Hey, I just met you, and this is Lazy... get these fast finance fixes and mail me, maybe?

A Tale of Two Buffetts

36
Comments
Written by

Warren Buffett is the Oracle of Omaha. He exudes a very button-downed, no frills persona - still living in the same home that he bought for $31,500 more than 50 years ago. Over the years, he has amassed a fortune estimated at $35-$40 billion dollars. Buffett is an extremely skilled investor. His company, Berkshire Hathaway, has its hand in just about everything, owning some companies outright and holding substantial shares of others. Companies that Berkshire Hathaway has a significant piece of include GEICO, Pampered Chef, Helzberg Diamonds, Coca-Cola, Kraft, Wells Fargo, and Fruit of the Loom.

When Wile E. Coyote purchases building supplies, he goes to Acme Building Supplies. Who owns Acme? Berkshire Hathaway, of course. Stay out of my cartoons, Warren Buffet!

Nearly all of Warren Buffett’s income comes from capital gains. When he pays taxes on these gains, the tax rate is 15%. However, Buffett certainly had deductions (such as charitable contributions) that drive his effective tax rate even lower.

In contrast to the low key, buttoned down image of the Oracle of Omaha, Jimmy Buffett is the poster child for the party lifestyle. Buffett’s home base is in Key West, and his music fits the locale. The recurrent themes of escaping from the pressures of life and just relaxing strike a chord with millions of devoted fans who refer to themselves as Parrotheads. Many of his songs are just as relevant today as they were more than thirty years ago, and Buffett is a coveted collaborator, sharing the stages with the likes of The Eagles, the Zac Brown band, and Alan Jackson.

Jimmy Buffett has brought pleasure to millions of fans over the years. In addition to his songs, he has dabbled in writing - joining former Key West resident Ernest Hemingway and a handful of other authors who have hit #1 in both the fiction and non-fiction best-seller list.

Jimmy has also entered into a variety of licensing rights over the years. Across the country, you can find a number of Buffett-themed restaurants and casinos.

When Jimmy Buffet pays taxes on his touring revenue, album royalties, and licensing deals, it’s getting taxes at a rate of 35% - taking a bit of the spark out of Jimmy’s party.

On a number of occasions, Warren Buffett noted that his effective tax rate was less than his secretary's. This has even attracted the attention of President Barack Obama who has proposed a tax plan called the Buffett Rule designed specifically to fix this tax inequality.

Ever wonder why Steve Jobs worked for a salary of $1 a year? Here's a hint... it wasn't because he was nice. It's because he got his compensation in the form of stock and stock options. He knew that he could manage this type of income to pay less in taxes.

The Middle Class and Effective vs. Marginal Tax

Many middle-class Americans may be looking at the 14% number and thinking to themselves, "But I pay 25% in income taxes and I'm not making millions. Something is wrong." Those people are right, a couple of things are wrong. First, many are not paying the 25% that they think they are. Many look at the tax brackets like this one for 2012 tax year (as a single filer):

  • 10% on taxable income of $0 to $8,700
  • 15% on taxable income of $8,700 to $35,350
  • 25% on taxable income of $35,350 to $85,650
  • 28% on taxable income of $85,650 to $178,650
  • 33% on taxable income of $178,650 to $388,350
  • 35% on taxable income over $388,350

... and make the mistake of thinking, "I make $50,000 a year, so I pay 25% in income tax." Some will even try to find some last minute tax deductions to try to get under that $35,350 mark in an attempt to save big on taxes. Fortunately, that's not how it works. Kosmo at The Soap Boxers explains how marginal and effective rates work. The person earning $50,000 of taxable income actually pays at each level. This breaks down to $870 at the 10% bracket, $3997.50 at the 15% and $3662.50 at the 25% bracket for a grand total of $8,530 in actually tax owed. This is an effective tax rate of around 17%, not the 25% that some expect.

Additionally, it is worth looking at the $50,000 taxable income number. Many people who make a $50,000 salary are able to reduce their taxable income number through deductions and programs like 401k plans.

The Tax Code is the Problem

Why are capital gains taxed at such a low rate? The basic idea is that there is more risk in equity investing than in investment vehicles such as passbook savings accounts. Some startups go the path of Apple, Google, and Facebook, but some startups are Lazy Man’s Beantown Hummus. (Let’s not talk about that business venture. ;-).) Thus, in order to ensure that people are stimulated to invest in startups, capital gains are taxed at a lower rate.

OK, I’ll buy into that. Tax capital gains at a somewhat lower rate than ordinary income. But ratchet the capital gains rate up a bit. The rates for ordinary income are progressive; why not have brackets for capital gains instead. Maybe a $50,000 capital gain is taxed at 15% but a $50 million gain is taxed at 25% or 30%. If you make that change, you’ve increase tax revenue by $5-7.5 million while still allowing the capital gain to be taxed at a lower rate than ordinary income.

Even if the person making $50,000 in taxable income isn't paying 25%, it still seems wrong that billionaires can pay 15% on dozens of millions of dollars and an average Joe (not necessarily Joe the Plumber) is paying 17% on his ordinary income.

That's a raw deal and it isn't going unnoticed.


How to Pay Less in Taxes

It’s going to take an act of Congress to change the inequity between ordinary income and capital gains. Bear this in mind when you head to the polls in November. However, there are steps you can take to reduce your taxes:

  • Earn less money–Less income means you pay less in taxes! (OK, this is actually a really terrible idea. Don’t cut off your nose to spite your face.)
  • Take all your deductions– Don’t leave any money on the table. Take all the deductions you are legally entitled to. If you normally take the standard deduction, check to make sure it doesn’t make sense to itemize. If your life situation has changed substantially (buying a house is a great example), this can make a huge difference between taking the standard deduction or the itemized deduction.
  • Donate your crap–Still have that leisure suit that was actually in style once upon a time? Vinyl albums from the days when you had a record player and books from the pre-Kindle days? Donate them and you’ll get a tax write-off (assuming that you itemize). Added bonus? The items will actually be used by someone, instead of gathering dust in your attic.
  • Tax advantaged accounts– If you pay for day care, you can take advantage of a flex spending account for this expense. Medical expenses have more possibilities. Flex spending accounts for eligible medical expenses are relatively common, and you may also have the option of a health savings account (HSA) or health reimbursement account (HRA). These accounts all allow you to pay for expenses with pre-tax money.
  • Time your expenses – If you have some deductible items that are due to be paid in January, write the check in December. The most common case is with mortgages - paying the January payment in December results in a larger interest expense in the current year. In general, this is a case of robbing Peter to pay Paul, as it will reduce that expense in the next year (since there is no January payment). However, if you’re right near the cutoff of standard deduction vs. itemized deductions, it might save you money to itemize in the current year and take the standard deduction the next. It also makes sense to pull as many deductions in the current year if you expect to be in a lower tax bracket next year (if you are retiring, for example).
  • Contribute to a 401(k) – There’s plenty of debate about the decision of whether a Roth or 401(k) is the better option, which much of the decision based on your projected future tax rate. However, one thing that’s for sure is that contributing to a 401(k) will reduce this year’s tax bill.

Continue to Never Settle for Less by Filing online at H&R Block or in an H&R Block Office.

Though this article was sponsored by H&R Block, H&R Block did not supply any of content for the article. The article's ideas/opinions are Lazy Man and Money's and not H&R Block's.

Posted on February 23, 2012.

This post deals with:

, , , , , , ,

... and focuses on:

Tax

Don't forget to these five minute financial fixes to save thousands!

36 Responses to “A Tale of Two Buffetts”

  1. The earn less money is really the one that helps Buffett and other investors/business owners. Although their net worth may rise, they actually don’t have to realize any income. Capital gains come when you sell, but if you don’t sell then you don’t “earn” the money even though it has use to you. For example, you can borrow against the appreciated asset to buy new assets, or if you own the company then the company can invest in other assets instead of you. In that way, the individual doesn’t earn the money, it just stays invested.

  2. Theoretically, Buffett could pay not only a lower tax rate, but actually lower taxes than his secretary. If both he and his secretary could live on $50,000 per year (which I hear Buffett has a reasonable lifestyle, so maybe) then Buffet would pay less if his $50,000 came from selling assets while the secretary’s income was through wages.

  3. One other thing. The top 1% of earners in the US pay around 30% to 40% of the taxes.

  4. Buffet’s AGI for 2010 was $62.9 million and paid $6.9 million in federal income taxes, for an effective rate of 11%

    http://money.cnn.com/2011/10/12/news/economy/buffett_taxes_2010/index.htm

    Buffett is no doubt frugal by billionaire standards, but this is overstated at times. Much is made of the fact that he still lives in the Omaha home that he bought in the 50s … but he does also own a $4 million home in Laguna Beach (which, granted, is still fairly modest relative to his wealth).

  5. Squeaky says:

    Great article Lazy Man. I appreciate you breaking down the tax levels like that. Marginal vs Effective tax rates was a great lesson.

  6. That’s hilarious that they would actually call the proposed tax plan The Buffett Rule. I’m thinking the super rich outside of his personal circle probably aren’t too happy with him. I’m sure they were laughing all the way to the bank about their low tax rate on capital gains.

  7. Dave M says:

    You are missing the point. Capital gains taxes are actually triple taxation. You are taxed when you first earn the money. The business you invest your money in is taxed on its profits. Then you are taxed again when you make any money on your investments.

    The argument about Steve Jobs & $1 salary is skewed too. Stock options have a whole set of different tax rules too. Ask the people who never made money on options yet had to pay thousands in taxes.

    • Lazy Man says:

      That’s a good point Dave M.

      I don’t think you can put the taxes on earning the money in in the capital gains category. While businesses have to pay taxes, they are generally very good at limiting their tax liability. Also investors tend to make this less of an issue for the Warren Buffets or Steve Jobs (RIP) of the world. I haven’t heard anyone who had Apple stock from 5 years ago complain that they should get more money because Apple is being taxed as well.

      I’m fairly familiar with stock options. I used to work at a leading publication on the matter. It was a long time ago I’ve since filled my head with information that is more relevant to my situation. However, if memory serves, when people had to pay thousands in taxes without making money, it was due to the Alternative Minimum Tax (AMT) in that they executed their option to buy which triggered a tax event (I think), and they held on in an attempt to limit their tax liability via long-term capital gains vs. short term capital gains. That’s a difficult call, I’ve seen it first hand dozens of times. I think it should be evaluated with a professional tax adviser.

      I think the best way to avoid the issue of never making money on options and paying a big tax bill is to just execute the option and sell enough shares to cover the tax bill. Hold the rest for long term capital gains if you believe the share value is justified.

      Awesome discussion though, I love when we dig deeper into these more complex financial topics. I often learn a thing or two and I hope that readers do as well.

  8. Also, not all capital gains are earned in the stock market.

  9. In Canada, where I’m from, options or stock paid instead of cash is taxed on it’s value. So if Jobs made $1 and got $100M worth of options, he would be taxed on $100,000,001 income (in Canada). It’s probably similar in the US otherwise no employees would take salary.

    Dave is a bit wrong about the multiple taxation on capital gains, it’s that way for dividends. Capitals gains are all about buying an asset and reselling for more. You could imagine that you just buy a brick of gold for $400K and then sell it for $500K, there would only be taxation on $100K. Same with a stock. However, the dividends are corporate income taxed once at the corporate level and another time in the hands of the owner, so they are double taxed (but not triple)

    Kosmo: Awesome find on Buffett’s income and tax bill! Cool that he also avoids paying taxes by charitable giving.

  10. Mike says:

    This post sponsored by H&R Block?? Please, if you’re going to [sell] yourself out, at least be a little tactful about it. I feel used and dirty. Also why don’t you recommend a reputable tax preparation service with people actually certified to prepare people’s tax returns rather than a bunch of people who take a night class for 8 weeks to become a “tax expert” then work for $8 an hour to get you your “maximum refund.” Then after they’ve gotten you that nice refund, they hit you with a nice 100% annualized interest rate on your refund anticipation loan.

    [Editor’s note: I’ve replaced Mike’s original word with a more family-friendly one.]

    • Lazy Man says:

      Mike,

      I don’t feel the need to sugar coat the fact it is a sponsored post. In my opinion trying to “be tactful” or hide it would be worse. The disclosure was H&R Block’s requirement, that was about the only part of the post that I didn’t have complete editorial control over. H&R Block basically asked that I write something about taxes. As for accepting money from H&R Block, I had two thoughts:

      1. I was already going to write about taxes, because it is tax season and taxes are on people’s minds.
      2. It would be disingenuous of me to write a blog about making money (amongst other things like saving money and spending money) while passing up opportunities to do just that.

      I have used H&R Block’s tax preparation service for years. They did make a mistake once, but it earned me an extra $3000 due to their guarantee. I’ve got no complaints there. H&R Block doesn’t require that you take a refund anticipation loan. I’ve never taken one from them.

  11. Tommy Z says:

    I am a strong advocate that you should not tax capital or wages – that would equalize things out.

    Why would anybody want to penalize the people that invest their capital to growth the economy?

    We also fought a huge war over slavery because the slaves were not entitled to the fruits of their own labor. Actually, the slaves did get some benefit from work…free loding, free food, free medical care, etc. It is estimated that 90% of the value a slave worker contributed was actually spent on the upkeep of the slave. The remaining 10% went to the owner of the slave. In other words, slaves paid about 10% in taxes to their owners. We are worse off today then slaves were then!

  12. Tommy Z says:

    On the issue of capital gains, there would be more of them if businesses were taxed at 0% because the business would have more money to reinvest in itself or pay out as dividends.

    Corporations are not real human beings. Their owners are. In reality, it is the owners paying the corporate taxes because they receive less in terms of capital gains and dividends.

    So you really need to include the cost of corporate taxes AND the cost of taxes on capital gains/dividends THEN compare that to the taxes on wages.

  13. Tommy said “Corporations are not real human beings”. Actually they are legal “persons” just like humans are legal “persons”, so actually they are treated very similarly. You can enter into contracts with corporations, sue corporations, corporations can own things, have bank accounts, etc.

    It’s often said that the fairest tax is a consumption tax, not an income tax.

  14. “It is estimated that 90% of the value a slave worker contributed was actually spent on the upkeep of the slave.”

    I’m curious – do you have a source for this?

    Even if this is accurate, would you really trade your current life for a situation where you pay a 10% tax rate and have no control over your life, as the slaves did? If not, then saying that we are worse off than today than slaves were isn’t true.

    As for corporate taxes, bear in mind that companies CHOOSE to use a corporation form of ownership. They aren’t forced into this, and there are other options that allow for pass-through (rather than double) taxation of a multiple-owner business.

  15. Tommy Z says:

    Source:

    Weiss, T. “Review of Robert William Fogel and Stanley L. Engerman, “Time on the Cross: The Economics of American Negro Slavery”, Economic History News Services – Book Reviews, November 16, 2001. Book review. Retrieved October 24, 2007.

    Of course trading in your freedom to pay a 10% tax as a slave is not even a realistic option today even if you wanted to. This is just an example to show for comparison purposes how burdensome our taxes are now today vs. what they used to be. I also heard that serfs in the middle ages paid 25% of their earnings to their lords. America supposedly is a very pro-freedom country, yet our taxes (as a whole when you add them all up…not just including federal income taxes) are higher than what the serfs paid to their lords. Just another example for comparison purposes.

    Companies do choose to use a corporation form of ownership, but they cannot CHOOSE to not pay taxes. Its not like you can blame the problem of taxes on a company because they decided to use a certain form of ownership over another. There are taxes either way. Those taxes are ultimately paid by the owners, regardless of how the ownership is structured.

    As a result, if you compare the taxes of a normal wage earner type employee to a rich fat cat, you need to make sure you compare apples to apples. Capital gains taxes are only part of the taxes an owner/stockholder pays. You must include the taxes the corporation pays on his behalf as well.

  16. “Its not like you can blame the problem of taxes on a company because they decided to use a certain form of ownership over another. There are taxes either way”

    No. Not necessarily. That’s exactly my point.

    If a partnership makes $500,000 in income, the partners pay taxes on their share of the income, but the partnership itself pays no taxes (except in situations where the partnership is treated as a corporation for tax purposes).

    If a corporation makes $500,000, the corporation pays taxes on the $500,000 and if they pay out the $500,000 in dividends, the shareholder also pays taxes.

    The companies have chosen the corporate structure, in spite of the negative tax consequences, because it has positive features that outweigh the negatives.

    I’m afraid I don’t own that book on slavery. I’ll poke around the web to see if there’s more information on this.

  17. Tommy Z says:

    The taxes a corporation pays is money that would have otherwise been distributed to the owner’s of the corporation. Therefore, you must included the taxes the corporation pays on the owner’s behalf as taxes on the owner.

    If the company was formed as a partnership, there would be no corporate taxes. However, the income (and taxes) to the partners would be higher as well.

    In either circumstance, taxes are paid.

    What Buffett does not personally pay in taxes, his corporation pays on his behalf. If he restructured so his corporation did not pay, then he would have to pay.

    The thing that really upsets me is that when you exclude the taxes paid on his behalf, it is not an apples to apples comparison to the taxes his secretary pays.

  18. “If the company was formed as a partnership, there would be no corporate taxes. However, the income (and taxes) to the partners would be higher as well.”

    This is not true in the example I gave. The partners and shareholders would pay the exact same amount in taxes (since the corporation paid out those profits in dividends, which are taxed as ordinary income), PLUS the corporation pays corporate taxes. For this sort of situation (bulk of profits paid in dividends), the partnership form will result in far less total taxes paid.

    My main point here is that there are a variety of ownership structures for a company, and the companies that choose the corporate structure may very well do so for reasons unrelated to taxes – and in some case, in spite of an obvious tax disadvantage. The ultimate goal is the maximize the amount of money an owner retains. This is not the same thing as minimizing the amount of taxes paid.

    I’d also like to note that capital gains are not always reflective of past retained earnings, but can often be merely the promise of future earnings.

  19. Tommy Z says:

    For simplicity sake, say the effective/average corporate tax rate was 25% and the personal income tax rate was also 25% (inclusive of all the various brackets). Assume the company made $250,000.

    A sole proprietorship would be taxed 25% of $250,000. The taxes paid would be $62,500 leaving the owner with $187,500.

    A corporation would pay $250,000 in wages to the owner/manager and have a taxable income of $0. Then the owner would get taxed the same as if he was a sole proprietor.

    But what if the corporation only paid the owner a $1.00 salary and payed out 10% of its pre-tax earnings in dividends (15% tax rate) and then reinvested the remainder?

    The corporation would pay $62,500 in corporate taxes and $25,000 in dividends, leaving the corporation with only $162,500. The owner then pays 15% dividend tax on his $25,000 leaving him with $21,250.

    At the end of the day, the owner has $21,250 in his bank account and $162,500 in the corporation’s bank account for a total of $183,750. The total taxes paid were $66,250.

    So if the owner goes around talking like an idiot that he only paid 15% tax rate (dividends only), he is a liar because he actually paid far more than that.

    To your point, the arrangement with the corporation means taxes paid were higher than if the corporation just paid everything out in wages and/or if the business was a sole propriotorship ($66,250 vs. $62,250)…but the main point I am concerned about is that you cannot exclude the taxes paid for the earnings that were left inside the business.

  20. I forgot that dividends were temporarily being taxed at a lower rate.

    Even with that in place, the partnership example still ends up with far less in taxes due to pass through taxation.

    So, then, why do companies opt for corporations instead of other forms of ownership?

    Because it’s not all about taxes. There are tons of non-tax advantages to a corporate form of ownership. Hence those companies are VOLUNTARILY opting for a form with a worse combined tax rate because the other advantages offset the negative tax consequences.

    FWIW, S-corporations – which seems to be the example you are describing – have pass-through taxation rather than the double taxation that occurs with C-corporations. The there would be no corporate tax paid by the corporation you describe.

  21. Tommy Z says:

    Yes, I understand that what you say is true. However, the problem is that when Buffet says the taxes he pays are less than his secretary, he is not being honest.

    Buffet pays taxes on his capital gains and dividends in addition to the taxes he pays through his corporation. If had a different form of ownership, the tax effects may be more favorable than what he currently has now but so what?

    What is another reason Buffet does not pay himself a salary? Simple. The company trades at a PE of 17. For every $1.00 the company earns, the stock goes up in value 17X. So by paying himself no salary, it pushes corporate profits higher as well as the stock price (and his wealth).

  22. “Its not like you can blame the problem of taxes on a company because they decided to use a certain form of ownership over another. There are taxes either way”

    This was the comment I have been replying to. My assertion is that there definitely are ways to have the business itself pay no taxes.

  23. Tommy Z says:

    Right – I agree. However, if the business itself pays no taxes…then those taxes get paid directly by the owners.

    So either way, the owner is the one paying the taxes. He can structure the business in such a way to minimize taxes as you pointed out, but they cannot be avoided entirely.

    All I’m saying is that if the taxes are shifted away from the actual owner and onto the company, its not like the owner is not paying taxes. He still is…but through his company. As you pointed out, this decision may actually lead to a higher total tax bill.

  24. I think we’re going to continue to disagree because we’re defining some things differently. There are aspects of your last comment that I still don’t agree with, but I don’t see much point in going further down the path.

  25. […] your effective tax rate.Why it mattersFor starters, there’s “bragging rights” — both marginal and effective tax rates are an indication of higher income and thus a subtle way to brag about it.You might say “I’m in […]

  26. […] [email protected] Man and Money writes A Tale of Two Buffets – Even if the person making $50,000 in taxable income isn’t paying 25%, it still seems wrong […]

  27. Tommy Z says:

    Let’s just eliminate taxes on being productive. Tax capital AND income at 0%. Generate revenue only through consumption taxes. This is the right incentive we need for a higher standard of living.

  28. I’m guessing that retired people might not like this, since they already paid income taxes during their entire careers and are now being hit with a consumption tax. Not to mentioned the people who have put a lot of money into Roth IRAs. You could somehow adjust for all these possibilities, but then you’re adding complexity to a system that is suppose to be simple. The tax then also become regressive, as the poor spend a higher percentage of their income than the rich (out of necessity).

    Also, you could end up pushing money out of the US. For example, suddenly it’s cheaper to vacation outside the US due to the consumption tax in the US.

  29. “adding complexity to a system that is suppose to be simple.”

    I mean that the consumption tax is often touted as simple, not that the existing system is simple.

  30. Tommy Z says:

    Retired people would of course be free to get a break on any income they earn in retirement. They may decide that with the taxes on income gone, it is worthwhile for them to start working again. Also, many retired people would benefit from no taxes on their investment income.

    Furthermore, you could make the arguement that the current tax system distributes money from poor young people to rich old people. Do young people today honestly expect they will get the same level of social security and medicare benefits in THEIR retirements compared to what our grandparents got?

    Another arguement is that because government debt has increased nearly every year (with some slight exceptions) this century, retired people have underpaid their fair share of taxes in relationship to the cost of providing government services.

    Just like with any debt, it has to be paid back at some point. When you overconsume today (and take on debt), you must underconsume in the future (to pay it back). Today’s young people will be hit with higher taxes and fewer benefits.

    In regards to your comment about pushing money out of the USA (travel abroad), you are 100% correct. If consumption taxes are too high, people will do what they can to avoid them. In response, this will force the government to reduce taxes (and spending) to a more reasonable level or risk losing tax revenue.

    In response to it being unfair to the poor, I disagree. The poor and the rich both spend 100% of their income. The only difference is the timing. The poor are spending nearly 100% of their income to survive. The rich might spend only 10% of their income today, but spend 3,000% of their income once they retire and dip into their savings.

  31. “Retired people would of course be free to get a break on any income they earn in retirement. They may decide that with the taxes on income gone, it is worthwhile for them to start working again.”

    I think you’re missing my point. This is effectively double taxing all of their income – one when it was earned and once when it was spent – whereas those at the beginning of their career would only be taxed on consumption.

    “Furthermore, you could make the argument that the current tax system distributes money from poor young people to rich old people.”

    I think it’s fairly well know that you’ll pay very little income taxes until your 20s, very little income taxes in your 60s and beyond, and the bulk of your taxes during your prime working years. Since everyone goes through these phases of life (except for those who die young), everyone has a chance to be on both side of the equation.

    “Do young people today honestly expect they will get the same level of social security and medicare benefits in THEIR retirements compared to what our grandparents got?”

    Are we talking about income taxes, or FICA? Those are different conversation.

    “The poor and the rich both spend 100% of their income. The only difference is the timing.”

    No … some people die with an estate and thus don’t consume 100% of their income. Some family fortunes have been building for hundreds of years and quite possible will never be 100% consumed.

  32. Tommy Z says:

    Tax rates have changed over time and politicians have gotten crafty. Social security taxes have been steadily climbing over time. State taxes have been increasing. Fees and permits (taxes by a different name) have been climbing. The effective tax rates on average are increasing even though the margin rates have declined in recent times largely because loopholes and the ability to deduct expenses are becoming harder and harder to come by. All in all, it is fair to say that a 30 year old today pays a much larger share of their income in taxes/fees/inflation (yes, inflation is a tax too) than the same 30 year old did 50 years ago.

    Although a 75 year old today paid most of their taxes between ages 20-65, a 75 year old in the year 2055 will have paid far more in taxes. Not only that, but the future retired person will get less benefits than today’s retired person. As a result, I do not feel bad about taxing their consumption.

    When a rich person dies, they may have some unspent income. This income is then distributed to charity or heirs which will then spend that money on behalf of the dead person, at which point it will be taxed.

    Additionally, any savings a rich person has (before it is spent) is invested to grow the economy and provide jobs for the poor person, so both groups are better off.

  33. :)

    Ok, you’re still missing several of my points, but 35 comments is probably enough.

  34. […] in February, my friend Lazy Man discussed the different tax rates paid by the Brothers Buffett. The gist is that Jimmy gets hammered with a 35% tax rate on his earnings, while Warren wheels and […]

Leave a Reply

Your email address will not be published. Required fields are marked *

Previous: Financial Thoughts on a Maui Vacation
Next: A Decision to Buy into a Timeshare
 
Also from Lazy Man and Money
Lazy Man and Health | MLM Myth | Health MLM Scam | MonaVie Scam | Protandim Scams | How To Fix | How To Car | How To Computer