Sunday, March 3, 2013

Taxing Credulity on Honesty

Debbie Bozaneck at 2012 State of the Union
During the 1992 Presidential campaign, both Warren Buffet and President Obama loved to point out that secretaries paid at a higher personal tax rate than the billionaires.  His secretary paid the higher 35.8% income tax rate whereas the Wizard of Omaha paid an effective 17.4% rate. In fact, Debbie Bozaneck, Buffet's personal secretary,  was invited to sit in the Presidential box during the 2012 State of the Union to highlight the inequity.

The truth be told, Warren Buffet derived most of his income from capital gains, not salaried income. Thus Buffet's long term capital gains were taxed at 15% and most of his earnings were not subject to the 4.2% Social Security and the 1.45% Medicare payroll taxes.  Nor does Buffet's low figure take into account double taxation coming from taxable income from long term capital gains, which would be  taxed at an effective rate of 49% (15% long term capital gain and 34% personal income).  Of course, none of these figures include state, local and sales taxes.

This flurry of tax inequity publicity ostensively was meant to sell the stillborn Buffet Rule which Mr. Obama parried during his re-election campaign. But instead of being the basic of tax reform, it served as a campaign cudgel of class warfare against upper income Americans (the top  2%) who already shoulder  the bulk of the tax burden. 

If Buffet really felt like he was fleecing the Feds, he can always gift the Treasury Department more money, surely Uncle Sam will spend his largess.   Maybe it will mitigate the effects of sequestration.  But Buffet's bravado reveals that his honesty taxes credibility and serves as a cheap trick in public policy discussions.

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