Fact Checking Econintersect: Buffett vs His Secretary’s Taxes

An Econintersect analysis post by Dr. Mark Perry provided evidence that the rich paid more than their fair share of taxes.  The evidence provided in this post is factual.

The Internal Revenue Service publishes analysis of tax revenues on its website.  One interesting table of the effective tax rates of the top 400 taxpayers in the USA – which Warren Buffett easily is included:   

This table shows that, starting with 2003,  well over half of the top income earners in the USA had an effective tax rate of less than 20%.  The peak year was 2007 when 72% of the top 400 paid less than 20%.

If all the tax revenue data is averaged, the evidence is indisputable that the rich are paying their fair share.

Based on the above Table 3, here is a breakdown by category.  Also included is the real average taxes paid by people in that category.

Tax Category Top 400 AGI tax category (estimated distribution from Table 3 above based on effective tax rate)
Average tax Rate for Each Category (used 2009 data)
5 percent
1.02%
10 percent
0.70%
15 percent 6% 5.50%
25 percent 32% 11.49%
28 percent 34% 17.16%
33 percent 10% 21.59%
35 percent 18% 25.91%

As Dr. Perry points out, “the U.S. federal income tax system is already highly progressive (as it’s intended to be, and not regressive as Buffett and Obama seem to imply)”. The rich do indeed pay their fair share – EXCEPT THE TOP 400, and maybe a few more.

The issue is not the tax rates, but the tax loopholes.  Tax loopholes are intended to spur economic growth – but looking around there is little evidence of economic growth.  Could it be that many loopholes have outlived there usefulness?

We have no clue what Warren Buffett pays his secretary, but based on the top 400 income earners – it is very possible Warren Buffett pays less tax (as a percent of income) than his secretary.

2 replies on “Fact Checking Econintersect: Buffett vs His Secretary’s Taxes”

  1. Is it not true that “donations” is one way to divert tax money. Maybe some “tax man” can enlighten me. As I don’t have billions to give away I do not know how this loophole works.

  2. True, but is not real “donations” from the heart – with no reward expected? what we are allowing is a person to offset taxes. one could argue that donations allow the government not to spend money for social safety net items.

    taking this a logical step further, should everyone be allowed to direct how their tax money is to be spent? loopholes are a nasty road which like incentives must be constantly reviewed to see if the objective is being achieved….

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