Someone in the national media finally caught on to the fact that billionaire Warren Buffet’s claim about his secretary paying a higher tax rate than himself is far off the mark.
Over at Forbes.com, Paul Roderick Gregory wrote that the secretary would have to make between $200,000 and $500,000 a year in order for Buffet’s assertion to be true. The reason is that a typical secretary pays an “effective” income tax rate of about 5 percent – after all exemptions, deductions and credits are subtracted – according to IRS figures. That’s the average effective rate in the $25,000 to $50,000 income category.
Most of Buffet’s income is taxed at a special 15 percent rate because his earnings derive mostly from capital gains on investments. But if the secretary, Debbie Bosanek, were paying in the 15 percent range on her weekly wages, Gregory determined, she would be making in excess of $200,000, based on the IRS tax brackets.
Before President Obama decided to propose a “Buffet rule” – a minimum tax rate of 30 percent on millionaires – he should have found a more accurate, if not less dramatic, example to publicize.
As I pointed out here last week, the claim that Mitt Romney’s estimated 15 percent rate – now verified at about 14 percent – is not less or “much less” than a typical middle income taxpayer, despite hundreds of media reports to the contrary.
The reason is the same as in the Buffet/Bosanek situation: the typical middle class taxpayer pays a single-digit percentage rate.
Bosanek has decided to participate in a campaign for the Buffet rule. She was seated in the first lady’s box at the State of the Union and she and her boss did some TV interviews the next day.
In one interview, they claimed that she paid about 35 percent in taxes. That’s not even close, according to Gregory, an economics professor. Beyond the obvious error at play here, and ignoring the softening effects of the U.S. system of marginal tax rates, it’s clear that even a claimed tax bracket of 25 percent or 28 percent for Bosanek would be highly inflated.
Half of all taxpayers pay no federal income tax, that's wrong. The more productive taxpayers that do pay federal tax, pay at a rate that is too high. Read this and tell me what is wrong with our tax and entitlement carnival. http://www.zerohedge.com/article/entitlement-america-head-household-making-minimum-wage-has-more-disposable-income-family-mak
The most productive taxpayers have no obligation to pay at a rate that is higher than anyone else.