Flat Taxes and Warren Buffett's Lies

All tax proposals soak the poor?

It seems that the ultimate privilege of wealth and celebrity is to use those platforms to pontificate on political and economic issues you know nothing about.  How many times have we seen celebrities hold forth to a fawning media audience on the subject of starving Africans based merely on a well-guarded whirlwind tour, where knowledgeable Africans with serious credentials are totally ignored despite solid facts and research?

Celebrities are experts on looking pretty and that topic alone is the only one on which they have anything to say.  Warren Buffett, in contrast, became one of the world's richest men by prudent long-term investment; at the very least he knows how to identify well-run businesses and economic trends.  He's not at all pretty, so he would seem to be worth listening to on matters financial.

Yet his most renowned public statement is a real head-scratcher.  For years now, he's maintained that his secretary pays a higher percentage of her immeasurably smaller income than he does.

Obviously, if true, that would be grievously unjust.  Virtually all Americans would agree that the rich should pay at least the same percentage of their incomes in tax as the poor, if not more.

President Obama took this ball and ran with it:

“Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There’s no justification for it,” President Obama insisted while pitching his $4 trillion deficit reduction plan in the Rose Garden on Monday.

So far, so fair.  Rich people shouldn't be able to skip out on their taxes by artful deductions and strategizing.  Perhaps if we eliminated most deductions, and slapped a single rate across everyone, we could at least ensure that the wealthy pay their "fair share" as their secretaries do?

As it happens, there are several "flat tax" plans out there amongst the Republican candidates, most famously Herman Cain's 9-9-9 proposal.  By definition, these systems are supposed to hit everyone equally; Warren Buffett and his friends should be relieved, right?

Wrong!  The left's response to every single flat tax ideas is a furious accusation that they'd increase taxes on the poor.  Here's what Robert Reich had to say:

The flat tax is a fraud. It raises taxes on the poor and lowers them on the rich... Under Cain's plan, fully 95 percent of households with more than $1 million in income would get an average tax cut of $487,300. And capital gains (a major source of income for the very rich) would be tax free.

Something is badly wrong here.  Our current tax system is anything but flat.  It's intentionally designed to put rich people in higher brackets where they pay bigger percentages than poor people.  Everyone's first $20,000 or so of income is income-tax-free, for instance - only if you make more than that do you have to worry about paying income taxes at all.  A graduated income-tax system like what we have now certainly ought to bleed more from the wealthy.

If it doesn't - if, somehow, the wealthy are able to deduct their way out of their taxes - then how could a limited-deduction flat tax fail to hit the rich more effectively?  It's neither mathematically nor logically possible that both the flat tax and our current system are incapable of taxing the rich!

There is, of course, another possibility: the Left is lying.  Here's The Blaze's analysis of Warren Buffett's finances by a group of professional tax accountants:

“I set up three test returns, one for Mr. Buffet’s secretary at $60,000 as if she is a single person making $60,000 with no deductions which is the most conservative approach and the result is that her effective tax rate is 14.08 percent.  The second scenario I set up is if the secretary is married and makes $60,000, assuming her husband doesn’t make anything  then the effective tax rate is 7.6 %.”

We don't know who Warren Buffett's "secretary" is - nobody in his organization has that title - but it doesn't really matter, as we can do the math easily enough on a generic secretarial salary and average middle-class lifestyle.  Depending on marital status, Warren Buffet's generic secretary pays either 14% or 7.6% in taxes.

What about Mr. Buffet?  Here, we actually know the number, or at least we know what says his number is: Mr. Buffett says he pays 17.4%.

In other words, Mr. Buffet is lying: he does in fact pay a larger percentage of his income than do his employees - just as it should be.

Whether a flat tax would be better for our country, we can't say - it did work wonders in Eastern Europe.  At the very least, though, the side which is knowingly telling lies about the very basis of taxation shouldn't be assumed to have pure intentions.

Americans hate the IRS and our current tax system; let's give something else a try!  It can't be much worse than what we already have.

Once we do that, Warren Buffett can go back to doing what he's the best in the world at - making money for himself - and stop trying to help the government steal from everybody else.

Petrarch is a contributing editor for Scragged.  Read other Scragged.com articles by Petrarch or other articles on Economics.
Reader Comments

We need a very serious discussion concerning the FAIR TAX. If you are not familiar with it check it out on line at www.fairtax.org.

Abolishes the IRS.
Provides a Prebate to protect very low income earners.
Abolishes the Income, Inheritance, and Corporate tax.
Abolishes most deductions.
This is a 23%, revenue neutral, consumption tax on new goods only.
This is definitely NOT a Value Added Tax (VAT).
Only purchases of new goods are taxed.

December 25, 2011 12:41 AM

Buffet's been playing the middle class and MSM for at least 2 decades. People think Buffet's great talent is picking longterm stocks. Wrong. That was years ago. Now, his great talent is in playing the MSM.

January 2, 2012 10:36 AM

Any plan that eliminates capital gains is going to weigh hard on the middle class. A person with a house one car and average living expenses in the United states as of my calculations in 2012, will be paying 7% additional tax, to make up for this. Anyone that would call this review neutral is an absolute idiot.

July 16, 2013 10:11 AM
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