We examine liberal assertions that: (1) the US tax system favors the rich; and (2) Warren Buffet pays a lower tax rate than his secretary. When including refundable tax credits, the lowest income 60% of Americans pay less than 1% of individual income taxes. This is by far the lowest of any nation; moreover, the share of Americans not paying tax has doubled in recent decades. OECD and other studies confirm America has the most progressive tax system including federal, state, local and payroll taxes.
Let’s turn from the bottom 60% to the top income cohorts. The highest income 10% of Americans pay 35% more of the total tax burden than in Sweden for cryin’ out loud. Data are similar for the top 1% or 5%. During the past 30 years, the US has become far more progressive relative to Sweden, Germany, France and Finland. Corporate tax rates in America also are the highest in the developed world – by a large margin.
The liberal reflex is to blurt out, “Although income taxes are progressive, payroll taxes are steeply regressive and this makes the overall tax system regressive.” They fail to distinguish between a general purpose tax and one linked to a specific benefit to a specific taxpayer. Consider: (1) the tax base is capped, but so is the benefit; (2) higher income taxpayers receive less of a benefit as a percentage of contributions than lower income taxpayers; and (3) Social Security income is subject to highly progressive income tax rates. Independent studies, including by the Social Security Administration, conclude that both Social Security and Medicare taxes are progressive.
Warren Buffet Versus Debbie Bosanke
Using virtually any metric, the US tax code is the world’s most progressive. Liberals trot out disingenuous comparisons for misdirection and maskirovka to try and show the system favors the wealthy. Perhaps the most bizarre liberal attempt to bamboozle and to hoodwink is the assertion Warren Buffet pays a lower tax rate than his secretary.
MLLG once published a highly detailed tax computation showing Warren Buffet’s true tax rate; this post was one of our all-time most popular and is easily accessible on our website: www.mllg.us.
This post summarizes and updates data from the original.
Buffet asserted he paid 17.4% in income tax and his secretary paid a much higher rate. In truth, Buffet paid close to 80% solely on that tranche of his income. Before Buffet can invest, he must first earn income subject to taxes of federal 39.6%, payroll 6.2%, Nebraska 6.8% and Obamacare 3.8%. He may then invest his after tax income in Berkshire and pay federal tax on his share of Berkshire’s income at 35% and Nebraska tax at 7.8%. When he sells stock he pays a 20% capital gains tax. At death, Buffet is subject to a federal estate tax of 40% and a Nebraska tax of 18%. Whew!
When properly computing his tax, Buffet is subject to an overall rate of nearly 80%. The 17.4% rate he cited was cherry picked from only the capital gains phase of the complete tax cycle. Furthermore, Debbie Bosanke earns $250,000+ per year – unlike a typical secretary who earns more like $25,000 and pays little or no income tax.
Buffet (like liberals everywhere) was cynically banking on the ignorance and class envy of the American people. His deception transcends political spin and crosses into a netherworld of duplicity and deceit. It froths with contempt for the American people. All we can do is shine the bright spotlight of truth on this sordid affair.
We now begin our summer in Montana and the next post is a surprise.