Eleven ways Warren Buffett is lying about Warren Buffett

The president is basing a new law off of Warren Buffett.  This means that we are basing US tax policy on what is happening to the top 0.0000006% of people.  Does that seem sensible?

Regardless, Warren has been trotting out this point about his secretary for years.  Unfortunately, when Warren talks about Warren’s secretary, Warren lies about Warren’s secretary.  Here is his definitive statement about the situation from as far back as I can find it:

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.

The President says that those who defend this situation “ought to have to answer for it.”  Fair enough.  Short answer: Warren Buffet is lying.  Much longer answer: 10 points.

  • Most simply, Warren Buffett is almost definitely lying about the tax rate of his secretary.  Now, it’s possible to pay any tax rate if you really want to, by paying more than is required.  You can just send in a check.  Since Warren apparently refuses to do that, let us dismiss that option for his secretary.  The typical person making between 50-75k, according to this IRS tax data, pays an effective rate of about 14%.  14% is less than 30%.  Even adding on payroll tax, it’s nowhere near 30%.  CBO data, including payroll taxes, shows that someone making about $64,000 per year pays a total effective rate of around 14.3%.  We asked an accountant to run the numbers in general for someone like Buffett’s secretary.  The results: if they were single, 14%.  If married, 7.6%.
  • Buffett is comparing two different taxes. One is a tax on income, one is a tax on investments.  They are two different taxes on two different things.  Want another scandal?  Warren Buffett pays less in sales tax than his secretary does in income tax.  We better write another law.

  • Warren Buffett has already been taxed on that money.  Here’s an oversimplification to explain what I mean.

You earn $100 in salary.

TAX #1: Uncle Sam takes $35, leaving you with $65.

You then invest that $65, and that investment earns 10% or $6.50.

TAX #2: Of that new $6.50, Uncle Sam takes another $1.

Now, add up the earnings: the original $100 + $6.50 = $106.50.

And, add up the taxes: $35 + $1 = $36.

On $106.50 in earnings, you were taxed $36, or 33.8%,– about double the rate Warren Buffet claims he’s paying.  This gets more complicated with margin, outside investment, and a million other variables, but this how it works in general.  (Dividends are worse: you get taxed on initial income, the company gets taxed on their profits, then when they give you a slice, it gets taxed again.)

So, how does Buffett justify his low tax numbers?  He acts as if TAX #1 never occurred.  Then he tells you that the rate of TAX #2 is too low.  It’s a completely disingenuous shell game.

  • Buffett is an exception to the rule of the mega rich. While he earns around 90% of his income at the lower rate through investments, the typical person who earns more than $10 million per year only earns about 38% of their cash at that rate.  Sure, someone who is mega rich is an exception to the rule.  But, Buffett is an exception to that exception.  Basing a rule on his experience is not sober policy making.
  • Buffett’s secretary is an exception to the rule of secretaries. She/he makes $60,000 per year.  While I’m not exactly blown away by Buffett’s generosity in his pay-scale either, the average secretary makes about $33,000 per year.  Instead of the 14% tax rate of Buffett’s secretary, the typical secretary pays more like 10%.   This information makes something like this, even dumber than you previously thought.
  • Rich people pay far more than the middle class in both total dollars and percentage terms.  Don’t take my word for it, listen to the Associated Press: “This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes…Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.”  Those numbers aren’t even close to what Buffett is claiming.  Did I mention he is lying?  (Quick side note—a tax is nothing but a fee you pay to the government to run the structure that maintains society.  In theory, each person has equal access to government services. Even in Buffett’s (false) example, he’s claiming that he pays over $8 million, and his secretary pays $18,000 for the privilege of living here. Does that really sound so unfair even if it was true?  (It is not.))
  • Rich people already carry far more of the burden than the poor or the middle class. The top 10% of tax payers carry 73% of the income tax burden.  The bottom 51% of tax payers carry 0%.
  • The Buffett rule has nothing to do with wealth.  The “problem” Obama is describing is a “problem” with professional investors, not rich people.  To get a rate of 17.7% on your income as Warren Buffett, you have to earn roughly 90% of your earnings from investments.  But, you don’t have to make tens of millions for this to happen.  Anyone who makes 90% of their money from investments could theoretically pay right around 15% whether they earn $50,000 or $50,000,000.  Yet, Obama just keeps talking about rich people.  This is one way to be completely sure this is really about class warfare, not tax policy.
  • Obama’s rule doesn’t actually target people like Buffett.  Forget everything we’ve talked about here for a second and strip things down to the core.  The claims about secretaries are just false.  But, in theory, someone making $1 million could complain that he pays a rate that is slightly higher than someone making $11 million. Those 7 figure earners are victims to the tyranny of the 8 figure earners!  Cry for them!  In other words, the really rich get slightly screwed as compared to the really REALLY rich.  But Obama’s rule, just targets anyone making $1 million or more—the rule actually “screws” the people being “screwed” most by the “problem.”
  • The rate on investments should be lower than the normal rate…for many reasons (see #3 and #10 for example).  But in addition to those: when I go to work, I receive a salary.  When someone earning their living through investments goes to work—they may LOSE money.  It’s wonderful to focus on the ultra-rare person like Warren Buffett who is so successful that he/she is able to acquire tens of billions of dollars.  But the average person who invests might just bet wrong and get hammered.  When he/she bets right, it makes sense that he/she gets taxed at a lower rate.  They’re playing a different game than you and I, and therefore pay a different tax.
  • Lowering the capital gains tax, brings in more revenue. Even the media understands this.  Charlie Gibson, not a guy who is up for a job at the Heritage Foundation, asked Obama this question in one of his debates with Hillary Clinton:

CHARLIE: Alright, you have however said you would favor an increase in the capital gains tax. As a matter of fact you said on CNBC and I quote, “I certainly would not go above what existed under Bill Clinton which was 28 percent”. It’s now 15% that’s almost doubling if you went to 28%.  But actually Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent and George Bush has taken it down to 15%  and in each instance when the rate dropped, revenues for the tax increased. The government took in more money and in the 1980s  when the tax was increased to 28% revenues went down. So why raise it at all? Especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well Charlie what I said is that I would look at raising the capital gains tax for purposes of fairness.

Obama is claiming that he wants this change to create jobs in a jobs bill, but he’s really trying to implement his version of “fairness.”  Those are two competing interests, and the unemployed will feel the weight of his indecision.

I suppose some of these aren’t Warren’s lies, instead just lies/falsehoods/exclusions/spin by the media–but you get the point.

By the way—has anyone else noticed Buffett’s slight change in argument?  He’s been arguing forever that he paid a higher rate than his secretary.  His latest op-ed that started this up all over again never mentions his secretary.  Obama keeps saying it.  Warren does not.  He’s now saying he’s taxed more than other people in his office.  While I assume that his “secretary” works in his office, when someone is being this slimy, I wouldn’t be surprised if he’s attempting to intentionally weasel himself out of the original claim.  Sort of how he’s trying to weasel out of his taxes.

*I was initially going to use this post to take on the ridiculous Politifact “true” rating for Warren Buffett.  But, they are barely defending that themselves anymore, so I’ll give them a pass.

  • Anonymous

    Wrong.  Obama never said that.  Where do you get such b.s.?  tax revenues don’t increase when rates go down.  Depends on lots of factors, but generally/historically, they go down as well.  When taxes are lowered on rich folks, revenue goes down commensurately.  On the other hand, lower payroll taxes stimulated the economy because that money goes to working folk.  Low rates for guys like Buffet just make them richer and blow a bigger hole in the budgjet.  Higher taxes on the wealthy makes sense, “fairness” be damned.  When people with very high incomes paid really high marginal rates (50s, 60s, 70s), the economy was OK and budgets balanced.  When they went down under RR, we ran deficits, when they went up under Willie Clinton, we balanced the budget.  When GW lowered them for wealthy folks, the budget went into deficit even while the economy was doing well.  Can you explain that?  ??/?

    • Anonymous

      Yes, it is B.S., but Obama did say it. It was in the debates with Clinton in 2008:

      CHARLIE GIBSON:  “But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent. And George Bush has taken it down to 15 percent. And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?”OBAMA: “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.”

      As Charlie Gibson pointed out, tax revenues did go up when Clinton dropped the capital gains tax to 20%. They also went up when Bush dropped it to 15%. Tax revenues went up after Reagan lowered taxes, after JFK did, and after taxes were lowered during the Roaring Twenties. If you think revenues “historically” go down when taxes are lowered, please give an example.

      Why did the budget go into deficit under Bush? Simple. Even though tax rates went down and tax revenues went up, the government spent more than they took in. If you get a new job that doubles your salary and you go out and buy a new house and a new car, you just increased your budget deficit even though your income went up. 

      Obama admitted in 2008 that he wanted to raise taxes for reasons of “fairness”, not to get more tax revenue. The problem isn’t taxes, it’s spending!

      • Anonymous

        No, most of what you write is incorrect. It’s important that you guys on the Right correct your misunderstanding of how taxes work because otherwise you’ll continue to fall for the b.s. economic policies of today’s Republican party.

        There are many kinds of taxes. Gibson referred specifically to capital gains, and you make the mistake of conflating the effects of lower cp rates with lower tax rates in general. For the record, lowering cg tax rates does not create more revenue over time; it usually creates just a bounce, since wealthy investors can time the sale of their asset to take advantage: http://business.time.com/2008/01/28/do_capital_gains_tax_cuts_incr/. Since this is a complex subject that bores most folks, Obama the politician just made a simplified argument about fairness and spared us the economics lesson. He did not agree with Gibson’s assertion about cg rates. He understands how taxes work.

        You also make the common mistake of conflating tax rates for wealthy folks with rates for the rest of us. Big difference. Tax rates have to be well-targeted to be effective at raising revenues while also boosting the economy. A payroll tax reduction will generally have a better roi than a tax cut for the wealthy because middle-class folks need the money to spend much morel than rich folks. When you cut rates for the uber-wealthy, as W did, you lose revenue relative to what you would have had. That is the measure of gain or loss of revenue I refer to. Without adjusting for
        inflation, overall tax revenues may increase with inflation and population
        growth even in a stagnant economy. I believe overall revenues actually
        fell as a pct of GDP for a couple of years under W, who lowered taxes on
        the wealthy, while the same measure rose every year under Clinton. Which
        begs the question for you and those who believe in tax-cutting nonsense is:
        why did the economy do so well after we increased taxes on the wealthy
        under Clinton? Why shouldn’t we put them back to those rates? How can you
        still believe in supply-side b.s.?

        Furthermore, the huge reduction in taxes on the very wealthy – as
        exemplified by Romney’s returns – has increased inequality and this, in
        turn, is one of the drivers of our current economic malaise. Nearly all of
        the wealthy created in the last 30 years has gone to the very top, which
        creates a demand shortage. In other words, this is very inefficient.
        Again, fairness be damned. It’s math. It’s basic economics.

        It’s not about out-of-control govt spending; that’s more Republican b.s.
        conjured up after the fact to explain Bush’s failure. Don’t fall for it.
        Tax expenditures are not a zero-sum game. An economy is dynamic, and
        reductions in certain types of govt spending can actually harm growth and
        productivity, leading to reduced tax revenues. What matter is how the tax
        dollars are spent and invested – along with where the tax dollars come
        from. When more tax revenues come from folks who can afford to pay them
        and are used to create growth, they’re beneficial. You can’t just “cut
        govt spending” across the board and expect tax revenues to remain the same.
        Basic economics is far, far more complex. Think about it.

        • Anonymous

          I find it telling that you think the government will spend money more wisely than the people who earn it. What has all the stimulus spending got us? Green company after green company going bankrupt after spending billions on boondoggles. Solyndra, Light Squared, Ener1 — like poring money down a rat hole. 

          And what would the rich do with their money if they were allowed to keep it? Would they stuff their mattress with it? No, they would invest it in their own business or the stock and bonds of other businesses, allowing them to grow and create jobs. Even if they just put the money in a back account, it is now available for people to borrow. 

          If you want to learn how taxes and tax cuts really work read the article Ann Coulter called ” the most magnificent article I’ve ever read.”  http://startthinkingright.wordpress.com/2010/09/08/tax-cuts-increase-revenues-they-have-always-increased-revenues/

        • Anonymous

          Oh, and by the way: 
          “For the record, President George Bush’s 2003 tax cuts:raised federal tax receipts by $785 billion, the largest four-year revenue increase in U.S. history.” 
          After the Bush tax cuts we had over 50 straight months of job growth, which was a new record. It came to an end in 2007 shortly after Democrats took over the House and put Nancy Pelosi and Barney Frank in charge. I’m sure you think that was a complete coincidence, right?

          • Anonymous

            So, you apparently believe in Supply-side economics, i.e. let wealth flow to job-creators, people make better purchase decisions than govt, etc. This is where you seem to go with all your responses.

            Are you even aware that supply-side is bunk? That it’s not even intellectually respectable within the economics community? That it’s a wing-nut theory that has taken hold of the Republican party, that it’s largely responsible for our current economic malaise and that, if allowed to drive our economy, will inevitably lead to further national decline? That it has been pretty much agreed by the CBO and every neutral economic study that the Bush tax cuts were net losers of revenue?

            If you didn’t know all of the above, where do you get your information? This is not left-wing propaganda, it’s well-known, fundamental knowledge, the kind of information our country must use to make appropriate economic policy. Yet you disparage it and don’t even seem to be aware that you’re arguing against the both of empiricism and theory. You’re spitting into the wind. Your argument is not with me, it’s with the way the world works.

            Look, I am willing and able to discuss any detail of your responses and show you how it fits into the bigger picture. If you’re interested, that is. I enjoy taking Right-wingers to the water, but I can’t make them drink. Or if you’d like, simply venture out in the information world, get some better sources and think for yourself.

            Last thought for you: don’t worry about media bias. The media, like all corporate, for-profit organizations, only has a bias towards profit. What that means is that the info is out there, you just have to look for it in different places than you seem to go to.

            Good luck. Let me know if I can help.

  • landofaahs

    You forgot to add that he was preceded in death by his wife “Morality”.

  • landofaahs

    Now that you have the ribbon round his neck little o….twist twist twist.

  • Anonymous

    I believe you guys missed something. I’m pretty sure I read somewhere that Buffet’s secretary was in the $170,000-$370,000 tax bracket (I think that’s the bracket). So that would explain why she is in the 30% range.

  • Anonymous

    And don’t forget, Warren Buffett was a trust fund baby.  His father, a true conservative, earned his money, saved and invested it.  Warren Buffett inherited a fortune and continued to invest it and did so well.  But apparently he feels guilty about his inherited wealth, like so many liberals.  And, like so many guilty liberals, they propose to tax those who are earning money now by working hard.  Buffett can take his inherited wealth and give it to the government if he wishes, but no, he is giving it to charity when he dies.  I’m sure he figures its better spent.  And besides, his son is taking over BH.  The only good solution to the tax code mess is a retail national sales tax and do away with taxing the current income of everyone.

  • Anonymous

    Don’t say “disingenuous.” Get rid of that stupid word. If you mean “dishonest,” say “dishonest.”

  • Anonymous

    Keep telling your lies glenn.
    Unlike you, Warren Buffet loves America and believes in this country more than he loves himself….
    A concept glenn beck will never be able to grasp!!!

    • SoThere

      Flagged for stupidity and hate.  Warren Buffet is in trouble with the IRS because his company owes the people in america taxes.

      “A little over two weeks ago, Berkshire Hathaway CEO Warren Buffett, the
      third-richest person in the world, penned an op-ed critical of the low tax rates for the
      superrich. It would seem his own company hasn’t prioritized paying its
      rightful share in a timely fashion either.

      Berkshire Hathaway, the eighth-largest public company in the world according to
      Forbes, openly admits to still owing taxes for years 2002 through 2004
      and 2005 through 2009, according to the New York Post. The company
      says it expects to “resolve all adjustments proposed by the US Internal Revenue
      Service” within the next year.”

      Huffy Post. 

    • Anonymous

      The real liar in this country is the liar-in-chief himself.
      Obumbler can not run on his failed record so he wages a phony campaign of class warfare, class envy, anti-business rhetoric, anti-religion, race war, supposed war on women by conservatives, war on big oil,  guns, voter ID laws, immigration common sense policies,  the constitution – let’s see what did I leave out?
      You must be a progressive whiner if you believe this administrations BS and think Glenn is the problem.

  • http://twitter.com/carpenter_kenny ken carpenter

    Just lower his office and secretaries rate to 15%, everybody equal!

  • greg mahloch

    Even if the Buffet rule is passed. Warren Buffet would not pay anymore taxes.

    Warren Buffet does not pay an increase in dividend tax because his company does not pay dividends to its stockholders.

    Warren Buffet does not pay capital gains either because he does not sell any Stock.

    He is now giving away his stock to a charity that is set up by him. He has never paid any taxes on that money, so he is giving away part of our money.

    Pipeline is being block by him, because he owns railroads and he wants the oil to be transported by his railroad.

  • http://pulse.yahoo.com/_G6QBXFCSPBDO6XSUUM4DC5ZFGA guy who knows

    The first thing people have to realize is: Buffet is an F’ing
    liar.  He does not pay a lower percentage
    of income tax than his secretary.  What
    he was referring to was; taxes he pays on one particular form of his income
    which accounts for less than 1% of his total income.  He pays a much higher rate on over 99% of his
    income than his secretary.


    Buffet is a liar!


    But the real issue we are dealing with is not “too little
    income going to the government.” 
    The problem is: too much government spending. 
    Increasing taxes is like rewarding the bureaucrats for their fanatical
    spending habits and telling them they have been doing a good job.  This is insane!  Government spending needs to be slashed.
    The national debt needs to be slashed.
    Taxes and regulations need to be dramatically reduces. 

    More spending and more debt will not solve our problem of
    too much spending and too much debt, but both Bush and Obama adopted this
    crazy policy.

  • General Kota

    But Obama trust him ha!

  • socalidays

    Great read!

  • http://www.facebook.com/people/Trey-Morris/1543689942 Trey Morris

    Thanks Stu,  but why do you use these facts when this story is based on fiction?  These people have no idea that we are NOT as dumb as they think we are.  WHY is Warren B. involved in ANY way with what the government does?  Is he a policy advisor?

    • Anonymous

      I have read that one of Warren B’s companies makes its money by loaning people money to pay inheritance taxes on family businesses.  In some cases he buys them instead.  If you want to buy a business at pennies on the dollar you need to find someone between a rock and a hard spot.

  • http://profile.yahoo.com/GY64P72GJII63XAAMMLYJZDPRM seakat

    Here is the secret of the rich-all the money is put in their charitable foundations and the foundations buy what they need and they just use it never needing money for anything.

  • Anonymous

    Maybe buffet claims his secretary as a dependent.  Then she would have to pay a higher rate because she would not be entitled to a standard deduction.  I believe that the net tax she paid would then still be below 30%, even when Reagan was in office.

    What we really need is a tax on crony capitalism.  

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