Warren Buffet vs Reality

Warren Buffet has come out recently on numerous occasions to take some comments about taxes and income. Rich people however, are just as susceptible to the influence of politics and ideology as anyone else in society. And for a great analysis of what Buffet really thinks and why I would recommend to watch this short video by Yaron Brook from ARC.

 

http://www.youtube.com/watch?v=GzX7DjYYs98&t=23m00s

 

After reading various responses to Buffet comments and double checking the claims of both sides I come to my own conclusions about his statements.

Buffet: 1980 to 2000 was a growth period during which 40 million jobs where added. This was a period of higher taxes.

Reality: Taxes where dramatically lowered during this period, top income and capital gains taxes where decreased significantly.

This graph also does not capture that Clinton signed free trade agreements that reduced tariffs by so much that it could be considered the largest tax cut the world has ever seen.

Buffet: Stated his effective tax rate was half that of the other people in his office. He then instructed Washington to raise tax rates on millionaires and billionaires like him

Reality: The company Berkshire Hathaway, of which Mr. Buffet owns 30%, paid $5.6 billion in corporate income taxes. Most of Buffet’s income comes in the form of dividends he receives from Berkshire Hathaway profits. Dividends are taxed at a lower rate then personal income, which is the reason Buffet calculates that he pays a 17% tax rate. However, before profits from dividends make their way to Buffet they are first taxed at the corporate level under a 35% corporate tax rate, something the Buffet does not include in his calculations. If Berkshire Hathaway was a Subchapter S corporation and exempt from corporate income taxes, Mr. Buffett’s personal tax bill would have been 231 times higher, at $1.6 billion.

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