I saw another quote today about how Warrent Buffet is complaining that his secretary pays a higher tax rate than he does. Enough with all the bullcrap Warren! I am seriously sick about hearing you compain that you don’t pay enough taxes, and that everyone should pay more taxes and entrust their money to the government.
Let’s break down some of the facts (and yes, my opinion) about these tax statements.
His secretary is rich
First of all, Warren’s secretary may pay a higher percent income tax than Warren Buffet, but that is because her income is mostly from salary, which is taxed at a higher rate than capital gains. But more importantly than that, his secretary is “rich”. From working in many high end investment banks and other financial service firms, I’ve seen what high end assistants get paid, and I wouldn’t be surprised if Mr Buffet’s assistant made well over $250,000. Not to mention the stock options and other taxable perks that come with the job.
He pays much more than anyone else
While Mr Buffet may not pay as high of a percent of income tax on his reported tax form, he still pays tens of thousands of times more in taxes than the average citizen. In fact, only half of Americans even pay federal income taxes. After all, it’s not like Mr Buffet doesn’t pay way more than his fair share of our country’s taxes.
Warren Buffet actually does pay a higher tax rate
As I mentioned earlier, the reason Mr Buffet pays a lower percent on his income tax return is because most of his income is derived from capital gains in the shares of his company that he owns.
The truth about capital gains is that taxes on all of these gets paid twice. Let’s think about where that money comes from. Stocks value increase with the amount of net income that the underlying company produces. However, don’t forget that America has one of the highest corporate tax rates in the world, averaging about 35%. All money that makes it to the net income line on Berkshire’s P&L has already been taxed at their prevailing corporate tax rate.
That means that while Mr Buffet may only be paying the prevailing captial gains rate on the money he earns, his company has already paid taxes on those same dollars.
He doesn’t trust the government with this money
While people may argue about Warren Buffet’s tax rates, they mostly agree that Warren Buffet is a good investor. So, what does he choose to invest in? Well, the answer is very simple – he doesn’t invest his money in government. In other words, if Mr Buffet believes that he should pay more taxes and that the government should have more money to (mis)manage, he doesn’t put his money where his mouth is. He invests his money into businesses that are expected to be efficient and profitable – the opposite of the government.
Just pay more taxes if you want to
Finally, there is no law that says you can’t pay more taxes than you owe. Mr Buffet could easily give his billions of dollars to the government to help with their spending deficits. Yet he chooses not to. This is very hypocritical if you ask me. If you really believe that the government should control more money, then why don’t you put your money where your mouth is?
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