Why Warren Buffett doesn't pay less in taxes than his secretary

Last night, for the seemingly millionth time, President Obama said that Warren Buffett's secretary paid more in taxes last year than Buffett, himself. Obama is comparing apples and oranges, and it's not a fair comparison. I was going to write my own comparison, but I found one that explains it perfectly:

Buffett is comparing two different taxes. One is a tax on income, one is a tax on investments. They are two different taxes on two different things. Warren Buffett has already been taxed on that money. Here’s an oversimplification to explain what I mean.

You earn $100 in salary.

TAX #1: Uncle Sam takes $35, leaving you with $65.

You then invest that $65, and that investment earns 10% or $6.50.

TAX #2: Of that new $6.50, Uncle Sam takes another $1.

Now, add up the earnings: the original $100 + $6.50 = $106.50.

And, add up the taxes: $35 + $1 = $36.

On $106.50 in earnings, you were taxed $36, or 33.8%,– about double the rate Warren Buffet claims he’s paying.  This gets more complicated with margin, outside investment, and a million other variables, but this how it works in general.  (Dividends are worse: you get taxed on initial income, the company gets taxed on their profits, then when they give you a slice, it gets taxed again.)

So, how does Buffett justify his low tax numbers? He acts as if TAX #1 never occurred. Then he tells you that the rate of TAX #2 is too low. It’s a completely disingenuous shell game.


There are also other variables involved, like how Buffett's secretary likely paid a much lower tax rate for her income bracket after deductions and other factors.

I was shocked to see Obama try to use this example to his advantage last night. The article I quoted was written over 3 months ago. This is an old argument that's been disproven over and over again, and yet he still gets away with it because most people simply haven't looked up the facts for themselves.

Rick Warren tweets about taxes, gets in hot water

I'm quite impressed Rick Warren tweeted about taxes. Unfortunately, he deleted the tweet shortly after posting, but not before his tweet was recorded and rebroadcast by many. Since he is the pastor of one of the largest churches in America, I can understand why he deleted it, since the model for pastors is to not publically share a political opinion. But part of me is also glad he took a stand.

I recently bought a bumper sticker that says "No representation without taxation." It's a bummer that those who pay no taxes are so willing to raise taxes on those of us who do.

The reality is that about half of Americans don't pay taxes. (Here's an article from last year that explains how and why.) Rick happens to be one of those who does pay, and probably gets hit hard from his income from book sales and speaking events (he no longer takes a salary from the church and, in fact, paid back what he had earned in the early years). Rick Warren is one of the most charitable men around; just imagine what he could do if he was able to keep even just a fraction more of the money he earned. He would put it to good use all around the world! Instead, too much of it gets sucked up by our behemoth of a government who really has no concept of economics and where money is best spent. Our money is best spent in the hands of those who work hard to earn it in large quantities; in the hands of people like Rick Warren.

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Why raising taxes on the rich isn't a good idea

Dear Mr. Obama,

Please lay off the millionaires and billionaires. In every speech, you paint them as the enemy - as these horrible people who should give away all their money. You act like they are the worst people in the world.

But Mr. Obama, don't you realize that millionaires and billionaires are the only reason most of America have jobs? It takes entrepreneurs to make this country great - to build things.

You recently talked about how America needs to invent things again. But then you punish their success.

What's the point of working hard if you're just going to take away all the benefits for working hard in the first place?


Cory Watilo

When is a tax cut not a tax cut? When it's a tax hike.

"There is now 8,719 news articles that talk about an 'estate tax cut'. The estate tax is going from 0% this year to 35% next year. And that's being portrayed as a cut because it could have been 55%.

If I were to gain 35 pounds but I could have gained 55 pounds, can I count it as a 20 pount loss? NO! It's not a cut. It is not a cut. It's a hike in the estate tax; it's a hike by 35%."

- Stu Burguiere, 12/13/2010

NY Assembly Looks At Millionaire's Tax

N.Y. Assembly Looks at Millionaire's Tax

Updated: Wednesday, 26 May 2010, 6:44 PM EDT
Published : Wednesday, 26 May 2010, 1:53 PM EDT


    MYFOXNY.COM - New York Assembly Speaker Sheldon Silver is reportedly pitching a plan for an increased "millionaire's tax" aimed at 75-85 thousand New Yorkers making $1 million or more a year.

    Political columnist Fred Dicker , who appeared on Wednesday's Good Day New York, says Silver secretly proposed a $1 billion tax hike on the highest income earners to Gov. Paterson.

    The plan would jack up a current millionaires tax another 11-percent. The current "millionaire's tax" actually starts affecting people who have incomes over $200,000. High income tax earners would pay more than 13-percent of their salary in local taxes.

    The highest one percent of income earners account for about 36 percent of all state taxes.

    The state is trying to close a $9.2 billion deficit.

    Governor Paterson approved a plan that would furlough 100,000 state workers one day a week for eight weeks, which would save $30 million a week for the state. A judge blocked that temporarily blocked that plan at a union's request.  A hearing was scheduled for Wednesday afternoon to review Paterson's plan.

    This "Millionaire's Tax" actually goes after anyone who earns more than $200,000 in a year. Unbelievable. This is nothing short of legalized robbery.