In President Obama’s most recent weekly address, he talks about taxes. Specifically, he talks about taxes for wealthy individuals. While I might not necessarily think we need to go crazy raising tax rates, it may be a good idea to raise taxes on our highest bracket modestly.
President Obama talks about the “Buffet Rule,” and mentions that Warren Buffet “is paying a lower rate than his secretary.”
What he doesn’t mention is that this is because of the differences in their sources of incomes. Buffet’s salary is $100,000 plus additional compensation. His total compensation (salary plus additional) was estimated to be $175,000 in 2007 and 2008.* His other income came from dividends and capital gains.
To compare what Buffet paid as a total tax rate (lumping in salary plus dividends and capital gains or income tax plus taxes on dividends and capital gains) isn’t really fair. There’s a reason that taxes are lower for capital gains and dividends – it’s to encourage investment. I won’t go into capital gains taxes and dividend taxes here simply because I don’t think I could explain them without being a bit verbose. See Wikipedia articles here and here for explanations.
So why is it ironic to call this tax rule the “Buffet Rule”? Because Warren Buffet falls in the portion of the population making under $250,000 a year when we judge by his actual salary. It would be far more sensible to name the rule after a billionaire or multimillionaire making over $1 million a year in salary alone, or not name it after anyone.
I also happen to think that naming the rule after a man who is notorious for his belief that wealthy people should pay much higher taxes. Did you know you can make voluntary contributions to our government? You can contribute to paying down our debt or contribute to the government’s income. They don’t have to mandate you paying more taxes for you to contribute higher amounts!