<p>Hope he does not do his own math on investments.</p>
<p>[FACT</a> CHECK: Are rich taxed less than secretaries? - Yahoo! News](<a href=“http://news.yahoo.com/fact-check-rich-taxed-less-secretaries-070642868.html]FACT”>http://news.yahoo.com/fact-check-rich-taxed-less-secretaries-070642868.html)</p>
<p>That article is “fact checking” straw men, arguments Buffett never made. It’s overwhelmingly likely that Buffett pays tax at a lower overall rate than many of his employees. He takes a low salary relative to his overall massive income. Probably less than 5% of his income is salary, taxed at ordinary income rates, and subject to FICA/Medicare, and in his case the portion subject to FICA will be only a fraction of his salary. The rest of his income will be primarily dividends and capital gains, which for federal purposes is taxed at the rate that applies only to the first $22,500 or so of a single person’s income.</p>
<p>Someone who makes $85,000 salary, and has no meaningful personal investment income, will probably be paying about 27% in federal taxes, including income and FICA/Medicare. Warren Buffett may make $20,000,000 and pay at a higher rate on half a million of it (about 39%), but only 15% on the remaining $19,500,000 of dividends and capital gains. That’s an average rate of 15.6%. (And I didn’t bother to estimate the effect of his deductions.)</p>
<p>I’m doing this off the top of my head, so don’t bother checking my math. But it’s not even close.</p>
<p>Of course the rich pay more taxes – they make ridiculous amounts of money. And if all Warren Buffett had was salary, he would be paying at a higher rate than his admin. But salary probably isn’t as meaningful a component of his income as I assumed for my illustration, and I’ll bet he doesn’t have a lot of taxable interest income, either, relatively speaking. Essentially, the bulk of his income is getting taxed at 15% for federal income tax purposes, and that’s lower than any but the most low-income wage-earner pays on employment income.</p>
<p>Apparently its not an outrage that the middle class pays a lower percentage of their income for food clothing and shelter than the poor pay.</p>
<p>I have to love how the rhetoric focuses on the rate rather than the amount.</p>
<p>I’ll also note that when you work for wages, the most you can lose usually is a week or two’s wages, since you’ll stop working if you don’t get paid. If you invest, you take some risk of waking up to a surprise announcement or circumstance and losing a substantial part of your investment. And if you do have a loss, the current code does not allow you to subtract it from your income. You have to bleed it in at a rate of 3k per year. Never has seemed fair to me, but I guess fairness seems to be in the eye of the beholder. </p>
<p>I still haven’t seen any accurate reports about Buffets number one prescription, which was for major spending cuts. Ignored in every discussion I’ve seen.</p>
<p>I saw a different fact check but it basically stated that the corporations are taxed at 35% so they added that rate to the personal income tax rate to get 40 to 45 percent. Berkshire Hathaway doesn’t pay a dividend (I owned it for a few years). Berkshire Hathaway’s stock price hasn’t done all that well for the last couple of years. Is there a relationship between capital gains and earnings and corporate tax rates? Probably. Is it linear? Probably not. Berkshire Hathaway is generally not known as a bubble stock (perhaps outside of it’s trip to $150,000 and back down again).</p>
<p>That fact check was bs too.</p>
<p>Corporations pay various amounts in taxes…and many of the top companies pay very little income tax.</p>
<p>JHS is right.</p>
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<p>What do corporations pay on average?</p>
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<p>Then where is he getting his money? His income was about 39 million on 2010, he paid 6.9 million in federal income taxes but his salary from Berkshire was half a million.</p>
<p>Probably sold his stock from when he got the company for $40 to $80 a share.</p>
<p>Then he is comparing long term capital gains with a 20 % tax rate to ordinary income of his secretary with a top rate of 35%. If his secretary has long term capital gains, she also has a 20 percent tax rate. Apples and oranges.</p>
<p>There is no law that says capital should be taxed lower than labor…</p>
<p>Well…there is a law…it could be changed…</p>
<p>What, exactly, is Obama proposing in terms of increasing tax rates on the rich?</p>
<p>I believe his point is that capital gains (in his case, presumably short term capital gains from his personal investment) shouldn’t be taxed at a lower level than ordinary income.</p>
<p>I haven’t seen any legislation but it sounds a lot like the Alternative Minimum Tax.</p>
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<p>Wow, I think I might actually agree with dstark on something. Short terms capital gainst are treated as ordinary income. Why are long term capital gains taxed at a lower rate? I realize our society wishes to encourage that behavior but from a purely economic standpoint, is there a justification?</p>
<p>Tax reform in Obama’s jobs proposal</p>
<ul>
<li>Let 2001 and 2003 Bush tax cuts expire for incomes above $250K. (This doesn’t require any legislation, as the cuts sunset.)</li>
<li>Return estate tax to 2009 levels.</li>
<li>Reduce the value of itemized deductions and other tax preferences to 28 percent for families with incomes over $250,000 (married) or $200,000 (single).</li>
<li>Tax carried (profits) interests as ordinary income. (This would mean income from partnerships is treated as ordinary income.)</li>
<li>Eliminate special depreciation rules for corporate purchases of aircraft. </li>
<li>Eliminate oil and gas tax preferences.</li>
</ul>
<p>and there are a bunch of other proposed rule changes that are more technical.</p>
<p><a href=“http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf[/url]”>http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf</a></p>
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<p>It encourages long-term investment.</p>
<p>Singapore and Hong Kong (along with many other countries) have no capital gains taxes. How are their economies doing? Singapore’s unemployment rate is 2%. Hong Kong’s is 3%.</p>
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<p>I think you meant to say “long term capital gains.” Short term capital gains are already taxed the same as ordinary income.</p>
<p>You’re right, Bay. Long term gains. Note that long term gains mean gains for investments held a year or more. So, the long term isn’t very long.</p>
<p>I perused the link that Cardinal Fang provided, and didn’t see anything about raising the long-term capital gains rate. Did anyone else find it buried somewhere?</p>
<p>The link says:</p>
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<p>But I don’t understand from the rest of the document how that is supposed to work. It may be some sort of AMT-like rule for long term capital gains.</p>