Buffet and taxes

[samgold]

Warren Buffet claims he pays the lowest tax rate of all in his office and suggests raising taxes on those who can affort (>200K) so that it is more equitable.

I have tried to find ways to reduce my taxes several times, but my accountant always tells me - if you make the money you have to pay the tax. Which is fine and I end up in a high bracket.

How does Buffet manage to lower his rate? Any ideas?

Also - another gripe - because we are supposedly well off (both wife and I work) we cannot get a break on any tuition, no financial aid or any help in sending kids to school and college. So we end up paying huge amounts and with less disposable income than the so called poor people. Also the financial aid game is a little wierd. If you have a huge mortgage you are more likely to get financial aid than if you paid up everything.

Comments?
Sam.

[swgprop]

Re: Buffet and taxes

Buffett's compensation was only 500K in 2009. The other $50 million or so in earnings was likely all capital gains which is taxed at 15%.

So if you'd like to keep your taxes low just ensure that all your income comes from capital gains.

Not so easy for working schlubs like you and me.

[flintlock]

Re: Buffet and taxes

dis·in·gen·u·ous (dsn-jny-s) KEY

ADJECTIVE:
Not straightforward or candid; insincere or calculating: "an ambitious, disingenuous, philistine, and hypocritical operator, who ... exemplified ... the most disagreeable traits of his time" (David Cannadine).
Pretending to be unaware or unsophisticated; faux-naïf.
Usage Problem Unaware or uninformed; naive.

[lakedaemonian]

Re: Buffet and taxes

I wonder what Buffett's response would be if he was compelled to pay himself in salary only over the past 50 years?

He has made reference to how he pays less in taxes(as % of total income) than his secretary, but he is very careful in ensuring it's not an apples/apples comparison.

[Jeff]

Re: Buffet and taxes

I'm in the same situation, albeit at a much lower level. My income has been primarily treated as capital gains for over a decade, and in addition, I had some very large losses in the '90's. As a result, I haven't owed taxes since then, as I can take all of my losses against any years' gains, not to mention invoking the $500,000 in gains not due on the sale of a primary residence (twice in the last 10 years). As I understand it, if you lost lots of money, and only have earned income to offset it, you can take $3,000 a year against it. That's it. Those of us with capital gains can take all we want, any year we want, for as long as we have losses remaining. The working stiff (i.e. anyone with a salary) will be unlikely to live long enough to benefit from any big losses.

Those of you out there who vote Republican, please hurry up and vote to repeal the "death tax" so my heirs are spared the indignity of having to get actual "jobs" alongside your nasty little offspring. Oh, and please hurry up and drop the capital gains tax even further, or else I'll have a hissy fit and stop hiring your plebeian asses. Go ahead, DO IT! Scoot along now. Shoo. (Chumps.)

[swgprop]

Re: Buffet and taxes

Those of you out there who vote Republican, please hurry up and vote to repeal the "death tax" so my heirs are spared the indignity of having to get actual "jobs" alongside your nasty little offspring. Oh, and please hurry up and drop the capital gains tax even further, or else I'll have a hissy fit and stop hiring your plebeian asses. Go ahead, DO IT! Scoot along now. Shoo. (Chumps.)

Good thing my sarcasm meter is in tune ....

[goodrich4bk]

Re: Buffet and taxes

How does Buffet manage to lower his rate? Any ideas?

1. Muni bonds: all income is tax free.
2. No SS tax on income greater than about $120k. I made less than that last year, so as a sole proprieter I paid a flat tax of 15% of GROSS earnings. Buffett paid probably less than 1%.
3. The liquidity advantage. This is the advantage that wealthy people have because they don't need to make any income in any particular year. If you don't have much capital, you can't take much risk with what capital you have. Less risk means more "conventional" investments, i.e., stocks and bonds that generate predictable income and, therefore, tax liability. More risk means more exotic investments --- limited partnerships, private equity, IPO's --- all of which involve greater amounts of deferred income and, therefore, lower taxes

[Starving Steve]

Re: Buffet and taxes

disingenuous=not straight-forward or not candid, thus insincere, sly, foxy (in English as an adjective)= insincero/a, o astuto/a, furtivo/a como un zorro (en espanol en uso como un adjetivo).

[Starving Steve]

Re: Buffet and taxes

Got work? If so, I got a "plebeian ass". S.S.

[cjppjc]

Re: Buffet and taxes

Also Buffet pay a lower percentage of his income on Fica taxes than his office.

[c1ue]

Re: Buffet and taxes

I have tried to find ways to reduce my taxes several times, but my accountant always tells me - if you make the money you have to pay the tax. Which is fine and I end up in a high bracket.

How does Buffet manage to lower his rate? Any ideas?

Also - another gripe - because we are supposedly well off (both wife and I work) we cannot get a break on any tuition, no financial aid or any help in sending kids to school and college. So we end up paying huge amounts and with less disposable income than the so called poor people. Also the financial aid game is a little wierd. If you have a huge mortgage you are more likely to get financial aid than if you paid up everything.

FICA taxes (or lack thereof) is a big part: 7.62% if an employee, double that if self employed. Of course if you are really 200K income or higher, you get some of this benefit anyway since you'll hit the FICA contribution limit.

Capital Gains is another big part of that.

As for the rest - having a corporation also allows significant tax free or tax subsidized transfers. For example, if your kid works for your corporation, there is a tax break associated with contributions towards schooling. Similarly health care can be pre-tax in the corporation. The corporation can also be in a lower tax state like Delaware.

Corporations also can do lots of interesting stuff which individuals cannot.