In Monday's Deficit Reduction speech, Obama proposed a "Buffett Rule" based on Warren Buffett's paying less taxes than his secretary. There are so many issues with that claim, and I'm pleased that the nonpartisan Tax Policy Center crunched the numbers and found the falseness in the claim.
First and foremost, there are the facts: Individuals who make $1,000,000 will pay approximately 29.1% in taxes after deductions, while those making $50,000-75,000 will pay 15%. These are the IRS numbers friends. According to an AP article on this subject:
On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government. (1)
So the wealthy actually pay significantly more taxes, both in a percentage and in net dollars. And again, before the Left starts gumming about "fair share" the wealthiest 10% pay 50% of the taxes. The only people who don't pay their fair share are the people who pay 0% in taxes and receive the majority of the benefits that are coming out of taxes from the rest of us who do pay taxes, but I digress.
The entirety of this argument is based upon a misunderstanding of taxes and tax rates. Perhaps Warren Buffett doesn't pay his full tax rate, but that's because he's pretty good at using the legal system (note: they aren't "loopholes" they are legal deductions and tax shelters) to reduce his tax payments. For the record, nothing is stopping Buffett from sending more tax money. I know I said it about a month ago, but Mr. Buffett if you want to send more money to the government, the address is:
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
This entire argument is centered around a fundamental misunderstanding of taxation. First off, Buffet's annual salary is currently $100,000 (2), well below Obama's $250,000 per year "millionaire." (Apparently the President has STILL not figured out how much money is $1,000,000 and whether or not $250,000 = $1,000,000. For those of you from Palm Beach County, FL, $250,000 doesn't equal $1,000,000.) Secondly, there is a major difference between income taxes and capital gains taxes.
Income taxes are paid on salary. Salary is guaranteed to an employee from their employer as payment for services rendered. The employee contracts with the employer to provide labor in exchange for those wages. The employer then fulfills their end of the contract with wages. Unless you work on pure commission, your salary is guaranteed. There is no risk. If you are in the top tax bracket, your tax rate on income is 35%.
Now we come to Capital Gains taxes. Now there are huge differences between Capital Gains taxes and Income Taxes. One, there is no guarantee of a Capital Gains situation (that's making money on an investment, for those of you from Palm Beach.) There is also a huge chance that you lose that money. With income there is no chance of losing your money, because a) you didn't invest your money and b) you are guaranteed your paycheck, or else your employer is in breach of contract. Two, and more importantly, that money was already taxed once! It was either taxed as income at up to 35%, or it was taxed as inheritance at either 50%, or at 35%, unless it was inherited in the brief period of time when the rate was 0%, and even if it was, that money was taxed as the deceased's income or capital gains! So any money in a capital gains situation was taxed previously, and then it's taxed again at an additional 15% for being successfully invested.
In conclusion: First of all, very few CEOs are not paying less taxes than their secretary, unless their secretary's salary is more than their own (which is highly possible, since many executive assistants of Fortune 500 CEOs make more than $100,000 per year). Secondly, Capital Gains taxes are different than Income Taxes. Please write this down. Thirdly, even if Buffet does pay less than his secretary, he is the exception, not the rule. And finally, once again, if Mr. Buffet feels he isn't taxed enough that address to send the amount he feels he has under paid is:
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
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