Taxing Warren Buffet's Rich People

Randall Hoven
Warren Buffett just told us again that taxes should be raised on people like him.  Here are his words, from the New York Times.

"Last year my federal tax bill - the income tax I paid, as well as payroll taxes paid by me and on my behalf - was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income - and that's actually a lower percentage than was paid by any of the other 20 people in our office."

The math says his taxable income was $39,877,839. Let's go to the IRS tables.

Mr. Buffett is in the highest group listed: those with incomes over $10 million. There were 8,274 such tax filers in 2009. That is the top 0.006% of all tax filers. The average federal income tax for filers in that group was 26.3%, well over the 17.4% Mr. Buffett paid. Moreover, Mr. Buffett included payroll taxes when calculating his 17.4%, so his income tax rate was even less than that.

Somehow, Warren Buffet not only paid lower tax rates than his staff; he paid lower rates than most of the other 8,273 people who made over $10 million in 2009. Whatever loopholes he found, an awful lot of other rich people couldn't find them or couldn't use them.

Those 8,274 people had total taxable income of $204.3 billion in 2009, for which they paid $53.8 billion in taxes. That gives that rate of 26.3%.

What would you like that rate to be? Mr. Buffett compared his tax rate to those of his staff, the highest of whom paid a rate of 41%. So let's go with that: 41% (even though Mr. Buffett's apples-and-oranges calculations included some taxes but not others).

Let's say we tax all incomes over $10 million at 41% instead of just 26.3%. How much money would that have raised in 2009? Answer: $30 billion -- enough to fund the federal government for three days in 2009, or enough to cut that year's deficit by 2%.

And if we taxed all 8,274 of those rich guys at 100%? That would have raised $150 B -- enough to fund the federal government for 16 days, or enough to cut that year's deficit by 11%. Of course, this all assumes those guys would keep making money knowing they would collect none of it.

We reality-based people keep doing this. We do the math. There just isn't that much income that can be taxed from the super-rich to make a dent in the federal government's finances.

And that's where liberals go next: defining "rich" down. The deficit was $1.4 trillion in 2009. Even with tax rates of 100% on the "rich", you would have had to define "rich" as incomes somewhere between $100,000 and $200,000 to eliminate that deficit.

If you went for a more "reasonable" tax rate of, say 40%, you'd have to define "rich" as anyone making any money at all, and that still wouldn't have been enough to eliminate the deficit in 2009. You would have had to tax all incomes at 47% to eliminate the 2009 deficit.

As Senator Marco Rubio said, "We don't need new taxes. We need new taxpayers..."

If Warren Buffett wants everyone as rich as he is to pay higher taxes, I'm actually OK with that. That group of people would include all of Bill Gates and Warren Buffett - two people in the US. Go ahead and tax them more. Heck they could do that themselves by filling in a form online at Pay.gov.

Warren Buffett just told us again that taxes should be raised on people like him.  Here are his words, from the New York Times.

"Last year my federal tax bill - the income tax I paid, as well as payroll taxes paid by me and on my behalf - was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income - and that's actually a lower percentage than was paid by any of the other 20 people in our office."

The math says his taxable income was $39,877,839. Let's go to the IRS tables.

Mr. Buffett is in the highest group listed: those with incomes over $10 million. There were 8,274 such tax filers in 2009. That is the top 0.006% of all tax filers. The average federal income tax for filers in that group was 26.3%, well over the 17.4% Mr. Buffett paid. Moreover, Mr. Buffett included payroll taxes when calculating his 17.4%, so his income tax rate was even less than that.

Somehow, Warren Buffet not only paid lower tax rates than his staff; he paid lower rates than most of the other 8,273 people who made over $10 million in 2009. Whatever loopholes he found, an awful lot of other rich people couldn't find them or couldn't use them.

Those 8,274 people had total taxable income of $204.3 billion in 2009, for which they paid $53.8 billion in taxes. That gives that rate of 26.3%.

What would you like that rate to be? Mr. Buffett compared his tax rate to those of his staff, the highest of whom paid a rate of 41%. So let's go with that: 41% (even though Mr. Buffett's apples-and-oranges calculations included some taxes but not others).

Let's say we tax all incomes over $10 million at 41% instead of just 26.3%. How much money would that have raised in 2009? Answer: $30 billion -- enough to fund the federal government for three days in 2009, or enough to cut that year's deficit by 2%.

And if we taxed all 8,274 of those rich guys at 100%? That would have raised $150 B -- enough to fund the federal government for 16 days, or enough to cut that year's deficit by 11%. Of course, this all assumes those guys would keep making money knowing they would collect none of it.

We reality-based people keep doing this. We do the math. There just isn't that much income that can be taxed from the super-rich to make a dent in the federal government's finances.

And that's where liberals go next: defining "rich" down. The deficit was $1.4 trillion in 2009. Even with tax rates of 100% on the "rich", you would have had to define "rich" as incomes somewhere between $100,000 and $200,000 to eliminate that deficit.

If you went for a more "reasonable" tax rate of, say 40%, you'd have to define "rich" as anyone making any money at all, and that still wouldn't have been enough to eliminate the deficit in 2009. You would have had to tax all incomes at 47% to eliminate the 2009 deficit.

As Senator Marco Rubio said, "We don't need new taxes. We need new taxpayers..."

If Warren Buffett wants everyone as rich as he is to pay higher taxes, I'm actually OK with that. That group of people would include all of Bill Gates and Warren Buffett - two people in the US. Go ahead and tax them more. Heck they could do that themselves by filling in a form online at Pay.gov.