.
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