# 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:** 15\ **Page:** 4
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [September 21, 2011, 8:56pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/61 "2011-09-21T20:56:54Z")
> [@elfkin477](#): > > Then is he doing it unevenly? Counting it for them, but not himself? No - he is doing the same for both: counting the total of federal income tax and payroll taxes. > [@](#): > > If you take his 17.5% and subtract out payroll taxes, you only get 10%. Others have explained why this is wrong. ---
**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 23, 2011, 5:14pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/62 "2011-09-23T17:14:52Z")
> [@Zeriel](#): > > Show me numbers on capital gains. All I see at your link is income tax, which is adequately covered. The numbers at the link are if all income both earned and capital gains are taxed at certain rates. ---
**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 23, 2011, 5:34pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/63 "2011-09-23T17:34:19Z")
> [@BrightNShiny](#): > > 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? Tax incidence is the most important part of tax policy, as the object of tax policy is to raise as much money with as little harm as possible. Knowing the tax incidence will let us know how much harm is done and to whom. Tax incidence is important because if the purpose of a tax is to target rich people but the incidence falls on the poor or middle class then the tax policy has failed. [The wikipedia article about tax incidence is a good one](http://en.wikipedia.org/wiki/Tax_incidence) [Cite](http://finance.yahoo.com/news/Warren-Buffetts-Frugal-So-Why-investopedia-1012408202.html?x=0) that Buffet has a modest lifestyle. > [@](#): > > Warren Buffett earns a base salary of $100,000 a year at Berkshire Hathaway. It’s a salary that has not changed in 25 years. A man of simple tastes, including watching sports on television and eating junk food, Buffett easily supports his modest standard of living with this salary. [Cite](http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html) > [@](#): > > that Buffett paid 7 million in taxes. Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. [Cite](http://finance.yahoo.com/taxes/article/112560/what-top-companies-pay-taxes-forbes) that Berkshire Hathaway paid 5.6 billion in tax > [@](#): > > Berkshire Hathaway > Pretax income: $19 billion > Provision for income taxes: $5.6 billion > Net income: $13 billion > Tax rate: 29% Are there any other factual claims I have made that I did not have cites for? ---
**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 23, 2011, 5:41pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/64 "2011-09-23T17:41:12Z")
For those who do not want to wade through the article about tax incidence the upshot in this case is that whatever tax money this proposal would raise from Mr Buffett, it would ultimately be paid by the recipients of the Gates Foundation, which are mostly poor children in the US and sick children in Africa. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [September 23, 2011, 6:25pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/65 "2011-09-23T18:25:43Z")
> [@puddleglum](#): > > For those who do not want to wade through the article about tax incidence the upshot in this case is that whatever tax money this proposal would raise from Mr Buffett, it would ultimately be paid by the recipients of the Gates Foundation, which are mostly poor children in the US and sick children in Africa. We should not tax rich people because they will gie the money to charity if we don’t? As I said before, if his rate is 17% then presumably he gets 17 cents on the dollar refund. How much he gave to charity is probably not dependent of tax rates, tax refunds, etc. It does not sound like he gives to the point where he needs all the rest to support his lifestyle. More likely he gives a part of his large disposable income that he feels like giving, and a somewhat higher tax rate won’t change that. ---
**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 23, 2011, 7:13pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/66 "2011-09-23T19:13:00Z")
My comments were not about rich people in general but Mr Buffett in particular. He has announced plans to give all his money away [Cite](http://money.cnn.com/2006/06/25/magazines/fortune/charity1.fortune/) No matter how much you raise his taxes it is almost impossible to raise it enough to impact the amount of hamburgers he eats or force him into a smaller house. What it will do is reduce the total amount of money he has which will lower the amount of money he gives to Gates. This will result in fewer bed nets and tutors. Most rich people are not Buffett so it makes no sense to design tax laws around him, but it shows how important tax indicidence is when designing a tax policy. ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [September 23, 2011, 7:33pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/67 "2011-09-23T19:33:17Z")
> [@puddleglum](#): > > The numbers at the link are if all income both earned and capital gains are taxed at certain rates. I don’t see any indication that that’s the case–when people talk about tax policy, they are almost always talking about “income tax”, and excluding Schedule D Capital Gains Tax. Looking at the actual stat source link of tax returns for people with Schedule D income calculations, (Table 4a, 2008) the total effective tax rate for people over $1mil in reported income using Schedule D is around 25.49%. This calculation was performed by doing a weighted average using the total returns filed (column 1) and tax paid as a percentage of AGI (column 22). Already we’re different from the article’s number (29.1%), therefore he is not using the charts that include Schedule D, therefore he is not talking about Capital Gains tax. Additionally, if we take a straight 35% of the AGI (column 2) from that Table, we find that a theoretical 35% rate the total taxes generated from those reporting more than $1mil income including Schedule D would pay a total of $299 billion in tax on an aggregate reported income of $855 Billion. Incidentally, taxing cap gains at 35% as straight regular income WOULD take a nice big bite out of the deficit, looking at that. That’s almost 20% of the deficit right there. I’m sorry your link was used to prove you wrong. 😃 ---
**Author:** ![What\_the](https://avatars.discourse-cdn.com/v4/letter/w/f4b2a3/32.png) [@What\_the](https://boards.straightdope.com/u/What_the)\ **Post date:** [September 23, 2011, 10:07pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/68 "2011-09-23T22:07:23Z")
So how does this Buffet Law work…do I get to pay the same tax rate as my secretary? ---
**Author:** ![What\_the](https://avatars.discourse-cdn.com/v4/letter/w/f4b2a3/32.png) [@What\_the](https://boards.straightdope.com/u/What_the)\ **Post date:** [September 25, 2011, 2:03pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/69 "2011-09-25T14:03:23Z")
> [@What\_the](#): > > So how does this Buffet Law work…do I get to pay the same tax rate as my secretary? A little help please… I may be able to reduce my withholdings. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [September 25, 2011, 2:08pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/70 "2011-09-25T14:08:37Z")
> [@What\_the](#): > > A little help please… I may be able to reduce my withholdings. Indeed. It is in the very rules of the law that you will pay exactly the same rate as your secretary. In fact, if you don’t have a secretary the law won’t apply to you. Because politicians never talk in analogies or metaphors. ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [September 25, 2011, 8:38pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/71 "2011-09-25T20:38:46Z")
> [@What\_the](#): > > So how does this Buffet Law work…do I get to pay the same tax rate as my secretary? It means you, personally, have to pay 100% of your income in taxes. And hire a secretary. What can I say, Buffet doesn’t like you for some reason. ---
**Author:** ![What\_the](https://avatars.discourse-cdn.com/v4/letter/w/f4b2a3/32.png) [@What\_the](https://boards.straightdope.com/u/What_the)\ **Post date:** [September 26, 2011, 12:58pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/72 "2011-09-26T12:58:02Z")
> [@Ludovic](#): > > Indeed. It is in the very rules of the law that you will pay exactly the same rate as your secretary. In fact, if you don’t have a secretary the law won’t apply to you. Because politicians never talk in analogies or metaphors. Nice… my secretary gets an earned income credit ! ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [September 27, 2011, 7:09am UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/73 "2011-09-27T07:09:59Z")
> [@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”. Ok, but is this significant? Of course it is: the Washington Post’s editorial board never misses a chance to coddle conservatives with false equivalences and factually challenged claims. But even WAPO noted that the top 400 taxpayers paid an average of 18.1% of their income in federal taxes, down from 30% in 1995. They then go through the tax rates of various quintiles, conveniently ignoring payroll taxes which cap out at about $107,000. Then they baffling downplay hedge fund managers taking advantage of the covered interest loophole which permits them to apply a top rate of 15%. Meanwhile somebody making $35,000 per year will pay 14.2 percent income tax added to 12.4% payroll tax for a grand total of 26.6%. (I’m adding in the employer contribution, since taxes on labor are more likely to fall on employees via lower wages than on the company). The Buffet rule addresses something real, only if you believe that 15% \< 18% \< 26%. Otherwise it doesn’t matter and there’s really no reason to oppose closing such loopholes. [http://www.washingtonpost.com/blogs/fact-checker/post/obama-taxes-and-the-buffett-rule/2011/09/20/gIQAXdd0iK\_blog.html](http://www.washingtonpost.com/blogs/fact-checker/post/obama-taxes-and-the-buffett-rule/2011/09/20/gIQAXdd0iK_blog.html) ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [September 27, 2011, 1:23pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/74 "2011-09-27T13:23:57Z")
> [@Measure\_for\_Measure](#): > > Meanwhile somebody making $35,000 per year will pay 14.2 percent income tax added to 12.4% payroll tax for a grand total of 26.6%. (I’m adding in the employer contribution, since taxes on labor are more likely to fall on employees via lower wages than on the company). :nitpick: I just realized something. I agree that it is not a mistake to count employer contributions as part of employees tax rate, but if you do, you should also count them as income. Once you add that extra 6.2% to the income you find that the effective tax rate is “only” 25% in your example. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [September 27, 2011, 1:33pm UTC](https://boards.straightdope.com/t/obamas-buffet-law/596898/75 "2011-09-27T13:33:31Z")
> [@Ludovic](#): > > :nitpick: I just realized something. I agree that it is not a mistake to count employer contributions as part of employees tax rate, but if you do, you should also count them as income. Once you add that extra 6.2% to the income you find that the effective tax rate is “only” 25% in your example. Correct. And why not also allow for Medicare - 2.9% extra tax and 1.45% extra income. This should be added to the high-earners’ figures also as there is no cap. [Previous page](https://boards.straightdope.com/t/obamas-buffet-law/596898.md?page=3)