Warren Buffet The Hypocrite – The Truth About His Taxes

by on March 20, 2013

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?

Please feel free to share your thoughts on this matter by leaving us a comment.

{ 7 comments… read them below or add one }

Fatima from access 2013 training March 29, 2013 at 4:05 pm

It is indeed ironic how most of the people try to evade taxes and disturb the whole economic cycle. Reading about such cases only makes me sad and I only wonder more about the poor whose rights are compromised. Thanks for sharing the information.
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Aayna from wholesale rug suppliers March 29, 2013 at 7:36 pm

Due to the close of the financial year, the world is buzzing with taxes. Warren Buffet is one personality which I admire in terms of making money. I actually has lots of amazing moments while reading this brilliant post. Thanks for sharing the post.
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Lee April 2, 2013 at 9:04 am

Hi
Taxes always get people fired up. People may moan about warren buffet but how many people would volunteer to pay more taxes than they have to. Not many i suspect basically because would you rather have the money in your pocket or the pocket of the treasury. I am not sure when national tax day is this year but I am sure when I researched it. It was some time in may so everything you earn until may from the beginning of the year goes in some sort of tax or another. If you look at it another way the people warren buffet employs also pay tax so he is in directly helping in state treasury in many ways apart from the tax he pays himself.

Great post thanks lee
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Lena jacob May 7, 2013 at 7:34 am

No businessman likes taxes. Buffett is working on his next “investment”, just likes what he is good at with his very profitable investment portfolio by being the loudspeaker for Obama to promote more taxes but no solution for the deficit and the unaccountable federal spending.

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BackFlip June 21, 2013 at 8:09 pm

As long as the law not only allows, but encourages the aggressive use of “tax avoidance” (as opposed to “evasion”) as a budgeting strategy, then I don’t see what the problem is. Anyone who doesn’t take advantage of perfectly legal ways to keep more money in their own pocket is sadly misinformed.

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Eliana Decruise July 16, 2013 at 5:21 am

People are so fool that they do not understand the simple fact that the tax returns they are paying will eventually come back to them in the form of roads constructions, buildings and education of their children. I feel pity as well as angry on these kinds of people.
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Greg July 24, 2013 at 10:00 am

The average person pays say about 10K in taxes, maybe a little more, Warren pays well into the milions of dollars. Sure he has a good tax strategy, but he is still paying a lot more than the average person and is contributing his fair share. What does he do with the extra money? He invests which creates jobs so his secretary can have a 250,000 a year job!
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