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Archive for the ‘Warren Buffett’ Category

Obama’s Buffett Rule AMT Math Off by Factor of 289, or $1.4 Trillion/Year

In Federal Deficit, Income Tax Rates, Warren Buffett on April 11, 2012 at 5:50 pm

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President Obama claimed the new Alternative Minimum Tax he calls the “Buffett Rule” would eliminate the deficit. [1]  He is off by a factor of 289, or $1.4 Trillion per year.

The Obama AMT (“Buffett Rule”) would raise about $4.7 billion per year [1].

The Obama deficit in the past 365 days was $1,359.1 billion [2].

Just yesterday, White House officials conceded the Buffett Rule would only produce $47 billion over ten years in additional tax revenue for the government. That amounts to just 0.6 percent of the $7 trillion in spending projected for that period. [1]

Whatever the merits of demerits of the proposal, the claim was wildly false.  Personally, I’d recommend cutting spending.  Eliminating Obama Administration give-aways to for-profit businesses under the guise of ‘green’ initiatives would reduce more than the Obama AMT would.

[1] http://www.cbsnews.com/8301-503544_162-57411687-503544/white-house-pushes-buffett-rule-on-taxes/

[2] Using search range of April 11, 2011 ($14,267,760,539,191.80) to April 10, 2012 ($15,626,832,596,694.90) at http://www.treasurydirect.gov/NP/NPGateway

Pictures from Wikipedia Commons.

Warren Buffett’s Firm Regularly Requests SEC Disclosure Exemptions

In Political Rhetoric, Regulation, Warren Buffett on January 31, 2012 at 9:23 pm

 

Back on December 8, 2011, the Wall Street Journal disclosed something interesting in light of recent political news, namely, billionaire investor Warren Buffett’s Berkshire Hathaway conglomerate recently obtained an exception from a SEC disclosure rule.  It turns out Buffett has sought SEC confidentiality exemptions in no less than 10 of the past 20 quarters, according to the WSJ article below.

Given Mr. Buffett’s recent political activism, it is interesting he has opted to keep Berkshire investments in the dark.  It is also interesting because of Mr. Buffett’s advocacy of higher tax rates, though he personally carefully structures his own income to minimize his own taxes.  Perfectly legal, but an example of “do as I say, not as I do”.

The rationale for the SEC exemption is certain high-profile investors, like Mr. Buffett’s firm, could be harmed if people know about their investing activities.   Presumably, though, any firm is at a competitive disadvantage to have to disclose their holdings to their competitors.  The WSJ reports:

“Fifty money managers have used Securities and Exchange Commission rules to keep confidential their stakes in certain companies so far this year, an analysis of securities filings shows.  The longstanding practice got a new burst of attention last month when billionaire Warren Buffett’s Berkshire Hathaway Inc. disclosed a $10.7 billion bet on International Business Machines Corp.  The Omaha, Neb., conglomerate had been secretly accumulating the shares since March, twice receiving an exemption from the SEC on a 36-year-old law that requires investment firms owning more than $100 million in publicly traded stocks to disclose their holdings quarterly.”

Full article at: http://online.wsj.com/article/SB10001424052970204319004577084723328963742.html

Disclosure: at the time of this writing, the author was a long-term owner of Berkshire Hathaway stock.  SEC building picture from Wikipedia Commons.

Warren Buffett’s Secretary Earns Hundreds of Thousands of Dollars

In Buffett Rule, Income Tax Rates, Obama Administration, Warren Buffett on January 25, 2012 at 11:42 pm

As I said last August, it is literally impossible for Warren Buffett’s secretary to be “middle class” and pay a higher income tax rate than Buffett.  She is either married and filing jointly with someone who earns hundreds of thousands of dollars or is earning over $200,000 a year herself.

Forbes picked up on this in a post today: 

“I have nothing against Debbie Bosanke earning a half million or even more. Buffet is a major player in the world economy. His secretary deserves good compensation. At her income, however, she is scarcely the symbol of injustice that Obama wishes her to project.” See http://www.forbes.com/sites/paulroderickgregory/2012/01/25/warren-buffetts-secretary-likely-makes-between-200000-and-500000year/

My original posts on this topic are here:  

https://econscius.wordpress.com/2011/08/29/is-warren-buffetts-924725-employee-super-rich/ 

and see what people actually pay, according to the IRS:  

https://econscius.wordpress.com/2011/10/09/who-pays-what-average-income-tax-rates/

Who Pays What Average Income Tax Rates

In Income Tax Rates, Political Rhetoric, President Obama, Warren Buffett on October 9, 2011 at 2:23 am

Average Tax Rate by Share of Income, Source: IRS 2008 Data

There is an awful lot of misinformation floating around about what average tax rates are paid at different income levels.  It is actually very simple, which is why I put together this graph. 
 
Some would have you believe the richest of the rich pay a lower average rate than “a secretary”.  On average, that is simply not the case.  The Bottom 50% of taxpayers paid an average of 2.59% of their Adjusted Gross Income (“AGI”) as income tax.  The Top 1% paid 23.27% of their AGI as income tax.
  

Share of Income Average Tax Rate
Bottom 50% 2.59%
25-50% 6.75%
10-25% 9.29%
5-10% 12.44%
1-5% 17.21%
Top 1% 23.27%
 
The bottom 50% of taxpayers paid 2.7% of all income taxes paid, and the top 5% paid more than half of the total.
 
 

Share of Income Group’s Share of Income Taxes
Bottom 50% 2.70%
25-50% 10.96%
10-25% 16.40%
5-10% 11.22%
1-5%

  20.70%

Top 1% 38.02%
 
Data source: 2008 IRS data from http://www.taxfoundation.org/news/show/250.html

Taxes Already Going Up On Warren Buffett

In Buffett Rule, Income Tax Rates, Obama Administration, Warren Buffett on September 20, 2011 at 1:46 am

Warren Buffett does not have to worry: his income tax rate will be rising about 3.8% on January 1, 2013.   He does not even need a new “Buffett Rule” tax:  it is a part of the health care reform bill of 2010 (“ObamaCare”) that “unearned income” (meaning interest, dividends and capital gains like those enjoyed by Mr. Buffett) will pay an additional surtax of 3.8% on amounts over $200,000 for individual taxpayers. [1]  

This means Mr. Buffett’s average income tax rate, which he says was 17.7% in 2010, will be approximately 21.5% under the 2013 tax rates.  The new rate is already enacted as law.  This fact is certainly relevant for any discussions of a “Buffett Rule” or higher tax rates on the affluent, yet it seems to be almost completely ignored in the media.

For more on Mr. Buffett’s misleading opinion piece, see https://econscius.wordpress.com/2011/08/19/trust-a-cpa-warren-buffet-is-wrong-about-tax-rates/ and https://econscius.wordpress.com/2011/08/29/is-warren-buffetts-924725-employee-super-rich/

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[1] http://www.heritage.org/Research/Reports/2010/04/Obamacare-Impact-on-Taxpayers

Pictures from Wikipedia Commons.  Disclosure: the author owned common stock in Berkshire Hathaway as of this writing.

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.