Thursday, June 28, 2007

Mr. Buffet: IRS Accepts Voluntary Tax Payments

Greg Mankiw writes today about Warren Buffet saying at a fundraiser for Hillary Clinton that he does not pay enough in taxes, because he was taxed at a rate of 17.7% on income of $46 million (tax bill of $8.142 million) and his receptionist was taxed at 30%.

First, Mankiw points out that Buffet's low 17.7% tax rate was because of the 15% maximum tax rate on dividends and capital, which was a large share of Buffet's taxable income, compared to his receptionist, who probably had only ordinary income taxed at the higher rates, and very little dividend income. Further, Mankiw points out that corporate income is subject to double taxation, and Buffet ignored the first round of taxes on corporate profits at rates up to 35% before Mr. Buffet could receive his dividend checks and pay his 15% tax.

Further, if Buffet thinks 30% is a better, more "fair" rate for rich people like himself, he doesn't have to wait for any changes in the tax code, he can simply write a check to the IRS for an additional $5,658,000 to make up the difference between what he actually paid (17.7% tax rate) and what his receptionist paid (30%). He could have done this to set an example, and then encouraged Hilary Clinton and the 600 Wall Street bankers and money managers attending his talk to do the same.


At 6/28/2007 12:43 PM, Blogger Tim Worstall said...

The address:

Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 6D37
Hyattsville, MD 20782

At 6/28/2007 1:00 PM, Anonymous Anonymous said...

Maybe he needs to give his receptionist a huge raise. A few million dollars a year should do the trick.

At 6/28/2007 1:03 PM, Anonymous Anonymous said...

Walt: Touche!

At 4/14/2011 2:32 AM, Blogger Unknown said...

I'm amazed that "supposedly" educated people in the area of economics, like Mankiw, still continue to make the false claim that corporate income is subject to double taxation. WOW!!! How do such people have any credibility at all
on economic matters?!!!


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