By Dennis Seid/NEMS Daily Journal
Warren Buffett doesn’t think rich people should pay a lower tax rate than his secretary. In other words, he doesn’t think he should pay a lower tax rate than most of you reading this column.
He thinks the very well off like himself should pay more of their “fair share.” So who are these uber-rich that Buffett thinks should pay more to Uncle Sam?
Conveniently, Forbes has released its list of the 400 wealthiest people in the U.S. They’re worth a combined $1.53 trillion, up 12 percent compared to a year ago.
Buffett, however, isn’t the top dog. He’s at No. 2, trailing Bill Gates, who’s worth a mere $59 billion.
Still, Buffett has enough to stay ahead of third-ranked Larry Ellison ($33 billion) and Charles and David Koch ($25 billion apiece). Rounding out the top 10 were Walmart heirs Christy Walton ($24.5 billion), Jim Walton ($21.1 billion), and Alice Walton ($20.9 billion); George Soros ($22 billion) and Sheldon Adelson ($21.5 billion).
Taxing these guys more doesn’t sound like too bad of an idea after all.
But at first glance, the wealthiest people in America apparently do pay at a higher rate and contribute a much larger share of the overall taxes.
President Barack Obama’s proposed “Buffett rule” says people making more than $1 million shouldn’t pay a smaller share of their income in taxes than middle-class families. Who can argue with that?
According to the IRS, nearly 1,500 households with incomes more than $1 million paid no federal income tax last year. As The Associated Press points out, that’s less than 1 percent of the 237,000 returns with incomes above $1 million.
This year, those households will pay an average of 29.1 percent of their income in federal taxes. Households making between $50,000 and $75,000 will pay an average of 15 percent of their income in federal taxes. Households making between $40,000 and $50,000 will pay an average 12.5 percent; those making between $20,000 and $30,000 will pay 5.7 percent.
According to the Congressional Budget Office, the top 10 percent of households with the highest incomes pay half of all federal taxes and more than 70 percent of federal income taxes.
So it seems the rich do pay their fair share, right? Well, not quite when you dig a little deeper.
If you combine all income taxes, and not just federal taxes, the richest 1 percent pay a 19 percent income tax rate, while the average worker pays 9.3 percent, according to the CBO.
The Buffett rule, according to Ryan Chittum of the Columbia Journalism Review, “wouldn’t apply to a measly millionaire whose effective federal tax rate is already 31 percent on $1,000,001 in salary and bonus a year. It would hit folks like Buffett – the super-rich who get most of their income from capital gains (or avoid it with tax shelters), which are taxed at less than half the rate labor is.”
Thus, Buffett’s effective federal tax rate last year was 17.4 percent. In 2008, the average for the top 400 tax returns was 18.1 percent, including all federal taxes.
The Buffetts of the world are paying more than us middle-income folks, yes. But consider the top 10 percent take home half of all income in the country.
So maybe the super-rich can pay more taxes, and pay yours and mine, too. But should they?
Contact business editor Dennis Seid at (662) 678-1578 or email@example.com.