Quote:
Originally Posted by spence
Reality check...
Overall taxation in this country is at an historic low and effective tax rates allow the top earners to pay far below the top brackets while they bemoan progressive taxation ( Warren Buffett excluded  ). -spence |
Stephen Moore: Warren Buffett Is Wrong on Taxes - WSJ.com
During Monday night's national address, President Obama recited the Buffet line that millionaires and billionaires pay lower tax rates than their secretaries. Democrats in Congress routinely cite Mr. Buffett's tax confessions as irrefutable evidence that tax rates on the very rich are too low and the system is unfair. Taxes on millionaires and billionaires are already near a record high in terms of the share of all income taxes paid. And the effective tax rate on this group is much higher, not lower, than any other income category. The best way to balance the budget is for the economy to produce a lot more American success stories like Warren Buffett.
"First of all, Mr Buffet isn't "making BILLIONS". He holds assets that represent unrealized capital gains in the several tens of billions (primarily shares of Berkshire-Hathaway). If BH were to go belly up tomorrow, his holdings become worthless. His company pays him a salary of $100,000 each year, and he "earns" a few million dollars every year in interest and dividends. This income, plus his salary, is what he pays taxes on, much of which is taxed at the lower capital gains rate rather than income tax rate.
Quoting his tax rate, based on CG rates compared to his secretaries, based on income tax rates (and not at his or her *effective* income tax rate, at that) is apples and oranges.
Mr Buffet takes full advantage of the tax system to minimize his taxes. He has accountants and tax lawyers. He has clearly structured his affairs to minimize his taxes, as, for example, when he established trusts for his children.
It is further worth noting that when Mr. Buffet and his friends Bill & Melinda Gates set out to figure out how to improve the world, they created the tax-exempt foundation and donated billions of dollars to the foundation, rather than simply letting the government have that money. We have to ask why? Didn't they trust to government to do the "right thing" with that money?
Finally, note that both Gates and Buffet, when they donated to the foundation, did so by giving away appreciated shares of their respective companies, thus garnering for themselves the largest tax break possible--not only did they not have to pay GC taxes on the gains (substantial they were, too), but they get to claim the *appreciated* value as a deductible charitable contribution. So, if WB had been granted one share of BH when it sold for $1000, he would owe income taxes on on the $1000. But if he held that share until BH sold for $200,000 per share, he would owe income taxes on the $1000, and CG taxes on the $199,000 difference. But by donating the share to the foundation, he still owes income taxes on the $1000, pays no CG taxes, and gets to claim $200,000 charitable donation (which can go a long way to offsetting any other income he has)."