Does Warren Buffett really have a lower tax rate than his secretary?
"The scenario you mention regarding capital gains is pretty much the core of the issue. Here's a run-down from PolitiFact.com that explains it a bit. It's important to focus on it being the tax rate, not the tax amount (which I think you get, but I want to reinforce that for other readers).  Basically, most of Buffett's income comes from capital gains and   dividends, income from investments he makes with the money he already   has. Income earned by buying and selling stocks or from stock   dividends is generally taxed at 15 percent, the rate for long-term   capital gains and qualified dividends. Buffett also mentioned that some of the ""mega-rich"" are hedge fund   managers ""who earn billions from our daily labors but are allowed to   classify our income as 'carried interest,' thereby getting a bargain   15 percent tax rate."" We don't know the taxes paid by Buffett's secretary, who was mentioned   by Obama but not by Buffett. Buffet's secretary would have to make a   high salary, or else typical deductions (such as the child tax credit)   would offset taxes owed. Let's say the secretary is a particularly   well-compensated executive assistant, making adjusted income more than   $83,600 in income. (Yes, that sounds like a lot to us, too, but   remember: We're talking about the secretary to one of the richest   people in the world.) In that case, marginal tax rates of 28 percent   would apply. Then, there would be payroll taxes of 6.25 percent on the   first $106,800, money that goes to Social Security, and another 1.45   percent on all income, which goes to Medicare. The secretary’s overall   tax rate would be lower than 28 percent, since not all the income   would be taxed at that rate, only the income above $83,600. Buffett, meanwhile, would pay very little, if anything, in payroll   taxes. In the New York Times op-ed, Buffett said he paid 17.4 percent   in taxes. Thinking of the secretary, it gets a little complicated,   given how the tax brackets work, but basically, people who make   between $100,000 and $200,000 are paying around 20 percent in federal   taxes, including payroll and income taxes, according to an analysis   from the nonpartisan Tax Policy Center. So in this case, the secretary's rate is higher because so much of   Buffett's income comes from investments and is taxed at the lower   capital gains rate. Here's Buffet's original Op-Ed in the NYT for those of you that aren't familiar."
"But when you focus just on taxes on work, as the OECD does in a new report out this morning, the U.S. starts looking a little less like a low-tax paradise. The total ""tax wedge"" -- which measures ""the difference between labour costs to the employer and the corresponding net take-home pay of the employee"" -- was 31.7 percent of labor costs for the average single U.S. worker with no children in 2016, higher than in 10 other OECD countries.  https://www.bloomberg.com/view/articles/2017-04-11/why-the-u-s-overtaxes-labor   https://www.ssa.gov/oact/progdata/taxRates.html" exactly...and this isn't even just theory...we have hard examples of higher tax rates NOT translating into higher tax receipts:  While we had crazy top income rates in the past per this: http://t-a-x.net/wp-content/uploads/2016/08/1.png  we saw that didn't translate at all into higher actual $ receive by the govt: https://cdn.theatlantic.com/static/mt/assets/business/taxrevenuepercentGDP.png Lots of pride in your statement... but he wrote a check that kept them afloat.  We (taxpayers) also wrote a check, but by the time that was signed by Congress, GS would already have died. Buffett's (intentional, amazing) liquidity reserves saved them first.  By analogy, Buffett threw the life preserver; the taxpayers scooped them out of the sea after the worst of the storm passed. The purpose is to be a racket. Assuming you're in the same tax bracket, you pay exactly as much tax later as you would now. If you're in a higher bracket, you pay more! And even if you pay less (assuming they don't change tax law before you retire) you give up direct control of your assets in exchange for a promise which may not be honored. "If AIG wasn't bailed out by the US Government, Warren Buffet would be the greatest **RICHES** to **RAGS** story ever.  I can see why he promotes paying more taxes and is so willing to ""betray"" his own ""class"" on behalf of the USGov.  It's because he's in the crony capitalist class post AIG bailout and tax dollars are the only reason he isn't greeting people at WalMart." It is the most incorrect piece of the article, but it's not the lack of taxes that have allowed the wealthy to do better than the rest of us. You can argue for the seizure of their assets by the gov't - through taxes - as a way to take it from them. But the Fed's monetary policies are far more severe in how they impact inequality. Right. It couldn't have anything to do with the fact that the tax code is thousands of pages long and so complex that even most tax attorneys probably don't understand it in its entirety, let alone the average tax payer. There couldn't be *any* flaw in the system *except* that Bill Gates and Warren Buffett don't just fund the government all by themselves. Hey Buddy, I like how you echo the same BS the top 1% spews.  Time to educate you with some simple math (using arbitrary numbers to explain my point).   top 1% has $1,000,000 Bottom 80% has $1000  I say bottom 80%, because it is effectively top 1%, next 19%-20%, and remaining 80%   Top 1% tax @24.7%    --&gt; $1,000,000 / 24.75 = $753,000  Bottom 80% tax @30%   --&gt; $1000 / 30 = $700  $753,000 &gt; $700  Do you see the problem?    Sure, the rich pay $247,000 in taxes compared to $300 for the bottom 80%.  However, the wealth is still greatly disproportionate even after taxes.  Hence, why the wealth gap is increasing year over year.   *Edit The tax rates @24.7% and @30% are the numbers for 2015, assuming not much has changed since. I am using $1,000,000 and $1,000 as arbitrary representations of wealth; for better understanding the issue. "US federal tax law distinguishes many types of income. For most people, most of their income is ""earned income"", money you were paid to do a job. Another category of income is ""capital gains"", money you made from the sale of an asset. For a variety of reasons, capital gains tax rates are lower than earned income tax rates. (For example, it is common that much of the gain is not real profit but inflation. If you buy an asset for $10,000 and sell it for $15,000, you pay capital gains tax on the $5,000 profit. But what if prices in general since you bought the asset have gone up 50%? Then your entire profit is really inflation, you didn't actually make any money -- but you still have to pay a tax on the paper gain.) So if you make your money by investing in assets -- buying and selling at a profit -- you will pay lower taxes than if you made the same amount of money by receiving a salary from a job, or by running a business where you sell your time and expertise rather than an asset. But money made from assets -- capital gains -- is not tax free. It's just a lower tax. It MIGHT be that when combined with other deductions and tax credits this would result in you paying no taxes in a particular year. Maybe you could avoid paying taxes forever if you can take advantage of tax loopholes. But for most people, making money from capital gains could result in lower taxes per dollar of income than someone doing more ordinary work. Or it could result in higher taxes, if you factor in inflation, net present value of money, and so on. BTW Warren Buffet's ""secretary"" is not a typist. She apparently makes at least $200,000 a year. http://www.forbes.com/sites/paulroderickgregory/2012/01/25/warren-buffetts-secretary-likely-makes-between-200000-and-500000year/#ab91f3718b8a. And side note: if Warren Buffet thinks he isn't paying enough in taxes, why doesn't he voluntarily pay more? The government has a web site where citizens can voluntarily pay additional taxes. In 2015 they received $3.9 million in such contributions. http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm" "&gt;No they pay less  Except they don't.  Just look at the tax brackets.  It's progressive.  The more you make, the higher your tax rate.  10% $0 to $9,275 $0 to $13,250  15% $9,276 to $37,650 $13,251 to $50,400  25% $37,651 to $91,150   28% $91,151 to $190,150   33% $190,151 to $413,350   35% $413,351 to $415,050   39.6% $415,051 or more   See how the % increases with increased income?  That's called a progressive tax system.  Can you say ""progressive""?" My understanding was that if they cash out they only have to pay capital gains tax on it, which is lower than income tax for their bracket. You also have to think about tax on dividends from these stock options, which is only 15%, which is paltry to regular incometax rate that the rich pay on their salaries. According to Wikipedia:  Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law, qualified dividends are taxed at the same rate as long-term capital gains, which is 15 percent for most individual taxpayers  Anyways, SOMETHING needs to be done. I don't know about the Saudi part of your point, but generally these are estimations based on the ownership stake of X person's main enterprise (e.g. Amazon, Microsoft, Berkshire). Even if Bezos made millions one year investing in, whatever, McDonald's franchises, it's a rounding error compared to his ~$80bn stake in Amazon, so they don't need pour over tax returns to get exact info. "This is the best tl;dr I could make, [original](https://www.nytimes.com/2017/08/30/opinion/corporate-tax-cuts-jobs.html?smid=re-share) reduced by 87%. (I'm a bot) ***** &gt; Their huge tax savings have enriched executives but not created significant numbers of new jobs.  &gt; We chose this particular tax threshold because, as Mr. Stephenson mentioned, House Republicans are proposing to reduce the federal statutory corporate tax rate to 20 percent, down from the current 35 percent.  &gt; At a town hall this month at AT&amp;T headquarters in Dallas, Mr. Stephenson urged his employees to call Congress and demand a corporate tax cut.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6x0akf/its_a_myth_that_corporate_tax_cuts_mean_more_jobs/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~201273 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **tax**^#1 **company**^#2 **percent**^#3 **job**^#4 **stock**^#5" "This is the best tl;dr I could make, [original](https://www.ips-dc.org/report-corporate-tax-cuts-boost-ceo-pay-not-jobs/) reduced by 87%. (I'm a bot) ***** &gt; Job-cutting firms spent tax savings on buybacks, which inflated CEO pay.  &gt; The telecommunications giant managed to get away with an effective tax rate of just 8.1 percent over the 2008-2015 period, while cutting more jobs than any other firm in our sample.  &gt; Through extensive use of overseas tax havens, General Electric achieved a negative effective tax rate during the 2008-2015 period, meaning the firm got more back from Uncle Sam than it paid into federal coffers.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6x0arp/corporate_tax_cuts_boost_ceo_pay_not_jobs/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~201277 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **firm**^#1 **percent**^#2 **CEO**^#3 **tax**^#4 **more**^#5" &gt; Less capital tax = less pressure on the wealthy/entrepreneurs (since you keep bigger portion of your net income, the interest to bring back business should increase) = capital inflow back to the US.  IMO, this statement makes a whole lot of assumptions that are untrue.  1) The wealthy create jobs.  I believe the opposite is true.  I think if you want more companies/jobs you should offer universal healthcare so low to middle class folks can risk leaving an established company to start on their own.  2) More money to the rich means more investment in the economy. My experience shows the rich will use the money to grow their own wealth, not everyone's. I remember a recent Bloomberg article where businessmen said they would use repatriated money for buyouts, liminting competition and growing a company's hold on the market.  3) Take home money is used for investment.  It isn't. Companies do the large investments, not individuals.  Consider Amazon looking at growing their distribution channels or Apple with their iPhone evolution.  If you make it more profitable for corporate profits to go to compensation, you leave less money for investment.  4) Companies struggle in the US due to overtaxation. This is a flat out myth. Cost of taxes for business in the US is one of the lowest for rich, educated countries and that is before the tax kickbacks (a la Foxconn) or loopholes.  5) And the bigges IMO -- the US has been fed the lie that the best thing for the citizens of the country is aligned with the best things for the country's companies. The opposite is the case.