Warren Buffett and Mitt Romney
Back in August, as you may remember, Warren Buffett published in Pravda-on-the-Hudson an op-ed entitled Stop Coddling the Rich – in which he famously announced:
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — 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.
This act, which seems to have been carefully coordinated with the re-election campaign of Barack Obama, was immediately followed by a Democratic drumbeat, calling for dramatic tax increases on anyone who brought in more than $200,000 a year.
It was obvious to anyone at all alert that this maneuver was designed to put pressure on the likely Republican nominee, Mitt Romney, who is, like the oracle of Omaha, a very wealthy man. That much I realized at the time. What I did not then know was that the former Governor of Massachusetts pays in the ordinary year even less of his taxable income to the IRS than does chairman of Berkshire Hathaway. I only learned this last week when his Republican rivals began demanding that he release his tax returns; and, in his inept way, Romney let the cat out of the bag.
When it comes to politics, I am given to wariness. I am inclined to suspect that the candidates are – how shall I say? – less upstanding and less principled than they at first seem, and I regret to have to report that my suspicions are usually borne out. The more I learn, alas, the less I generally find to like.
This applies to Barack Obama as much as it applies to his Republican opponents. When he has run for office he has been strangely fortunate His opponents often have “accidents.” Embarrassing divorce records, which were sealed by the court, somehow find their way into the hands of the press. You know what I mean.
All of this leads me to wonder whether, by chance, a political appointee in the Obama administration working at the IRS broke the rules, took a peek at Mitt Romney’s recent tax returns, and reported to David Axelrod or to the Great Prevaricator himself the fact that the fabulously rich former Governor of Massachusetts ordinarily paid his income tax a much lower rate than you or I do.
Do you think that I am being too suspicious? Is it an accident that the op-ed published by Warren Buffett applies so well to the prospective Republican nominee?
Were I the chair of the appropriate committee in the House of Representatives, I think that I would look into this matter. In Chicago, whence Barack Obama comes, no one would ever think a development so convenient for the incumbent executive an accident. In Chicago, there are no accidents.
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Dec '10
Re: Warren Buffett and Mitt Romney
Paul A. Rahe
Do you think that I am being too suspicious? Is it an accident that the op-ed published by Warren Buffett applies so well to the prospective Republican nominee?
If Romney's skittishness about releasing his tax returns has something to do with Buffett's op-ed, he's a bigger coward than I thought.
Someone who spoke with such forcefulness about the merits of capitalism in last night's debate ought to take Buffett's op-ed as a gift, an invitation to lay out for the American people why a rich man paying 15% on income from accumulated wealth is in fact a good thing even in light of wage-earners paying 30 or 40 percent.
Dividend income is taxed twice; assets purchased with after-tax dollars incur more taxes when one takes capital gains. By contrast, wages are taxed once. Romney should take this opportunity to explain that and ask how it's fair for some income to be taxed twice. If he can't figure out how to make that case to the American people, he's not going to get far with his "shoving [the case for capitalism] down Obama's throat."
Re: Warren Buffett and Mitt Romney
Stuart, I agree. Romney is the sort who poll-tests every phrase before he deploys it.
Mar '11
Re: Warren Buffett and Mitt Romney
Actually, listening to the debate the other night, I don't think that he poll tested the comment that he believes he pays around a 15% tax rate. That is what I,with my 2 income <100k/year household pays. I thought that comment made him no headway, but I actually appreciated it. Number one, it rang true. Number 2, he wasn't embarased about it, and number 3, that sounds to me to be a relatively reasonable tax rate for the "super rich"
Re: Warren Buffett and Mitt Romney
Allow me to quantify Stuart's excellent observation above. But first, let me stress the essential point: Neither Buffett nor Romney pay anything like a 15% tax rate in anything but the most technical sense.
Consider $100 of gross profit in a hypothetical corporation owned 100% by Romney or Buffett. The federal tax rate is 35%, leaving $65 in net profit. This money can either be paid out in dividends to the owner or retained by the company and reflected in an increased stock price. The federal tax on the gain on the stock, if sold, or on dividends will indeed be 15%. That is 15% of the $65 remaining after the corporate income tax, netting $55 for the owner.
So Romney and Buffett are actually paying a 45% economic tax rate on their $100 in corporate profit, likely considerably more than others in the office.
The US corporate income tax rate is first or second highest in the world and, rather than go bankrupt, our global companies arrange their affairs to pay a lower average rate. However, even stipulating a more typical 25% average corporate tax results in a 36% total federal rate paid by Buffett or Romney.
Edited on Jan 20 at 5:38pmDec '10
Re: Warren Buffett and Mitt Romney
His payroll tax rate is 15.3% (13.3% with the holiday), so there's much more to this story than people are seeing. At a total tax rate of 17.4% he's paying an effective income tax rate of 2.1%. Romney isn't paying payroll taxes on his investment income, so his 15% is a straight 15%.
Mar '11
Re: Warren Buffett and Mitt Romney
The King Prawn
His payroll tax rate is 15.3% (13.3% with the holiday), so there's much more to this story than people are seeing. At a total tax rate of 17.4% he's paying an effective income tax rate of 2.1%. Romney isn't paying payroll taxes on his investment income, so his 15% is a straight 15%. · 1 minute ago
The tax base for the payroll tax is like a $110,000, which maxes out a a relatively low dollar level. Is that what you were referring to?
Jul '11
Re: Warren Buffett and Mitt Romney
Chicago is the city that works, just don't ask how. Regarding your hypothesis that Obama plays dirty, of course he is dirty. His whole life is one of a chameleon surrounded by agenda driven progressives with law degrees and no morals. People on this site are naive to think Obama will lose this election against a solid principled conservative ( oh brother where art thou ). Either pin a legitimate scandal on Obama or just forget about it and enjoy the show. This is war folks and the enemy is unprincipled.
Dec '10
Re: Warren Buffett and Mitt Romney
kgrant67
The King Prawn
His payroll tax rate is 15.3% (13.3% with the holiday), so there's much more to this story than people are seeing. At a total tax rate of 17.4% he's paying an effective income tax rate of 2.1%. Romney isn't paying payroll taxes on his investment income, so his 15% is a straight 15%. · 1 minute ago
The tax base for the payroll tax is like a $110,000, which maxes out a a relatively low dollar level. Is that what you were referring to? · 1 minute ago
Right, my bad. Is that medicare as well as OASDI?
Mar '11
Re: Warren Buffett and Mitt Romney
The King Prawn
kgrant67
The King Prawn
His payroll tax rate is 15.3% (13.3% with the holiday), so there's much more to this story than people are seeing. At a total tax rate of 17.4% he's paying an effective income tax rate of 2.1%. Romney isn't paying payroll taxes on his investment income, so his 15% is a straight 15%. · 1 minute ago
The tax base for the payroll tax is like a $110,000, which maxes out a a relatively low dollar level. Is that what you were referring to? · 1 minute ago
Right, my bad. Is that medicare as well as OASDI? · 4 minutes ago
I believe so. But what is really sad is that I refer to what amounts to 15K as "realatively low". It's all relative.
Sep '10
Re: Warren Buffett and Mitt Romney
Romney let the cat out of the bag
Someone just rang the dinner bell.
Romney will be the Potemkin Nominee - a target rich environment for the Democrats. Overweight former DH Newt Gingrich may not be able to win his team the game but he hits the ball hard enough that the pitcher is hiding under the mound and he's blowing the windshields out of cars 2 blocks away from the ball field.
Mitt's done nothing to dispel the belief that he can't throw a punch and now he's wrapped up like Gulliver with a bad case of Lilliputianitis. Take 2 tax attorneys Mitt, and call us in the morning.
Jul '11
Re: Warren Buffett and Mitt Romney
Pseudo, can we now claim Romney's Lilliputianitis is the result of Swift boating.
Sep '10
Re: Warren Buffett and Mitt Romney
I hear that its going to be quite a row.
Jul '10
Re: Warren Buffett and Mitt Romney
George Savage:
Consider $100 of gross profit in a hypothetical corporation owned 100% by Romney or Buffett. The federal tax rate is 35%, leaving $65 in net profit. This money can either be paid out in dividends to the owner or retained by the company and reflected in an increased stock price. The federal tax on the gain on the stock, if sold, or on dividends will indeed be 15%. That is 15% of the $65 remaining after the corporate income tax, netting $55 for the owner.
Yeah, and while some of this may not apply to Mitt or Warren, it's worth noting that inventory valuation, vendor credits, & principle loan repayment are all part of taxable profits.
Small businesses that bleed cash in their first year or two are well-advised to maximize losses, assuming that they don't need to look better for new investors...
With respect to Mitt, I think it's fair to knock him for failing to make his case. If he wants to be President then he has to communicate effectively.
The whining about hidden income in the Caymans would be more appropriate at Kos.
Dec '11
Re: Warren Buffett and Mitt Romney
Buffett is a a loathsome fraud, who, for decades, has had his PR flacks tout the fact that he continues to live in a modest Omaha ranch home and drives a Buick. That allows him to come across as a Prairie Populist. Meanwhile, he takes private jets to Davos and swanks around with Bill Gates.
He's the ultimate limousine liberal, but he carefully hides that reality.
He wants doctors, dentists and small-business owners to pay higher taxes, while he currently is disputing $2 billion in back taxes.
May '10
Re: Warren Buffett and Mitt Romney
Actually, professor, accidents only happen to Chicagoans who forget to keep up their "insurance" payments.
Mar '11
Re: Warren Buffett and Mitt Romney
The op-ed appears in August. In September, the Occupy Everything but an Occupation Movement starts, runs for months, and the concept of "the %1" gets drilled into our heads.
All just a coincidence, Professor. Nothing to see here. And I am Marie of Romania.
Oct '10
Re: Warren Buffett and Mitt Romney
Well spoken.
May '10
Re: Warren Buffett and Mitt Romney
You don't win long term by engaging in lefty-inspired cat fights in the primary season, particularly in the most hide-bound early state, if you believe that your total message is a winner. You focus on Obama, and follow your original plan of when to release what. Newt's appalling behavior (no, not the marriages, the anti-capitalist lefty arguments of convenience) will do him in.
Even if the farthest right activists are going crazy, as they have non-stop since the first weird obsession with Bachmann.
Feb '11
Re: Warren Buffett and Mitt Romney
From the NRO Corner, from a comment by Rich Lowry:
“Although one night poll results should always be interpreted with caution, [Newt] led the final night of the field period by a 40-26 margin.”
Looks like the voters may not do what they're told, this time.
Mar '11
Re: Warren Buffett and Mitt Romney
File the tax returns issue alongside Bain capital under the heading "Stuff We Should Have a Pre-Planned Response Ready to Go For".
I mean, really, the only tax plan that the Obama administration has put forward in the last four years has been soak the rich. Did Romney not expect that line of attack?