Wednesday, June 27, 2007

Buffet bets $1 Million against US tax system

I always get into tussles on message boards with people who claim that rich people pay the most taxes. Yes they pay DOLLAR wise the most taxes, but Percentage wise the middle class pays the most taxes. How is that possible???? Warren Buffet has bet $1 million dollars that you couldn't find a rich person in America who pays more taxes than their subordinates! Yes I've been supported in my statement finally.

Yes! He gets what I've said for years. Rich people shelter money, get paid the "right" way and know how to pay the least % of taxes for income. However a DINK couple who make $100k pay more than average than the rich person. Buffet personally only pays 17% federal income taxes on $46M last year. How much did you pay? On our income we paid more than that!

Yep, the middle class people pay the most taxes. Why? How? They don't get deductions like rich people. They don't donate millions either. But there is a big difference between making $100k/year and $1M/year.

One major sore point with me is the Social Security Tax. The taxes on SS is capped at $97k. So someone like Buffet who made $46M would have had to have paid 6.5% on 46M if there was no cap. Well maybe if that happened SS would be solvent!

Another issue is they tax capital gains/dividends at 15%. So if you are rich (millionaire status) and you live only on your interest, dividends you are only paying 15% at most. Wowsa! Imagine that! You can draw $100k from a portfolio and only pay 15% instead of say 25-28%! What an awesome deal.

I guess for everyone out there who hates paying taxes think well maybe there is something to feeling overtaxed. Because the lower classes pay a bigger percentage of their incomes in taxes. Although someone making $50k with 2 kids doesn't, but someone making $120k with 2 kids often has phased out tax breaks. So that person's real tax rate is very high.


Andrew said...

The link doesn't work for me?

I think I will take Mr. Buffet up on his bet. I own my own company with 45 employees. Last year my personal income was $700,000 and I paid $260,000 in Federal tax. This puts me in the 35% tax bracket and is AT LEAST 10% higher than any of my employees' tax bracket.

That the 'rich' don't pay their fair "share" of taxes is nonsense. I am in the top 1/10 of 1% of income earners and paid the equivalent of 5 American's average annual salaries in federal taxes last year. And another $32,000 in state taxes.

Living Almost Large said...

You must be doing something wrong Andrew. I know for a fact when my dad made a lot of money he paid a lot less than people who made 1/3 of what he did. He was a business owner with kids, had a mortgage, deductions, etc. When all was said and done he paid very little.

Also you paid more percentage wise than Warren Buffet. He paid 17% last years! Which is a ton when you consider he made $46M, but still, 17%!

Living Almost Large said...

Also by only paying $32k of state income taxes, you paid a lower percentage than my DH and I paid for state income taxes and we make substantially less than you. we are making less but paying more state income taxes?

Why is it not possible that we cannot pay more in income taxes?

Andrew said...

The state income tax rate varies by state, so unless we are in the same state that's not a real valid comparison. There are seven states that don't even have an income tax.

Maybe I am doing something wrong, I don't know. I'm only 25 and have only been at this income level for about 3 years so maybe I don't know all the tricks yet. I have specificall instructed my CPA that I don't want to be in anything remotely shady or exotic with my money, so maybe that's my problem. I have a large mortgage deduction and utilize a charitable trust to shield some of the money but that's about as sophisticated as I get...

Living Almost Large said...

Yes state income taxes vary, but people living in high state income tax state who make less than you may be paying more.

And there are a lot of ways to shelter money. For instance DH got stock from his company that would be tax free if we kept it for 2 years. Just things like that are available to people to shelter more income.

Anonymous said...

I call BS on Andrew.