Know tax facts about Buffett, secretary

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I’m getting tired of hearing our president state that Warren Buffett pays fewer taxes than his secretary.

The fact is that his personal income tax rate is lower than that of his secretary because she is paid a salary, while he – being the owner of Berkshire Hathaway – has opted not to take a salary but to receive his compensation in the form of dividends.

By law, dividends are taxed at the rate of 15 percent, while salaries can be taxed at a much higher rate, depending on her total income. So I’m sure that although his tax rate is lower than hers, the actual amount of taxes he pays is significantly higher.

But more important than that, as the majority stockholder of Berkshire Hathaway, his income is really that earned by Berkshire Hathaway, which pays corporate taxes. The more tax that the corporation pays, the less income Mr. Buffett earns. So, because of his structuring his holding company as a corporation, the tax on its income is paid by the corporation.

If BH were not incorporated, that tax would have to be paid by Mr. Buffett himself. Therefore, if we want to talk about the amount of Mr. Buffett’s taxes, we have to add the corporate tax paid by BH to Mr. Buffett’s personal tax.

Lastly, by opting to take his compensation as dividends rather than as salary, Mr. Buffett is avoiding completely any Social Security and Medicare taxes paid by all employees and self-employed on their earnings.

David J. Didimamoff

Aiken, S.C.

(The writer is a retired certified public accountant.)

Comments (18) Add comment
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desertcat6
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desertcat6 10/02/11 - 04:00 am
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Good info to know.

Good info to know. Unfortunately, the truth, the whole truth, and reason will never keep a politician from twisting the "facts" to suit their purpose.

Riverman1
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Riverman1 10/02/11 - 04:46 am
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In addition, your calculated

In addition, your calculated tax is the minium you can pay. Those who feel guilty can pay more if they want. There's a place on the tax form for that. But I believe Warren and his secretary have something going on and he feels guilty about not paying her more for her services. He should just slip her some jewelry on Valentine's Day.

FalseHopeLooseChange
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FalseHopeLooseChange 10/02/11 - 07:13 am
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Leave it to a politician to

Leave it to a politician to twist or "spin" the facts, or in Obama's case, downright lie.

If this president is as smart as the left want citizens to believe, surely he knows the difference between corporate and personal income. Therefore he must know he's deceiving his uneducated base, and promoting wealth envy as well as class warfare.

Deceit, lies and more promises of hope and change. That's all the community organizer can really run on in the next election.

seenitB4
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seenitB4 10/02/11 - 07:55 am
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Yeh...I think river is

Yeh...I think river is right...something strange about his secretary...so either pay her more or buy her diamonds or both.....who knows one day she might just write a book & tell all...Now that's a book I will buy!

carcraft
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carcraft 10/02/11 - 08:16 am
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Another interesting fact

Another interesting fact about Buffet is that his little company has owed back taxes since 2002. He is currently pursueing a strategy of trying to force the IRS to settle or deal with protracted litigations to reduce the tax burden instead of paying what is owed (as if he could not afford to pay the IRS). Please goole Fox News and Buffett's Berkshire Hathaway in Trouble With IRS! This is the height of hyprocrisy, but leave to Obama to hype it any way!

CorporalGripweed
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CorporalGripweed 10/02/11 - 09:08 am
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If Buffet thinks it's

If Buffet thinks it's terrible that he isn't paying enough, he can cut a check to the Treasury.I'm not holding my breath though.

harley_52
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harley_52 10/02/11 - 09:39 am
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I was a big fan of his after

I was a big fan of his after he did Margaritaville, but not so much now that he's into Berkshire Hathaway.

Shut up and sing.

harley_52
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harley_52 10/02/11 - 10:28 am
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Sorry.....I suppose my

Sorry.....I suppose my miserable attempt at humor fell flat again.

Tough audience.

seenitB4
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seenitB4 10/02/11 - 10:37 am
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harley.....hahah I'm

harley.....hahah I'm laughing--It's 5 oclock somewhere.

Riverman1
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Riverman1 10/02/11 - 10:42 am
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I heard the other night that

I heard the other night that The Duke, John Wayne, had a watch where all the numbers were 5's. Heh.

Carleton Duvall
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Carleton Duvall 10/02/11 - 11:44 am
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To his credit Mr Buffett did

To his credit Mr Buffett did say that the tax rate on dividends should be increased along with the tax rate on personal income for the wealthy.

CorporalGripweed
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CorporalGripweed 10/02/11 - 12:30 pm
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Again....all he has to do is

Again....all he has to do is write a check.

Carleton Duvall
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Carleton Duvall 10/02/11 - 12:42 pm
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I agree Corp but I don't you

I agree Corp but I don't you will see that happen. He would prefer to become a national figure by taking about it.

carcraft
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carcraft 10/02/11 - 02:53 pm
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scoobydo-Why not just pay the

scoobydo-Why not just pay the tax his company owes? Never mind paying more!

Carleton Duvall
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Carleton Duvall 10/02/11 - 03:49 pm
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CARCRAFT-I AGREE

CARCRAFT-I AGREE

raul
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raul 10/02/11 - 04:00 pm
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O.K. River and Harley. I am

O.K. River and Harley. I am giving you both... two thumbs up!

Iwannakno
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Iwannakno 10/02/11 - 05:07 pm
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I wonder if Obama's tax rate
Unpublished

I wonder if Obama's tax rate is as high as his secretary?

Little Lamb
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Little Lamb 10/02/11 - 07:49 pm
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I, too, thank Mr. Didimamoff

I, too, thank Mr. Didimamoff for enlightening us on the "rest of the story" about Buffett's tax rate. So Buffett wants the federal government to hike the tax rate on stock dividends back up to where it was several years ago? Why won't Obama say that? Why was that proposal not in his "jobs bill?" Instead, Obama is trying to monkey with the income tax brackets for people paying taxes on income above $250,000.

It's just a game to Obama. It's all about his re-election, not about restructuring the tax code. At least Herman Cain has a tax restructuring plan. Obama has only a re-election strategy that relies on demonization of any and all Republican Party ideas or personalities.

Will Obama be bold enough to propose raising the capital gains tax rate? I didn't think so.

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