Warren Buffet's Stance on Taxes

[West]

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I think most people would prefer if the rich at least paid the same taxes as the poor and middle class. There are a lot others who would be in favor of higher taxes on the rich than the poor.

I think corporations should pay higher taxes. I also think Warren should pay more taxes than I do. If I save an extra 1% of my salary, it will affect my life much more than if Warren saves.



[/ QUOTE ]Where the heck did you get the idea that the middle class and the poor pay more taxes than the rich?

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How about from Warrren Buffett in the link in the OP? Did you read it?

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No way, no is it right that the poor and middle class are shouldering more of the tax burden than the wealthy.

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He is not talking in terms of absolute dollars, obviously.

[spider]

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those ntu figures do not include payroll taxes, but i think they DO include capital gains taxes in their definition of "personal income taxes".

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I agree. The link does not give an explanation but the source is IRS which generally implies the numbers are simply total federal income tax (combo of reg rates, CG rates, credits, AMT, etc.) and do not include state taxes, sales taxes, or FICA. In fact, these aren't the best numbers to use for distributional comparisons but are often used b/c they are the most readily available (specifically, it's otherwise very tough to say much about the super-rich).

[CrushinFelt]

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those ntu figures do not include payroll taxes, but i think they DO include capital gains taxes in their definition of "personal income taxes".

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I agree. The link does not give an explanation but the source is IRS which generally implies the numbers are simply total federal income tax (combo of reg rates, CG rates, credits, AMT, etc.) and do not include state taxes, sales taxes, or FICA. In fact, these aren't the best numbers to use for distributional comparisons but are often used b/c they are the most readily available (specifically, it's otherwise very tough to say much about the super-rich).

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Well, I can't just take your word on this. What are the relative sizes of total income tax revenue versus the other items? If income tax dwarfs them (which I would think it does but I have not seen any comparison) then these numbers are fine to reference.

[spider]

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Well, I can't just take your word on this. What are the relative sizes of total income tax revenue versus the other items?

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If you are rich, income taxes easily represent the vast majority of taxes, with the possible exception of state taxes in a high tax state like NY or CA. If you are poor, income taxes can be a tiny fraction of overall taxes. For example, a family of four with two young kids and total income of 30,000 could pay literally nothing in income taxes, yet pay substantial amounts of sales tax & payroll taxes.

Not even my point though. It was that info on people like Gates & Buffett is EXTREMELY tough to come by, in large part because they won't be in any data that comes from sampling. The IRS data, in aggregate form, is one of the few pieces of public data that includes them.

[DesertCat]

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those ntu figures do not include payroll taxes, but i think they DO include capital gains taxes in their definition of "personal income taxes".

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I agree. The link does not give an explanation but the source is IRS which generally implies the numbers are simply total federal income tax (combo of reg rates, CG rates, credits, AMT, etc.) and do not include state taxes, sales taxes, or FICA. In fact, these aren't the best numbers to use for distributional comparisons but are often used b/c they are the most readily available (specifically, it's otherwise very tough to say much about the super-rich).

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Well, I can't just take your word on this. What are the relative sizes of total income tax revenue versus the other items? If income tax dwarfs them (which I would think it does but I have not seen any comparison) then these numbers are fine to reference.

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Its been said that three quarters of U.S taxpayers pay more in payroll taxes than income tax. And the social security tax rate isn't 7%, its double that because your employer pays a similar amount on your behalf, effectively out of pay you would have recieved if it werent for the tax. U.S. payroll taxes are over 15% up to $90k in income.

Buffett makes a great point about tax fairness that has been frequently misunderstood. Theresa Heinz Kerry pays 14% on total income north of $4m per year. But another rich guy busting his ass to make the same $4m per year in W2 income can easily pay twice the taxes as the trust fund baby Theresa Heinz Kerry. And a secretary making $50k per year can easily pay a similar percentage as the rich guy, or half that rate depending upon deductions. Our tax system has been sold to the highest bidder and they have the most advantageus rates.

[Jimbo]

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effectively out of pay you would have recieved if it werent for the tax.

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When I owned several businesses I never passed on savings to employees just because I saved them, whether they were from tax breaks, volume purchase savings or any ther type. Hard to believe any reasonable for profit business owner would either.

Other than picking that nit I understand your point and agree that it is obvious without any advanced calculations at all that more people pay more in payroll taxes than income tax. After all fortunately there are more poor people than rich ones.

Jimbo

[adios]

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those ntu figures do not include payroll taxes, but i think they DO include capital gains taxes in their definition of "personal income taxes".

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I agree. The link does not give an explanation but the source is IRS which generally implies the numbers are simply total federal income tax (combo of reg rates, CG rates, credits, AMT, etc.) and do not include state taxes, sales taxes, or FICA. In fact, these aren't the best numbers to use for distributional comparisons but are often used b/c they are the most readily available (specifically, it's otherwise very tough to say much about the super-rich).

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Well, I can't just take your word on this. What are the relative sizes of total income tax revenue versus the other items? If income tax dwarfs them (which I would think it does but I have not seen any comparison) then these numbers are fine to reference.

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Its been said that three quarters of U.S taxpayers pay more in payroll taxes than income tax. And the social security tax rate isn't 7%, its double that because your employer pays a similar amount on your behalf, effectively out of pay you would have recieved if it werent for the tax. U.S. payroll taxes are over 15% up to $90k in income.

Buffett makes a great point about tax fairness that has been frequently misunderstood. Theresa Heinz Kerry pays 14% on total income north of $4m per year. But another rich guy busting his ass to make the same $4m per year in W2 income can easily pay twice the taxes as the trust fund baby Theresa Heinz Kerry. And a secretary making $50k per year can easily pay a similar percentage as the rich guy, or half that rate depending upon deductions. Our tax system has been sold to the highest bidder and they have the most advantageus rates.

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Well I know Mrs. Kerry had tax free muni's and I assume she had a significant amount of dividend income that was taxed at the corporate level. Perhaps she had some long term cap gains. We've been through this a zillion times in the politics forum so I'm not sure I'm for it again. But the problem with taxing income is that the U.S. has a diverse set of income earners. What constitutes a business expense that is deductible for one person may not be the same for another. The tax system as it currently stands is the breeding ground of special interest groups. The main reason the tax code is so complicated is due to the fact that defining taxable income for all income earners is a complicated endeavor.

As far as the payroll tax is concerned. First of all it is specifically for SS. SS payments are skewed such that the poorest wage earners will get more than their fair share when they collect SS. I realize the SS trust fund is a gimmick but if they collect SS in the future they'll get more than their fair share for what they contributed. Second of all the lowest wage earners have the EIC and that can make up for a lot of the money that they pay in payroll taxes.

[DesertCat]

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effectively out of pay you would have recieved if it werent for the tax.

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When I owned several businesses I never passed on savings to employees just because I saved them, whether they were from tax breaks, volume purchase savings or any ther type. Hard to believe any reasonable for profit business owner would either.

Other than picking that nit I understand your point and agree that it is obvious without any advanced calculations at all that more people pay more in payroll taxes than income tax. After all fortunately there are more poor people than rich ones.

Jimbo

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I always get that reaction from fellow small business owners. Its a natural reaction, but aside from being a basic tenet of economics let me explain it to you another way. Presume you offer a $50k per year salary with a new employee. It's really a market rate, if the employee demands more you can get someone else and if you try to pay less he has other job offers at thst rate. Before he starts work the government suddenly imposes a $4k employer paid payroll tax. You tell the employee you only think his labor is worth $50k total and can only pay him $46k. He gets angry and calls his other job offers, he'll find they have suddenly dropped $4k as well, they cant pay any more than their original costs either (or they would have bid more before the tax was imposed).

Employer paid payroll taxes are paid by employees in the form of lower wages. It may not be as clean as my example, some employers may eat part of the tax when its imposed but over time a supply demand curve that intersected at $50k will now intersect around 46k. I say around because the supply demand curves are altered

[DesertCat]

Adios,

Almost everything you wrote is true, Buffett and I just think it is unfair. Where I quibble is it is not difficult to treat incomes the same. Buffett has already proposed an unlimited IRA to shield investment income until its converted into consumption. I'd go a few steps further,

1) abolish corporate income taxes to eliminate double taxation of earnings.
2) allow taxpayers to put all investments in unlimited IRAs so they can compound tax free until the taxpayer wants to withdraw and spend the money.
3) eliminate payroll taxes, support SS and medicare from income taxes. To make this possible, restrict SS and Medicare eligibilty to people making less than median income and pro-rate it against income. SS is supposed to be a safety net, make it that and nothing more.
4) tax all income, whether W2, dividends, muni bond interest, capital gains or IRA distributions the same with three brackets. Zero up to half median income, 15% up to three or four times median income, and 20% above that, no deductions, no exemptions.

Your tax form would be about five lines. You'd never have to track stock sales and purchases for tax reasons. A million smart people who are wasted working on tax forms would suddenly be available for more productive purposes. EITC can go away, no longer needed. IRS staffing could be reduced tenfold, once again diverting resources to better things. And since payroll taxes skew supply demand curves for employment we'd actually see a reduction in unemployment among lower income brackets.

And lastly, its fair. If you make the same as your neighbor, you can be comfortable knowing you will both contribute the same in taxes.

[Mark1808]

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Adios,

Almost everything you wrote is true, Buffett and I just think it is unfair. Where I quibble is it is not difficult to treat incomes the same. Buffett has already proposed an unlimited IRA to shield investment income until its converted into consumption. I'd go a few steps further,

1) abolish corporate income taxes to eliminate double taxation of earnings.
2) allow taxpayers to put all investments in unlimited IRAs so they can compound tax free until the taxpayer wants to withdraw and spend the money.
3) eliminate payroll taxes, support SS and medicare from income taxes. To make this possible, restrict SS and Medicare eligibilty to people making less than median income and pro-rate it against income. SS is supposed to be a safety net, make it that and nothing more.
4) tax all income, whether W2, dividends, muni bond interest, capital gains or IRA distributions the same with three brackets. Zero up to half median income, 15% up to three or four times median income, and 20% above that, no deductions, no exemptions.

Your tax form would be about five lines. You'd never have to track stock sales and purchases for tax reasons. A million smart people who are wasted working on tax forms would suddenly be available for more productive purposes. EITC can go away, no longer needed. IRS staffing could be reduced tenfold, once again diverting resources to better things. And since payroll taxes skew supply demand curves for employment we'd actually see a reduction in unemployment among lower income brackets.

And lastly, its fair. If you make the same as your neighbor, you can be comfortable knowing you will both contribute the same in taxes.

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I love the concept and agree that it would make for a much better and more fair system. However, I think you would see a tremendous revenue short fall under that system. It is my guess that the marginal rates you quote would have to be significantly higher to generate the same revenues.