All of this Buffett Rule nonsense started because, according to popular myth, Warren Buffett pays an effective tax rate that is less than his secretary’s. Therefore, obviously, this means that people who make a ton of money are cheating the tax code and should be punished by being forced to give their hard-earned cash over to the government who will then blow it on healthcare for Congress, toilet seats for the Pentagon and “public art” somewhere in Middle America.
As a strategy of wealth redistribution, it works, if you consider taking money and giving it to the government to use an effective way to handle wealth disparity. As a strategy of anything else, including a way to make the tax code more “fair” or “equitable,” it fails miserably, because, as it turns out Warren Buffett totally doesn’t make money because he’s classified all his income as capital gains and dividends, and what part of him that does make money – his company – is fighting tooth and nail with the IRS to avoid their tax bill. And Buffetts secretary makes like, half a million dollars, and would be likely in the crosshairs of the law that was founded to protect her.
Also, it appears Obama pays a lower effective tax rate than his own secretary – a relationship that the Buffett rule probably won’t equalize.
President Obama paid a total federal tax rate in 2011 on adjusted income of $789,674 that may be lower than that of his secretary, even though she earned substantially less. Obama has spent the past week touting the Buffett Rule, which calls on those who make $1 million – just a little more than Obama made – to pay at federal tax rate of at least 30 percent. The rule was inspired by Buffett’s comment that he paid a lower tax rate than his secretary.
The most recent information about salary regarding Obama’s secretary is for his former secretary, Katie Johnson, who is listed by the White House as having made $90,000 in 2010…On a $90,000 salary, she would pay $16,578 in federal taxes, $3,780 to Social Security, and $1,305 in Medicare taxes. That adds up to a total federal tax burden of $21,663 on $90,000 in adjusted gross income, or a tax rate of 24 percent.
Obama’s federal income tax rate was 20.5 percent
Huh. What’s worse? Joe Biden actually paid a 23% tax rate, and he only earned about half of what Obama earned.
The lesson here is, obviously, to stop making money around $70K. Or make a sh*tload very quickly. No in-betweeners. Because otherwise you’re screwed.