By: George Noga – February 21, 2012
For only the second time ever, I eschew the standard format to write more personally and directly. I have invested many hours researching this posting; if you stick with me to the end, you will be rewarded with an inimitable analysis and perspective.
Debbie Bosanke, for those of you not exposed to the White House and media spin machine, is Warren Buffet’s secretary, she who putatively pays a lower tax rate than her famous boss. President Obama is using her as an unwitting shill in his neutron bomb class warfare strategy to raise taxes to fund his hell-on-earth social welfare state. Never have I seen any issue so grotesquely demagogued, distorted, dishonest and deceptive. Consider the naked facts.
Buffet asserts he paid 17.4% in federal income tax. Although that isolated datum may be true, it is meant to dupe and hoodwink. Following is a fair and accurate calculation of Buffet’s real tax rate computed using the lingua franca of taxes by tracing a tranche of Buffet’s income through a complete tax cycle involving the following five stages.
- Before Buffet can invest, he must earn income. At the start of the cycle he earns $1 million on which he pays federal income tax of 39.6%, social security of 6.2%, Medicare of 2.9% and Nebraska tax of 6.84%. He pays $483,000 in total tax which is an effective rate of 48.3% after allowing for the deductibility of state tax.
- Buffet now takes $500,000 after tax which he uses to buy stock in a corporation. His investment is successful and the company earns 16% pretax profit for each of the next ten years. His share of the company’s income is $80,000 per year on which he (through the company) pays 35% federal tax and 7.81% Nebraska tax. The effective rate is 40.1% and Buffet pays $320,800 over the ten years.
- The company pays a 5% dividend annually; on Buffet’s share, this is $4,000. The dividend is taxed at 15% federal and 6.68% state. Over 10 years he pays $8,280.
- A decade has passed and Buffet decides to sell. Based on the aforementioned earnings and taxes paid, he nets a gain of $340,000. This is subject to a capital gains tax of 15% federal and 6.68% Nebraska. His total tax bill is $70,380.
- When Warren dies, he will be subject to federal estate tax of 35% and Nebraska inheritance tax which ranges from 1% to 18% – I have assumed 9% herein; this amounts to $379,600 based solely on the data for this tranche of income.
Buffet’s True Tax Rate is 70% in 2012 – Increasing to 80% in 2013
Buffet’s true tax rate is over 70% on this tranche of income over the entire cycle of earning, investing and leaving an estate. During the 10-year period Buffet had $1 million in individual earnings and $800,000 via his share of corporate income resulting in total income of $1.8 million; on that amount, he paid taxes of $1,262,100 – or 70.1% and not the 17.4% alleged. His reported 17.4% tax rate was based solely on step 4 of the above 5 steps, i.e. only on a single part of the cycle. His real tax rate is over four times (400%) higher than he claimed.
All this is based on current tax law for 2012. I also computed Buffet’s tax rate based on current law for 2013 and it is over 80% due to the statutory rise in estate taxes and the new 3.8% ObamaCare tax. I excluded federal and state unemployment tax, property tax, sales tax and over 20 other taxes Buffet would have paid. Moreover, if Buffet would have lost money on his stock, it would have be deductible only up to $3,000 per year.
And let’s not forget Debbie Bosanke. She shamelessly is being used as a surrogate for secretaries everywhere – the kind that works in your office and earns say $20,000 and pays little or no taxes. Bosanke hardly fits that bill. Based on the limited tax data she released, her income is at least $200,000 and could be as high as $500,000, anywhere from 10 to 25 times the earnings of a typical secretary. Bosanke’s income is inferred based on published IRS data on tax rates by adjusted gross income. Neither Buffet nor Bosanke has released their tax returns.
An Ignoble, Sordid and Squalid Spectacle
I can’t recall anything in my lifetime approaching the sheer chutzpah of the Obama-Buffet-Bosanke spectacle. It transcends political spin and crosses into a netherworld of intentional lie and deception; it froths with contempt for the American people.
- They assert Buffet’s tax rate is 17.4% when they know it is over 70% and rising to over 80% next year. They know Bosanke’s income is 10-25 times that of a typical secretary. They extract datum from only one part of the five-part tax cycle. All this is done with malice aforethought and intended to deceive and divide America.
- The President of the United States and one of the richest men on the planet jointly propagated this massive fraud and deception knowing they could count on the state sycophant media not to expose them.
- And just when you thought they couldn’t get any more scumlike, the bottom-feeding state sycophant media are flogging this deceit for all it’s worth. Even if they wished, they couldn’t get this story right because they graduate in the bottom deciles and their IQs are at least one standard deviation to the left of the norm.
- Was this hoax the price of Buffet’s recently awarded Presidential Medal of Freedom? Buffet should be shamed into returning the medal and his otherwise good reputation has been forever sullied. Also, shame on him for dragging Debbie Bosanke into this squalid affair and for using her as an unwitting political pawn.
- Perhaps the most sordid part of all this is that Obama is cynically banking on the ignorance and class envy of the American people due in part to the complexity of the tax code and his incendiary class warfare rhetoric. He is a divider, not a uniter.
The only antidote I know is to shine the spotlight of truth on this ignoble affair. In that regard, please be assured the tax data presented herein are accurate and fair as is the entire analysis. Please help me by forwarding this to as many as possible. Thank you.