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 expand=1] 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.

The themes of healing and redemption appear throughout the Bible.

Our bodies are buried in brokenness, but they will be raised in glory. They are buried in weakness, but they will be raised in strength. — 1 Corinthians 15:43
It is not the healthy who need a doctor, but the sick. I have not come to call the righteous, but sinners. — Mark 2:17.

So, for many Christians, it's no surprise to hear that people of faith live longer lives.

Heal me, O Lord, and I shall be healed; save me, and I shall be saved, for you are my praise. — Jeremiah 17:14.

But it is certainly lovely to hear, and a recent study by a doctoral student at Ohio State University is just one more example of empirical evidence confirming the healing benefits of faith and religious belief.

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Moreover, the study finds that religious belief can lengthen a person's life.

A joyful heart is good medicine, but a crushed spirit dries up the bones. — Proverbs 17:22
Lord, your discipline is good, for it leads to life and health. You restore my health and allow me to live! — Isaiah 38:16

The study analyzed over 1,000 obituaries nationwide and found that people of faith lived longer than people who were not religious. Laura Wallace, lead author of the study, noted that "religious affiliation had nearly as strong an effect on longevity as gender does, which is a matter of years of life."

The study notes that, "people whose obits mentioned a religious affiliation lived an average of 5.64 years longer than those whose obits did not, which shrunk to 3.82 years after gender and marital status were considered."

And He called to Him His twelve disciples and gave them authority over unclean spirits, to cast them out, and to heal every disease and every affliction. — Matthew 10:1

"The researchers found that part of the reason for the boost in longevity came from the fact that many religiously affiliated people also volunteered and belonged to social organizations, which previous research has linked to living longer. The study provides persuasive evidence that there is a relationship between religious participation and how long a person lives," said Baldwin Way, co-author of the study and associate professor of psychology at Ohio State.

Prayer is good medicine, and faith is a good protector.

In addition, the study showed how the effects of religion on longevity might depend in part on the personality and average religiosity of the cities where people live, Way said.

Prayer is good medicine, and faith is a good protector.

And the power of the Lord was with him to heal. — Luke 5:17
Heal the sick in it and say to them, The kingdom of God has come near to you. — Luke 10:9.

In early June, the Social Security and Medicare trustees released their annual report on the fiscal health of these programs, and the situation looks dire. Medicare is scheduled to run out of money in 2026 (three years sooner than anticipated), while Social Security is expected to run out in 2034. The rising national debt is only one of the well-known financial struggles the millennial generation faces. The burdens of student loan debt, high housing prices (thanks to zoning restrictions), stagnant wage growth, the rising cost of healthcare and lingering aftershocks of the Great Recession are among the biggest sources of economic anxiety millennials feel.

Progressive politicians have been very successful at courting the youth vote, partly because they actually promote policy ideas that address many of these concerns. As unrealistic or counterproductive as Senator Bernie Sanders' proposals for single-payer health care or a $15 an hour minimum wage might be, they feel in theory like they would provide the economic stability and prosperity millennials want.

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Republicans, on the other hand, have struggled to craft a message to address these concerns. Fiscal conservatives recognize, correctly, that the burden of the $20 trillion national debt and over $200 trillion in unfunded liabilities will fall on millennials. Some conservatives have even written books about that fact. But the need to reform entitlements hasn't exactly caught millennials' attention. Pollster Kristen Soltis Anderson, in her book The Selfie Vote, notes that millennials generally view protecting the safety net as more important than reducing the deficit.

Clearly, Republicans have a problem. They need to craft solutions that address the millennial generation's struggles, but they can't seem to sell entitlement reform, their biggest policy preference that addresses those problems. The Republican approach to wooing millennials on policy is failing because talking about stopping the debt from reaching an unsustainable level is long-term and abstract, and offers few immediate tangible benefits. A new approach to both pave the way for entitlement reform and give millennials an immediate financial boost is to first reform not entitlement spending, but the payroll tax: specifically, by partially (or wholly) replacing it with a value-added tax.

Under the current Social Security model, workers pay for the benefits of current retirees through the payroll tax. This system creates the illusion of a pension program, in which what you put in is what you get out, but in reality Social Security is a universal safety net program for the elderly paid for by taxes. The payroll tax falls on workers and is a tax on labor, while the value-added tax (VAT) is a tax on consumption imposed at every part of the production process. Assuming that this policy change is revenue-neutral, switching to a VAT will shift the responsibility for funding Social Security and Medicare away from workers, disproportionately poorer and younger, and onto everyone participating in the economy as a whole. Furthermore, uncoupling Social Security funding from payroll taxes would pave the way for fiscal reforms to transform the program from a universal benefit program to one geared specifically to eliminating old-age poverty, such as means-testing benefits for high-income beneficiaries, indexing benefits to prices rather than wages or changing the retirement age.

Switching from the payroll tax to the VAT would address both conservative and liberal tax policy preferences.

Switching from the payroll tax to the VAT would address both conservative and liberal tax policy preferences. As the Tax Policy Center notes, the change would actually make the tax system more progressive. The current payroll tax is regressive, meaning that people with lower incomes tend to pay a higher effective tax rate than people with higher incomes. On the other hand, the value-added tax is much closer to proportional than the payroll tax, meaning that each income group pays closer to the same effective tax rate.

For Republicans, such a change would fit conservative economic ideas about the long-run causes of economic growth. A value-added tax has a much broader base than the payroll tax, and therefore would allow for much lower marginal tax rates, and lower marginal tax rates mean smaller disincentives to economic activity. According to the Tax Foundation's analysis of a value-added tax, the VAT would be a more economically efficient revenue source than most other taxes currently in the tax code.

Not only would replacing part or all of the payroll tax provide an immediate benefit to millennial taxpayers, it would also open the door for the much-needed entitlement reforms that have been so politically elusive. Furthermore, it would make the tax code both more pro-growth and less regressive. In order to even begin to address the entitlement crisis, win millennial support and stimulate the economy in a fiscally responsible manner, Republicans must propose moving from the payroll tax to the VAT.

Alex Muresianu is a Young Voices Advocate. His writing has appeared in Townhall and The Federalist. He is a federal policy intern at the Tax Foundation. Opinions expressed here are his only and not the views of the Tax Foundation. He can be found on Twitter @ahardtospell.

Glenn was joined by Alanna Sarabia from "Good Morning Texas" at Mercury Studios on Thursday for an exclusive look at Mercury Museum's new "Rights & Responsibilities" exhibit. Open through Father's Day, the temporary museum features artifacts from pop culture, America's founding, World Ward II and more, focusing on the rights and responsibilities America's citizens.

Get tickets and more information here.

Watch as Glenn gives a sneak peek at some of the unique artifacts on display below.

History at the Mercury Museum

Alanna Sarabia interviews Glenn Beck for "Good Morning Texas" at Mercury Studios.

Several months ago, at the Miss Universe competition, two women took a selfie, then posted it on Instagram. The caption read, "Peace and love." As a result of that selfie, both women faced death threats, and one of the women, along with her entire family, had to flee her home country. The occasion was the 2017 Miss Universe competition, and the women were Miss Iraq and Miss Israel. Miss Iraq is no longer welcome in her own country. The government threatened to strip her of her crown. Of course, she was also badgered for wearing a bikini during the competition.

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In an interview, Miss Iraq, Sarah Idan, said:

When I posted the picture I didn't think for a second there would be blowback. I woke up to calls from my family and the Miss Iraq Organization going insane. The death threats I got online were so scary. The director of the Miss Iraq Organization called me and said they're getting heat from the ministry. He said I have to take the picture down or they will strip me of my title.

Yesterday, Miss Iraq, Sarah Idan, posted another selfie with Miss Israel, during a visit to Jerusalem.

In an interview, she said that:

I don't think Iraq and Israel are enemies; I think maybe the governments are enemies with each other. There's a lot of Iraqi people that don't have a problem with Israelis.

This is, of course, quite an understatement: Iraq, home to roughly 15,000 Palestinians, refuses to acknowledge Israel as a legitimate country, as it is technically at war with Israel. The adages says that a picture is worth a thousand words. What are we to do when many of those words are hateful or deadly? And how can we find the goodness in such bad situations?