News shows continue to broadcast clips of President Obama remarking the need for higher taxes for those who make more money. My instant reaction is heck yeah. If you have more money, by default that’s what happens—you have more money available to be taxed so it will. Approximately 2 seconds later I give my 2cents (to the TV screen), yeah, whenever I’ve earned more money at work I’ve always got taxed more. I’m all for the “shared sacrifice” concept. Then I stop and think, if I’m already used to being taxed more when I make even 50cents more an hour, than how exactly are the rich getting out of higher taxes? I don’t support useless taxes just for the sake of taxing, but taxes have a purpose.
President Barack Obama says he wants to make sure millionaires are taxed at higher rates than their secretaries. The data say they already are.
“Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it,” Obama said as he announced his deficit-reduction plan this week. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.”
On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.
The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent of federal income taxes, according to the Congressional Budget Office.
This past Monday Obama impressed upon Congress “to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion.” In his tax code overhaul, he then referenced what he called the “Buffett rule,” (Buffett as in Warren Buffett the billionaire investor—for those of you under a rock dwellers)
Last week Buffet spoke openly in a New York Times piece (Stop Coddling the Super Rich) of the fact that,
“Very wealthy people like himself pay lower tax rates than the middle class, thanks to special tax categories for investment income. While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.”
“If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot,” Buffett wrote. “To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.”
He himself for example paid a tax rate of 17.4 percent, verses the higher effective tax rates of between 33 percent and 41 percent that the people who worked in his office paid.
Wow. (You’re definitely going to want to read the rest of his article. Go for it, click the highlighted link above)
What I find most interesting is that while it’s awesome that Buffett stepped up and put the rich on blast (himself included), and our President is blatantly riding on the coattails of this omission to back up the need for change—why is it that Buffett had to reveal this insane oversight? The President has been in politics a while, and has been pretty wealthy a while too. While he’s not an investor by trade, I’m sure, well I’d hope, he’d have a pretty firm handle on how taxes are orchestrated. Why didn’t he explain this…a while ago himself…?
(More info on these tax brackets and windows http://www.politifact.com/truth-o-meter/statements/2011/aug/18/warren-buffett/warren-buffett-says-super-rich-pay-lower-taxes-oth/)
- Buffett Rule: Not so simple (money.cnn.com)
- UPDATE: Obama’s newest tax proposal: the “Warren Buffett” tax (crushliberalism.com)
- The A.P. Fact Checks The “Buffett Rule” And Finds Its Premise Flawed (outsidethebeltway.com)