Posts Tagged ‘Buffett Rule’

Buffett Rule passes the House … now, you’re talking.

September 20, 2012

What gridlock in Washington?

Yesterday, the House of Reps passed a Buffett Rule that should put an end to Warren’s carping about how his taxes are too low.

According to the Washington Times:

The House passed Republicans’ own version of the Buffett Rule, which allows wealthy Americans to voluntarily pony up to reduce the deficit.

The bill, labeled the Buffett Rule Act, passed by voice vote, meaning Democrats and Republicans agreed with it.

Under the legislation, taxpayers can check a box on their taxes and send in a check for more than they owe to the IRS.

“If Warren Buffett and others like him truly feel they’re not paying enough in taxes, they can use the Buffett Rule Act to put their money where their mouth is and voluntarily send in more to pay down the national debt, rather than changing the entire tax code to inflict more job-killing tax hikes on hard-working Americans.”

Current law already allows taxpayers to send money to pay down the debt, but the process is a bit onerous.

Under their new plan, taxpayers would have an easy option on their tax returns allowing them to pay more.

Under the legislation, the money would go directly toward reducing the debt.

So, do you think Buffett will put his money where his mouth is?

I’m betting the under.

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The “Buffett Rule” that I want to see …

April 18, 2012

Two events this week got me thinking.

First, the Senate held the campaign-ploy vote on Obama’s Buffett Rule — intended to double capital gains tax rates on millionaires & billionaires”.

Then last nite, Buffett disclosed that he has been diagnosed with prostate cancer.  Consistent with the experience of several of my friends, Buffett says it’s not life-threatening, given the early detection and high success rate of treatments.  I wish him well … in our family, we take cancer very seriously.

That said, the events rekindled my thinking re: tax changes required to advance Buffett’s mission to “pay his fair share”. 

I got it !

 Simply stated:

Ken’s “Buffet Rule”

For purposes of estate taxation, estates shall be limited to a maximum deduction of $1 million for charitable donations. 

Now that Buffett has leveraged the tax laws to amass his $62 billion fortune, he advocates higher taxes for high-earners.

He’s suddenly amped about everybody paying their fair share.

Give me a break.

Let’s walk through Saint Warren’s personal “fair share” plan.

First, to the extent that any of Buffett’s wealth is in stocks with  “unrealized capital gains” … the the dough gets bequeathed at a “stepped-up basis”.

English translation: no capital gains get paid on his “unrealized gains” … ever !

Nice dodge, right? 

Ken’s Buffett Rule doesn’t fix that.

But, the  big daddy tax dodge is that  Buffett is bequeathing his estate to his buddy Bill Gates’ tax exempt foundation … part, I guess, to “give back to society” … but in large part to dodge estate taxes.

If his buddy Barack gets his way, estates will be taxed a minimum of 45%.

That means that Buffett dodges over $25 Billion in Federal estate taxes by channeling the estate to his buddy Gates.

Note: According to the Wash Post, Obama’s Buffett Rule is only projected (by Obama) to raise $46 billion over 10 years …  $4.6 billion annually … and most analysts think that number is a pipe dream.

So, Ken’s Buffett Rule would cop over half of Obama’s 10 year Buffet Rule tax haul, while isolating the tax to the man who won’t shut up about wanting pay his fair share … put YOUR money where your mouth is Warren.

Great idea, right?

P.S. For folks who worry about the collateral damage done to charities, the deduction limit can be raised to $1 billion per estate …. that would exclude practically every estate … except Buffett’s.

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What’s the difference between the “Buffett Rule” and the AMT?

April 17, 2012

Finished up my taxes this weekend …. OUCH.

Along with more than 30 million other taxpayers, I got caught by the Alternative Minimum Tax (AMT).

There are about 130 million Fed tax filings each year … about half of them pay no Fed income taxes (or get a refundable credit) … that means that about half of all tax payers get hit with the AMT.  it only takes about $75,000 in income to make somebody a candidate for the AMT.

This year — in part because of the hoopla re: the Buffett Rule — I dug dig into the AMT calculations rather than just take Turbo Tax’s answer and run.

The bottom line — based on my dissection — is that the AMT requires that high earners pay about 28% on their ordinary taxable income — wages, interest, pensions, etc.

So, on ordinary taxable income the Obama-Buffett Rule (OBR) boosts the rate from 28% to 30%.

Big deal, right?

The real impact is what happens to capital gains and “qualified” dividends — which are currently capped at a 15% rate — even under the AMT.

Under the Obama-Buffett Rule, capital gains and qualified dividends would be taxed at 30% — a doubling of the current AMT rate.

Now, that is a big deal.

When you cut to to the chase, the Obama-Buffett Rule is simply a doubling of the capital gains tax rate — selectively applied to those people who earn most of the capital gains.

The OBR simply takes capital out of play from the private sector and transfers it to the government sector.

If you think that the government does a better job allocating capital than the free market, then you gotta love the Obama-Buffett Rule.

If you think the government uses capital less efficiently than the private sector, you gotta hate it.

Put me in the latter camp …

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The Buffett Rule … a few facts might help.

January 31, 2012

At the risk of stifling the tax rate hysteria with facts, the Congressional Research Service did a great study on the “Buffett Rule”.

One of the key charts – with a couple of Homa Files accentuators – says that

  • “Millionaires & billionaires” tax rate is – on average – 11 points higher than folks making under $100k.
  • About 1 in 4 millionaires & billionaires (less than 100,000 tax payers) – those with the lowest effect tax rates – pay a lower rate than about 10% of the more than 100 million folks making under $100,000
  • Applying the SOTU Buffett Rule – minimum 30% for folks making more than $1 million – would jack up taxes for about 1/2 of millionarires and billionaires.

Is jacking the rate on about 200,000 taxpayers really going to get us out of this fiscal mess we’re in?

I’m betting the under.

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Supplementary data:

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Millionaires pay a lower tax rate than $50K teachers … not!

September 21, 2011

The press were abuzz yesterday debunking O’s key premise that millionaires pay taxes at a lower rate than teachers making $50,000.

Yesterday, we showed that a married  teacher with 2 kids who earns $50,000 pays at a 5.5% rate.  Even if you add 7.65 in payroll taxes to that, the resulting  13.15% is still less than a millionaire who pays only capital gains taxes at 15%.

That was a micro analysis.

The WSJ presented the macro analysis:

In 2008, the last year for which such data are available, the IRS reports that those who made more than $1 million in adjusted gross income paid an average income tax rate of 23.3%.

That’s slightly lower than the 24.1% rate paid by those making between $500,000 and $1 million, probably because the richest are like Mr. Buffett and earn more from capital gains and dividends.

The rate for a relative handful of the rich — 400 people — fell to 18%.

But nearly all millionaires still paid a rate that is more than twice the 8.9% average rate paid by those earning between $50,000 and $100,000, and more than three times the 7.2% average rate paid by those earning less than $50,000.

The larger point is that the claim that CEOs are routinely paying lower tax rates than their secretaries is Omaha hokum.

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I think the President should modify his Buffett Rule to read: anybody who earns more than $1 million … and who has accumulated wealth greater than $25 billion  … and who plans to bequeath practically all of his estate to a pal’s “foundation” shall pay an effective income tax rate of 90% … unless he /she whines that they’re being  coddled, in which case the tax rate escalates to 100%.

My real recommendation: limit the charitable estate exemption to $1 million so that Buffet has to fork about half of his estate over to the government … that’ll keep him from bring coddled in the grave.

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