# Obama's "Buffet law" **URL:** \ **Category:** Factual Questions\ **Created:** [September 20, 2011, 2:02am UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898 "2011-09-20T02:02:32Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [September 20, 2011, 8:06pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/41 "2011-09-20T20:06:36Z")
> [@Triskadecamus](#): > > Return on investments is taxed at another rate, much lower because of the myth that billionaires create jobs by investing their money. Short of sticking money in a mattress and sitting on it, all use of money creates jobs. If you, for example, taxed the wealthy a lot and the poor nothing at all, there might be an expanded amount of money spent on radio systems, casinos, and apartment building contractors. This necessitates the creation of jobs to meet the demand in these areas. If you taxed the poor a lot and the wealthy not at all, there might be an expanded amount of money spent on yachts, private jets, and personal chefs. Again, this will necessitate the creation of jobs to meet the demand. It’s impossible to spend money and not be paying for someone, somewhere, to be making a living. The only question is what work it is that the person is doing. But that’s just a big circle. I pay you to make food. You pay me to give you the food that you just made. What we really want, is to enable you to make double the amount of food, in the same amount of time. Thus we invest in new technologies and new methodologies, because that’s what turns everything from a big unchanging loop, into a growing system, where each generation has better medicines, an abundance and variety of foods, a nicer living space, etc. Investment money, more than any other use of money, goes towards advancing technologies. That’s the theory. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [September 20, 2011, 9:36pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/42 "2011-09-20T21:36:54Z")
> [@Jas09](#): > > That piece certainly has some facts. Including the fact that “In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service.” > > So the factual answer to the OP’s questions are “Yes, it does happen”. Actually, the OP’s concern was > [@](#): > > Does the issue Obama addresses with his proposed Buffet law an actual issue? If by issue you mean, “is it numerically possible whereby someone can make a mil and not pay any federal tax”? Then yes. If by issue you mean, “does this happen most of the time?” The answer clearly is no. The ‘Buffett rule’ really ought to be called the ‘Buffett exception’. And Obama knows this; he brought out this strawman for political reasons, not because it was going to raise any great amount of money to reduce the deficit. Again, just the facts, not a debate. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [September 20, 2011, 9:57pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/43 "2011-09-20T21:57:17Z")
> [@Mr\_Smashy](#): > > Again, just the facts, not a debate. Well, clearly once we venture into whether the magnitude of the tax avoidance is enough to be “an actual issue” we are in the realm of debate. But the second of the OP’s questions is clearly answered “Yes”. And the final question (how this is accomplished) has been answered up-thread. ---
**Author:** ![Mosier](https://avatars.discourse-cdn.com/v4/letter/m/7ea924/32.png) [@Mosier](https://boards.straightdope.com/u/Mosier)\ **Post date:** [September 21, 2011, 12:09am UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/44 "2011-09-21T00:09:23Z")
> [@Mr\_Smashy](#): > > And Obama knows this; he brought out this strawman for political reasons, not because it was going to raise any great amount of money to reduce the deficit. > > Again, just the facts, not a debate. You can’t post an opinion on a politician’s motives once sentence, then the next claim you’re only providing facts in the next. Follow up question: Does anyone (including Obama) have an estimate for how much tax revenue the Buffett Rule addresses? Does it actually make a hypothetical dent in the deficit? ---
**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\ **Post date:** [September 21, 2011, 12:45am UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/45 "2011-09-21T00:45:22Z")
> [@brocks](#): > > So the effective SS tax rate for someone making $200K a year is 3%, for someone making a $600K a year it’s 1%, and for some CEO making $60 million a year, it’s 0.01%. > > Just incidentally, all the politicians who say SS is broken, or a Ponzi scheme, or whatever, and needs drastic changes and cuts in benefits, are lying, and they know they are lying. All it would take to make SS fully funded for the next century or more is to extend the SS tax to incomes up to a million. If they did away with the cap altogether, it would be fine as long as the rivers flow and the winds blow. Obvious error is obvious. The amount that the government pays in social security benefits is related to the amount that one has paid into the system. So go ahead and eliminate the income limit; that’ll just mean that my social security checks get bigger. (Actually, don’t do that; get rid of the system entirely.) ---
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [September 21, 2011, 4:04pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/46 "2011-09-21T16:04:13Z")
> [@Zeriel](#): > > Mind telling me what happens if we make it 41% on capital gains, and “above 1 million” rather than 10 million? I bet it makes a fair chunk more than 2%. If you had 41% on those above one million for all types of income, not just capital gains it would raise slightly less than 5% of the current deficit. That is for 2009 which is the most recent year we have data for. 2009 was a very good year for the stock market and in a normal year capital gains would raise much less, even if you discount dynamic effects. [Here](http://www.theatlantic.com/business/archive/2011/09/chart-of-the-day-buffett-rule-wouldnt-bring-in-much-revenue/245404/) is a link that discusses how much would be raised under various rates. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [September 21, 2011, 4:10pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/47 "2011-09-21T16:10:56Z")
> [@Balthisar](#): > > Obvious error is obvious. The amount that the government pays in social security benefits is related to the amount that one has paid into the system. So go ahead and eliminate the income limit; that’ll just mean that my social security checks get bigger. (Actually, don’t do that; get rid of the system entirely.) Most (all?) proposals to eliminate the income limit also want to keep benefits relatively the same as they are now regardless of contributions, or at least means-test them. So you’d get much less extra income, if anything, from the extra you’d put in over the cap. ---
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [September 21, 2011, 4:17pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/48 "2011-09-21T16:17:52Z")
> [@BrightNShiny](#): > > Cite? > > Buffet doesn’t know his own tax rate? You’re just making stuff up now. I want a cite that his tax rate is the highest in the history of the world. That’s ridiculous, since tax rates were higher during the Clinton administration. I was speaking of tax incidence rates not income tax rates. His tax rate on income is 17%. Tax incidence is too complicated a subject to cover with any depth in a post, but a thumbnail is that tax incidence is when a person has to alter consumption to pay the tax. Mr Buffet is famously cheap and consumes a couple hundred thousand dollars a year. He paid around 7 million dollars in taxes. His tax incidence rate is consumption divided by his taxes paid. Thus his incidence rate is somewhere around 1,000% to 2,000%. Somewhat lost in all this is the fact that the majority of taxes paid by Buffett is corporate tax. He owns one third of Berkshire Hathaway which pays corporate taxes to the tune of 5.6 billion dollars a year in corporate taxes. Part of the president’s proposal for the Buffet law is the lowering of the corporate rate. So if the Buffet Law passes Buffet will probably end up paying hundreds of millions of dollars fewer taxes than he does currently. ---
**Author:** ![Diceman](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Diceman](https://boards.straightdope.com/u/Diceman)\ **Post date:** [September 21, 2011, 4:27pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/49 "2011-09-21T16:27:02Z")
> [@puddleglum](#): > > Somewhat lost in all this is the fact that the majority of taxes paid by Buffett is corporate tax. He owns one third of Berkshire Hathaway which pays corporate taxes to the tune of 5.6 billion dollars a year in corporate taxes. Part of the president’s proposal for the Buffet law is the lowering of the corporate rate. So if the Buffet Law passes Buffet will probably end up paying hundreds of millions of dollars fewer taxes than he does currently. So, in other words, Warren Buffett has a huge ulterior motive for supporting Obama in this plan? Figures. Or, to put it less charitably, Buffett is playing Obama like a cheap fiddle. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [September 21, 2011, 4:27pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/50 "2011-09-21T16:27:46Z")
> [@Mosier](#): > > You can’t post an opinion on a politician’s motives once sentence, then the next claim you’re only providing facts in the next. > > Follow up question: Does anyone (including Obama) have an estimate for how much tax revenue the Buffett Rule addresses? Does it actually make a hypothetical dent in the deficit? If you want even more facts, then check out today’s similar post in the very left-leaning [WaPo](http://www.washingtonpost.com/blogs/fact-checker/post/obama-taxes-and-the-buffett-rule/2011/09/20/gIQAXdd0iK_blog.html?hpid=z3) > [@](#): > > When you add up all of the various taxes, and look at the effective tax rates, it is clear the tax system is already pretty progressive. Everyone pays some tax, even those who pay no federal income taxes, and the wealthiest pay a larger percentage share of taxes. Here’s the effective tax rate for all of the groups, according to the CBO: > > Lowest quintile (23.4 million taxpayers), zero to $18,900: 4.3 percent > > Second lowest quintile (22.4 million), $18,900-$32,100: 10.2 percent > > Middle quintile (22.9 million), $32,100-$47,400: 14.2 percent > > Fourth quintile (23 million), $47,400-$71,200: 17.6 percent > > Highest quintile (23.6 million), above $71,200: 25.8 percent > > Top 10 percent (12 million), minimum income of $98,100: 27.5 percent > > Top 5 percent (5.9 million), minimum income of $134,400: 29 percent > > Top 1 percent (1.1 million), minimum income of $332,300: 31.2 percent and the bumper sticker: > [@](#): > > In other words, it may be an effective political argument, even if it’s not really much of a problem. It’s virtually all political. ---
**Author:** ![elfkin477](https://avatars.discourse-cdn.com/v4/letter/e/a9a28c/32.png) [@elfkin477](https://boards.straightdope.com/u/elfkin477)\ **Post date:** [September 21, 2011, 4:28pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/51 "2011-09-21T16:28:51Z")
> [@Zakalwe](#): > > Why not just ask [Warren Buffett](http://money.cnn.com/2011/08/15/news/economy/buffett_taxes/index.htm)? > > > [@](#): > > > > Originally Posted by Warren Buffett > > Last year my federal tax bill … was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income – and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent. This is what I don’t get: is he including state taxes into his figures? Unless I’m reading [wiki](http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Year_2011_income_brackets_and_tax_rates) wrong, _no one_ pays more than 35% in federal taxes currently, so his office can’t have a 36% average. And even to get to 35% he’d have to be paying them more than $379,151 a year, each. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [September 21, 2011, 4:41pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/52 "2011-09-21T16:41:09Z")
> [@elfkin477](#): > > This is what I don’t get: is he including state taxes into his figures? Unless I’m reading [wiki](http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Year_2011_income_brackets_and_tax_rates) wrong, _no one_ pays more than 35% in federal taxes currently, so his office can’t have a 36% average. And even to get to 35% he’d have to be paying them more than $379,151 a year, each. I believe he’s including payroll taxes, which are not included in “federal income tax” rates. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [September 21, 2011, 4:53pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/53 "2011-09-21T16:53:47Z")
As I understand it, he’s referring to _all_ taxes. Including sales taxes, which the Right likes to ignore completely except for when they’re praising them as the best sort of tax possible. ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [September 21, 2011, 5:02pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/54 "2011-09-21T17:02:34Z")
> [@puddleglum](#): > > If you had 41% on those above one million for all types of income, not just capital gains it would raise slightly less than 5% of the current deficit. That is for 2009 which is the most recent year we have data for. 2009 was a very good year for the stock market and in a normal year capital gains would raise much less, even if you discount dynamic effects. Show me numbers on capital gains. All I see at your link is income tax, which is adequately covered. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [September 21, 2011, 5:56pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/55 "2011-09-21T17:56:07Z")
I suspect he’s including all taxes paid on income. (I.e. not sales tax, not property taxes, not automobile license fees or taxes on gasoline…). Whatever shows up on your income tax forms as tax paid to a government. This would include federal income tax, social security, state income taxes, and if they work in Manhattan, city income tax. I know once I compared income tax rates (as above) between my Canadian tax rate and similar employees in the New York office many years ago. They paid about the same as me. I did not have to pay health insurance. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 21, 2011, 6:21pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/56 "2011-09-21T18:21:11Z")
In Eisenhower’s time the upper tax rate was 90 percent. We had plenty of rich people. We also were able to finance building the interstate road system. Now we can not even afford to repair it. Taxes for the rich have been dropping steadily since . We are practically broke. The tax breaks for the rich are not just found by smart tax accountants, but they are installed by congressmen who put them in due to special interest pressure. They were deliberately passed to benefit special groups of people. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [September 21, 2011, 8:38pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/57 "2011-09-21T20:38:52Z")
> [@puddleglum](#): > > I was speaking of tax incidence rates not income tax rates. His tax rate on income is 17%. Tax incidence is too complicated a subject to cover with any depth in a post, but a thumbnail is that tax incidence is when a person has to alter consumption to pay the tax. Mr Buffet is famously cheap and consumes a couple hundred thousand dollars a year. He paid around 7 million dollars in taxes. His tax incidence rate is consumption divided by his taxes paid. Thus his incidence rate is somewhere around 1,000% to 2,000%. I asked for a cite, and you failed to provide one. Where are you getting his consumption figures from? Furthermore, while I don’t quite agree with this definition of tax incidence, let’s go with it. So, he has very low consumption. Why should I care? What exactly is the relevance to an issue of tax rate policy? Edit: Come to think of it, you have yet to provide a cite for a single factual claim you’ve made in this thread. Why should any of us believe you? ---
**Author:** ![elfkin477](https://avatars.discourse-cdn.com/v4/letter/e/a9a28c/32.png) [@elfkin477](https://boards.straightdope.com/u/elfkin477)\ **Post date:** [September 21, 2011, 8:44pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/58 "2011-09-21T20:44:51Z")
> [@Ludovic](#): > > I believe he’s including payroll taxes, which are not included in “federal income tax” rates. Then is he doing it unevenly? Counting it for them, but not himself? If you take his 17.5% and subtract out payroll taxes, you only get 10% and I have trouble believing there are enough loopholes in our tax system to account for that being an accurate figure. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [September 21, 2011, 8:51pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/59 "2011-09-21T20:51:24Z")
> [@elfkin477](#): > > Then is he doing it unevenly? Counting it for them, but not himself? If you take his 17.5% and subtract out payroll taxes, you only get 10% and I have trouble believing there are enough loopholes in our tax system to account for that being an accurate figure. Payroll taxes don’t apply to unearned income, so his overall payroll tax rate relative to his total income will be lower because he has a lot of unearned income. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [September 21, 2011, 8:53pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/60 "2011-09-21T20:53:46Z")
> [@elfkin477](#): > > Then is he doing it unevenly? Counting it for them, but not himself? If you take his 17.5% and subtract out payroll taxes, you only get 10% and I have trouble believing there are enough loopholes in our tax system to account for that being an accurate figure. The Social Security portion of payroll taxes are capped (6.2.% up to around $100k). For the year he was talking about his payroll tax contribution is probably something well under 2% (the 1.45% for Medicare is not capped). ETA: And yeah, that only accounts for his earned income (salaries, wages, and tips). For Buffett, payroll taxes are negligible. [Previous page](https://boards.straightdope.com/t/obamas-buffet-law/596898.md?page=2) [Next page](https://boards.straightdope.com/t/obamas-buffet-law/596898.md?page=4)