Buffett's Income

[DesertCat]

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on another note, is buffet complaining about "rich favoring" tax treatment? i'm a fan of progressive income taxes.

if we didn't have them, the wealthy would pay virtually ALL of the taxes rather than only some massive majority they do now.

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Comparisons that claim the rich pay a massive majority of taxes usually ignores payroll taxes. The poorest person in america has to pay 15% of their earned income in payroll taxes (their employer pays half, but it's still the employees money). Then they pay income taxes on top, so if you are in the 30% bracket you are really in the 45% bracket plus whatever state taxes you have. That's way higher than a rich person living off dividends or muni bond interest.

For example, when John Kerry ran against bush, he and his wife were often heard bemoaning the tax code's unfairness to the poor, yet she lived off a trust that was invested heavily in tax free muni bonds and paid only 14% tax rate on $5M in income (IIRC).

I cannot throw stones because a good portion of my income is long term capital gains, 15%, no payroll taxes.

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OT: I am in favor of corporations paying substantially more taxes than they do now. Many big corps get big tax breaks just to exist especially in local taxes leaving the gap to be filled by small frys.

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The problem with this is that corporate taxation is double taxation. First the corporation pays up to 40% of their profits as taxes, then the 60% that's left over gets taxed when it's dividended to shareholders, for an effective tax rate of 49%+ (depending upon state taxes)

I think a fairer system would have no corporate income taxes (no double taxation and increasing incentives to invest and save), would treat all interest (including muni), dividends and capital gains the same as regular income, roll payroll taxes into the income tax code and retain the progessivity. Then you could graduate it from 15% probably to 35% at the top (or less if you reduce SS & Medicare spending by restricting benefits to the truly needy).

The current tax code isn't even fair to many rich, who are hard working entrepeneurs earning regular paychecks and paying rates of up to 50% (payroll+fed+state) on earned income while idle rich like Kerry's wife get a huge tax break for doing nothing.

[DcifrThs]

15% of a little is still a little. what % of all revenue the IRS collects comes from those earning >=500k/year?

that % comes from those earning <500k?

what % of the population do those samples make up?

Barron

[pig4bill]

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I think a fairer system would have no corporate income taxes (no double taxation and increasing incentives to invest and save), would treat all interest (including muni),

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You can't be serious! You would destroy the muni bond market? So then they need a bigger budget to pay higher interest. They in turn raise local taxes. That's brilliant!

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dividends and capital gains the same as regular income,

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I see. You hate a healthy stock market. I can't think of a more effective way to stifle investment.

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roll payroll taxes into the income tax code and retain the progessivity.

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The payroll "tax" you speak of is not a tax, it's Social Security. That money does not go into the general fund. It ends up getting spent anyway, but the government puts IOU's into the trust fund.

[DesertCat]

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You can't be serious! You would destroy the muni bond market? So then they need a bigger budget to pay higher interest. They in turn raise local taxes. That's brilliant!


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You believe corporations should pay more than cities to borrow money? So less factories and other capital investment, and more government pork of dubious economic value?

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dividends and capital gains the same as regular income,

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I see. You hate a healthy stock market. I can't think of a more effective way to stifle investment.


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Actually no. Both Buffett and I make our living from stock market investing and he'd agree with me on this one.

One point I forgot to mention as part of my proposal, is to index capital gains for inflation. Indexing would mean that effective cap gains rates would still be lower than individual income tax rates, esp. for longer held (multi-year) investments. For example, if you hold an investment for 5 years, sell it for a 50% gain while inflation was 3% per year, you'll only owe taxes on 35% of the gain. Assuming your tax rate is 30%, you'd pay 11.5%, or total tax rate of 23% on your non-inflation adjusted gains. Not as cheap as today's 15%, but very low by historical standards.

And indexing is fair. If your investment increases in value 3% per year, and inflation is 3%, you have broken even in real terms, but still owe taxes. That's one of the prime reasons cap gains rates are lower than regular rates, to help compensate investors for the fake gains that inflation causes. I'm just proposing to keep our progressive tax system intact, while directly shielding from taxes inflationary gains.

And clearly you understand that dividend taxes are dramatically lower under my proposal than todays effective 50% tax rates. DUCY?

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roll payroll taxes into the income tax code and retain the progessivity.

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The payroll "tax" you speak of is not a tax, it's Social Security. That money does not go into the general fund. It ends up getting spent anyway, but the government puts IOU's into the trust fund.

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It's not a tax? Then we can all skip paying it correct? Unless you want to go to jail I'd guess not. It's a tax, it's a payroll tax, and has never been called or regarded as anything else.

Once again, if you means test social security and medicare, say give zero to anyone making over $75k per year, you'd be able to dramatically reduce tax rates. If you tax muni bonds, again you'd be able to dramatically reduce tax rates. There is no reason for millionaires to get social security checks. And there is no reason for trust fund millionaires to pay 14% income tax rates when hardworking people pay much more.

[Al P]

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OT: I am in favor of corporations paying substantially more taxes than they do now. Many big corps get big tax breaks just to exist especially in local taxes leaving the gap to be filled by small frys.

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Don't you think the government is already a large enough shareholder in U.S. companies? Think of how much they've made off Microsoft without buying a single share of stock.

[Jeff W]

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OT: I am in favor of corporations paying substantially more taxes than they do now. Many big corps get big tax breaks just to exist especially in local taxes leaving the gap to be filled by small frys.

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Huh? Our corporate taxes are among the highest in the world. IIRC only Japan and a couple other nations take more.

[The4Aces]

US corporate tax is not competitve at all. Large corporations are choosing to open plants and other stuff offshore to avoid these taxes. We need to LOWER corporate tax and LOWER the personal income tax.