Tag: class warfare

How Much Income Tax Warren Buffet Pays

Despite his request to pay more taxes and that the rich do not do their fair share, it appears that Mr. Buffet has reduced his tax burden.  While you read the story below, consider if there is a double standard.

From Thomas Stanley, Ph.D.

Warren Buffett is the best of the best at transforming income into wealth.    How did he do it?  Wise investing, you say.  Combine this with his reputation for having enormous integrity and his well publicized frugal lifestyle.  When it comes to consumption he seems to possess traditional midwestern values.  In spite of his substantial wealth he lives in a relatively modest home and drives American makes of cars.  Ah , but there is something else.  As I stated in The Millionaire Next Door,

Millionaires know that the more they spend, the more income they must realize.  The more they realize, the more they must allocate for income taxes.  So . . . adhere to an important rule:  To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow).

You may recall from an earlier blog that the typical millionaire next door has a realized income that is equivalent to only 8.2% of his wealth [median].  But Mr. Buffett is much better at miniziming his income as a function of net worth.  According to the 2012 Forbes 400 list, Mr. Buffett has a net worth of $46 billion.  CNN Money reported that “his taxable income was $39,814,784” in 2010.  That is the equivalent of only 0.087% of his net worth! Translated, the typical millionaire next door’s percentage of realized income to his net worth (8.2%) is nearly 95 times higher than Mr. Buffett’s (8.2%/0.087%).

Also consider something else in this equation:  income tax as a function of net worth.  The typical millionaire next door pays the equivalent of approximately 2% (median) of his net worth in income tax annually.  But here again Mr. Buffett is far, far better in minimizing his income tax.  According to Reuter’s, “[Warren Buffett] paid only $6.9 million in federal income taxes in 2010.”

In a nominal sense, $6.9 million in income tax might appear to be a significant amount of money.  But look at Mr. Buffett’s tax bill as a function of his net worth, that is $6.9 million as a percentage of his $46 billion in wealth.  At this rate he is paying the equivalent of only 0.015% of his net worth.  Compare this with the 2% paid by the millionaire next door.  This rate is more than 133 times greater than Mr. Buffett’s.  In fact, if Mr. Buffett was taxed at the same rate (2%) he would owe the Treasury Department $920,000,000 or nearly $1 billion.  You might say that it is unAmerican not to pay your fair share.  But Mr. Buffett gets special dispensation regarding this topic.  Why?  He has pledged to leave the vast majority of his estate to noble causes.  And according to Forbes, he has already demonstrated considerable generosity.  “He gave $1.5 billion to the Gates Foundation in July, bringing his total giving to $17.5 billion. . . in August he pledged $3 billion of stock to his children’s foundations.

Who is more likely to do an efficient job distributing money from your estate, the government or enlightened eleemosynary organizations?  You know the answer and apparently so does Mr. Buffett.

France Rejects 75% Tax on Millionaires (Socialism fails again)

Once again, the rich like their money.  Once again, Socialism doesn’t work because growing an economy is the way out of a deficit rather than taxing your way out.  So Hollande’s premise during his campaign, like in the US is a facade.

As Frank Zappa said: Communism doesn’t work because people like to own stuff.

Margaret Thatcher noted that socialism doesn’t work because sooner or later you run out of other people’s money.

Read the whole article here:

France’s Constitutional Council on Saturday rejected a 75 percent upper income tax rate to be introduced in 2013 in a setback to Socialist President Francois Hollande’s push to make the rich contribute more to cutting the public deficit.

The Council ruled that the planned 75 percent tax on annual income above 1 million euros ($1.32 million) – a flagship measure of Hollande’s election campaign – was unfair in the way it would be applied to different households.

Prime Minister Jean-Marc Ayrault said the government would redraft the upper tax rate proposal to answer the Council’s concerns and resubmit it in a new budget law, meaning Saturday’s decision could only amount to a temporary political blow.

While the tax plan was largely symbolic and would only have affected a few thousand people, it has infuriated high earners in France, prompting some such as actor Gerard Depardieu to flee abroad. The message it sent also shocked entrepreneurs and foreign investors, who accuse Hollande of being anti-business.