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Mighty Hiker
climber
Vancouver, B.C.
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Apr 21, 2011 - 04:29pm PT
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Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.
How much is the "receptionist" paid? Could be that Buffett's receptionist is paid considerably more than the norm. Without hard information as to that person's complete financial situation, difficult to comment.
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Roger Breedlove
climber
Cleveland Heights, Ohio
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Apr 21, 2011 - 05:10pm PT
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I calculated that it has to be at least $60,000 to get near %30.
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JEleazarian
Trad climber
Fresno CA
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Apr 21, 2011 - 05:22pm PT
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There's also another problem with Buffett's statement. He allegedly makes most of his income on dividends. As I hinted in my earlier posts, econometricians cannot determine which individuals pay corporate income tax.
Assuming (or, to use another thread's theme, if) Buffett gets his income from dividends, a corporation needs earnings and profits to distribute dividends. Those earnings and profits are after tax profits at the corporate level, and taxed at the corporate rate. Accordingly, Buffett really earned a lot more, and paid a lot more taxes, if the distributees of dividends are the ultimate payors of the corporate income tax. Of course, we don't know that, and either does he. It's a pretty good guess, though, that he understates both his true income and his true income tax if we include the amount taken in taxes at the corporate level.
John
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Splater
climber
Grey Matter
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Apr 21, 2011 - 08:39pm PT
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There is nothing wrong with what Buffet said. He has been saying something similar for years. It basically agrees with #3 of the 9 things:
that the top 400 pay about 18% in combined income + payroll tax, while regular workers pay much more.
Buffett has promised $1 million to the charity of his or her choice for any billionaire who does the math in his or her office and proves him wrong.
Buffett says three of his close friends have taken him up on the challenge and they all came up with the same results: Ordinary folks are suffering under tax rates nearly twice as high as what billionaires pay.
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Splater
climber
Grey Matter
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Apr 21, 2011 - 08:44pm PT
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It is correct to say that Soc Sec was originally "sold" as being similar to a regular pension plan. If that was once partly true, it is no longer the case. It is now shifted far more towards a welfare system in numerous ways, and that part of it should be paid for through a tax on ALL income, not just "earned" income under $106K.
What are the ways that Soc Sec is different than a regular pension plan?
#1) The payout was changed in the 1970s to make it highly progressive; unlike a normal pension the formula pays a much higher return to low income than middle income groups, due to 2 bend points. http://www.ssa.gov/oact/progdata/retirebenefit2.html For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2011, the payout formula PAI is the sum of:
90% of the first $749 of his/her average indexed monthly earnings, plus
32% of avg indexed monthly earnings from $749 to $4,517, plus
15% of avg indexed monthly earnings over $4,517. (up to the max AIME of $7928)
See the chart at http://www.justfacts.com/socialsecurity.asp#benefits
chart is labeled "Annual benefits compared to lifetime payroll taxes."
#2) A huge amount is taken off the top for survivors and disability benefits. http://econ-www.mit.edu/files/597
#3) A pay as you go system with only temporary reserves is unlike any sound pension plan.
#4) SocSec is means tested - withhold $1 in benefits for every $2-3 of earnings in excess of the exempt amount, if you retire before Min age (65-67).
#5) Until 1984 Soc Sec benefits were untaxed. Now they are taxed more like regular income over two steps (roughly $25K-$34K). Workers already paid income tax on the original earnings. If it were like a Roth IRA, future payouts would be taxfree. At the time this tax was justified by claiming that typical benefits were so generous as to be unrelated to taxes paid. Now that situation has changed and many upper middle income earners will get a very UNgenerous benefit compared to any normal investment on all they paid into the system.
#6) From the beginning, Soc Sec had to be politically marketed, with words like contract, pension, rights, entitlements. None of these words are binding; the tax formulas and benefits can be changed at any time. Only the surplus money held by the trust in federal debt is a true claim.
#7) Soc Sec has large income redistribution transfers: from 1) single participants to married participants, 2) two-earner couples to one-earner couples, and 3) high-income (high meaning upper middle class, not upper class) participants to low-income participants, which likely also causes a transfer from high income areas of the country to lower income regions.
In a regular pension plan, the payout is proportional to what you paid in.
Since Social Security no longer follows this, it is taxing the middle class heavily to pay for the poor. And yet the wealthy are exempt beyond the $106K cap. They should be brought fully into the system, with ALL income taxed, including unearned income. And they can paid out with the same measly 15% upper payout step that already exists.
As far as cutting Soc Sec to decrease the federal deficit, that's already been done through #1 and #5. This time let's fix it by eliminating the earnings cap.
Roger - It's not a question of comingling Soc Sec and general budget.
Gunsmoke A. - Nor am I saying that income tax and Soc Sec should be lumped together. But the big part of Soc Sec that is a welfare/income distribution system should be paid for by taxes on ALL income. It's a question of who is transferring money to who.
As Soc Sec stands right now, it's mainly middle income people who transfer to low income people.
Interestingly, George Bush was able to turn Clinton's surplus into a deficit (Bush tax cuts & wars) despite having the large Soc Sec surplus of the 90s and 00s to mask the deficit. So when Soc Sec had a surplus, that allowed tax cuts (mainly) for the rich. But now that the bill is coming due, the tax cuts are proclaimed sacred.
Gunsmoke B. - It's not a matter of the federal taxes making up for regressive state taxes. Federal taxes have become much less progressive in the last 30 years regardless of state taxes. The state tax situation only makes it worse, but the federal system sucks all on its own.
Separately, Medicare is a bigger financial problem than Soc Sec. The Medicare tax of 1.45% employee and 1.45% employer has no earnings cap, but is only applied to "earned" income. Yet again, people with unearned income are exempt from tax.
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