Tuesday, September 20, 2011

How Much Does Warren Buffet's Secretary Make?

Here's what I've been told:

Warren Buffet pays a 17% income tax rate, and his secretary pays 33%

Which is really weird, because there's no 17% bracket, and capital gains is taxed at 15%, but we'll just roll with it.

Now, if it's true that Secretary is paying 33%, that means her annual income is upwards of $175,000 a year.

Hell, they don't even pay Congressmen that much.

Thing is, if she opted for a more frugal lifestyle and made some disciplined investment choices, Secretary could sock away enough to start living off her capital gains in about 10 years.

Then she could retire and enjoy that 17% lifestyle.

UPDATE: Forbes jumps into the guessing game with "$200,000 to $500,000", but their numbers are more of a stunt just to squeeze Google juice out of a headline, rather than any sort of serious investigation into the matter.

[SBA day 32]

8 comments:

  1. 17% is probably the effective tax rate, adding together the amounts that are taxed at varying levels of the graduated scale and adjusting for tax deductable spending.

    I am in the 28% bracket, but my "effective" rate is 18%.

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  2. I want to agree, but that would mean that the media is so corrupt that they would apples/oranges compare Buffett's effective tax rate to his Secretary's marginal tax rate.

    I really didn't want to have to think that cynically this early in the morning.

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  3. Of course the alternative explanation would be that Secretary is making so much money at the marginal 35% tax rate that her effective tax rate is actually 33%, which means she's making north of $1 million a year:

    http://www.moneychimp.com/features/tax_brackets.htm

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  4. It is also possible that she spends her money frivoulously and not in government approved ways to reduce her tax burden. Whereas Buffet, being a financial genious, spends his money so as to minimize his tax burden and increase his profits. We also learned recently that Buffet spends a lot of his corporate money on lawyers and accountants to minimize his personal taxes and sometimes just doesn't pay what he really owes. His Secretary can't get away with that.

    Two words Buffet's secretary should learn: Insider information.

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  5. Why just "roll with it" when you can do some research and make an informed statement? Not that it takes research to realize that the effective tax rate is what is being referenced, but that would have been clear if you had tried. Funny that your whole M.O. is revealing the "truth" behind things, but if actual numbers are involved, then, well, we'll just "roll with it".

    Besides, what difference does it make that she is well-compensation? No one anywhere was arguing that she was underpaid or overtaxed. No one is asking you to feel sympathy for the secretary. You missed the point entirely and are constructing an argument around a completely separate narrative from the one that Buffett put forth. That's nice and all, but what is your point?

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  6. Why roll with it? Because this is just a 5 minute throw-away post, so I'm not going to spend a whole lot of time doing research on irrelevant minutia.

    My point? Comparing an effective tax rate to a marginal tax rate is dishonest, but that's what the media seems to have done.

    Anyway, if you don't like what I wrote, don't read it.

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  7. So the tax rates are simultaneously the entire point of your post and also irrelevant minutiae. Should we then infer from the transitive property that your entire post is irrelevant minutiae?

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  8. Dude... it's a blog, not the New York Times.

    So, yes.

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