« Chronicle continues to fail us | Main | Panderama: Jennifer Kim »

DOUBLE TAX BAD! HURR!

A really great comment from a really odious thread on one of the economics blogs I read, where libertarian ideologues cluster like vultures and peck away at Warren Buffet for daring to have the gall to point out that it might not be such a great idea that our tax system taxes his secretary at a higher RATE than it does him. Double-tax whiners, pay attention.

Ok, so where did Buffett get the money to pay his secretary? Why probably capital gains and dividends from corporate stock he owns! Wasn't that already taxed at 35%?! Since money always is moving around in our economy there's always some way to spin a story that "my dollar was already taxed!"

True corporate income is taxed and owners of corporations have less to pay themselves after their company pays its taxes. But corporations are treated as separate persons under the law so Mr. Buffet doesn't have to worry that he will be sued should one of his companies goes bankrupt. If this benefit of incorporation isn't worth the 'double taxation' then why not simply 'unincorporate' his companies and let them take on the form of partnerships or sole proprietorships whose income would then only be taxed once?

I'm still stuck working in a conference room and very busy, so no non-trivial crackplogging from me for a while longer. Please contain your disappointment. Extra credit for those who identify the other libertarian commenter stereotypes which correspond to Tonto and Tarzan.

This entry was posted in the following categories: Economics

Comments

As usual, Mr. Buffett was keeping out a few details and hid the math used to come up with numbers.

You'll note that 17.7% and 30% are not official income tax rates according to : http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Year_2006_income_brackets_and_tax_rates

They say the devil's in the details, and I am sure that applies here. I'd also like to know his secretary's annual salary. Interesting how that is not revealed.

It is surely demagogic to leap past all those bothersome details to arrive at a pair of final numbers and then begin demanding tax system reform because one is bigger than the other while totally failing to mention his charitable/municipal contributions and how they might affect his tax obligations.

The tax system -does- need to be reformed, but I would like to see some more details about how he came to have a lower "effective" tax rate than his secretary, who, by the way, is assuredly making a healthy sum of money.

For example, I could hold up in comparison an individual who has a $50 million/year income having paid the same tax (final amount) with effective tax rate of 1.negligible% as another individual who has a $2 million/year income with effective tax rate of 30+%.

How does a system allow this kind of injustice, you ask?

Well, I left out the details of how the first individual contributed $40 million of that income to charity, and then invested $8 million of the remaining 10 into municipal bonds.

Is it such an outrage that he pays the same amount of tax as the second individual, who contributed nothing to charity and who instead of helping fund the Zilker park improvement project with a low-interest loan, decided to buy a yacht and a palatial home in Westlake?

Some might say the first individual ought to be paying -no- taxes on the remaining two mil, because he surely paid his annual debt to society with the first forty-eight.

It's these kinds of details that make the current tax system so complicated and opaque and, unfortunately, ineligible for easy "summary" analysis.

pel,

Buffet has not hid anything; nor has he been remotely dishonest; he has explicitly said that he is including payroll taxes (which many people dishonestly exclude from progressivity calculations on the hoary theory that SS is anything other than a pay-go system) and capital gains taxes (where most of his income is taxed).

He also explicitly said that they were effective tax rates, given all of the above.

Post a comment