The Homa Files

OK, I keep harping on the point, but …

At 7:25 pm last Thursday, Obama repeated the tired refrain about how Warren Buffet pays less taxes than his secretary and wants to pay more – his fair share.

Cutting to the chase: Buffett pays more in dollars, but pays at a lower rate.

Why?

Because most of Buffett’s income is “unearned income”.

English translation: capital gains and dividends.

So, there are only two ways to get Warren-the-sage on an equal rate  footing with his secretary: (1) lower marginal tax tax rates on the secretary’s earned income or (2) increase Buffett’s tax rate on his capital gains … to be taxed at the same rate as “earned income”.

Here’s the good news for Buffett: thanks to the ObamaCare bill, Warren will be paying a higher tax rate on his cap gains and dividends starting in 2013 (after the next election, of course).

So, the Buffett-secretarial gap will narrow.

Technical note: The ObamaCare Surtax on Investment Income takes effect Jan. 2013.

It’s a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).

Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations.

Source

But, even then there still may still be a gap.

So, either the rate on earned income comes down or rate on cap gains goes up.

I’m betting the latter.

So, to stop Warren from whining, Obama will likely raise the cap gains and choke capital flows – in order to stimulate the economy.

Huh?

Or, maybe Obama doesn’t understand the implications of his applause lines.

Hmmm.

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This entry was posted on September 13, 2011 at 6:32 am and is filed under Buffett, Warren, ObamaCare, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.