econscius

Is Warren Buffett’s $924,725 Employee Middle Class or ‘Super-Rich’?

In Income Tax Rates, Political Rhetoric, Warren Buffett on August 29, 2011 at 8:32 pm

 

Mr. Buffett’s “Stop Coddling the Super-Rich” opinion piece juxtaposes “while the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet” with a few sentences later, “and that’s actually a lower percentage than was paid by any of the other 20 people in our office.  Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.” [1] 

The implication seems to be Buffett’s 20 co-workers are middle class. 

Berkshire has 260,519 employees [2], which begs the question which 20 are in his office?  We can be sure the 20 does NOT include a janitor from subsidiary Benjamin Moore paints, an engineer from his BNSF Railroad subsidiary nor even the GEICO gekko, though I’d love to have that little green Australian as a cubicle neighbor myself.

In a typical large corporation, the inner sanctum at headquarters includes the CEO (e.g. Mr. Buffett), the Chief Financial Officer (“CFO”), Corporate Controller, Chief Information Officer, Chief Counsel (top lawyer), head of Human Resources, head of Mergers and Acquisitions, a few other high ranking executives from sales, marketing, legal and finance, and perhaps an executive secretary or two.  They are not middle class workers.  Quite possibly all 20 in Mr. Buffett’s office would be six-figure earners, which explains why they would be paying average federal tax rates in the mid 30%’s (see my post https://econscius.wordpress.com/2011/08/19/trust-a-cpa-warren-buffet-is-wrong-about-tax-rates/).

We know what Berkshire Hathaway’s CFO, Marc D. Hamburg, earns from the company’s 2011 proxy statement.  Mr. Hamburg took in $924,725. [3]  Are Mr. Hamburg and the other 19 workers in Mr. Buffett’s corporate office “middle-class” or are they “rich”, even ‘super-rich’?  As I posted before, the IRS reports the bottom half of all taxpayers paid only 2.9% of taxable income in federal income tax.  Even adding on Social Security and Medicare keeps the percentage below what Mr. Buffett pays.  Mr. Buffett’s comparison of his own tax rates to the 20 in his office is essentially meaningless because his co-workers are neither poor nor middle class.  They most certainly are nowhere near the bottom half of earners.

[1] http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=1

[2] http://en.wikipedia.org/wiki/Berkshire_Hathaway

[3] http://sec.gov/Archives/edgar/data/1067983/000119312511062515/ddef14a.htm

Disclosure: at the time of this writing, the author owned common stock in Berkshire Hathaway, Inc.

Buffett picture from Wikipedia Commons.

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