PolitiFact | Warren Buffett says the super-rich pay lower tax rates than others
What we all already know:
Here are the most telling pieces of the article, IMO:
Hmm...
Discuss.
What we all already know:
Income taxes. Federal income taxes are progressive, which means your income is taxed at higher rates as you make more money. Let's take a married couple filing jointly as an example. In 2011, after deductions and exemptions:
• the income between $0 and $17,000 is taxed at 10 percent;
• the income between $17,000 and $69,000 is taxed at 15 percent;
• the income between $69,000 and $139,350 is taxed at 25 percent;
• the income between $139,350 and $212,300 is taxed at 28 percent;
• the income between $212,300 and $379,150 is taxed at 33 percent;
• the income above $379,150 is taxed at 35 percent.
Here are the most telling pieces of the article, IMO:
The tax rates on investments tend to be lower than taxes on regular income. If you make money buying and selling stocks or receiving dividends from stock ownership, those earnings are generally taxed at 15 percent, the rate for long-term capital gains and qualified dividends.
Some hedge fund managers and other finance-sector executives get taxed at this rate on their earnings because their compensation is classified as "carried interest" and taxed as a capital gain. (The Wall Street Journal breaks down how carried interest works.) In fact, some economists believe that the lower rates for capital gains actually encourages tax dodges, because it motivates high earners to look for ways to classify normal income as capital gains. Defenders say the lower tax rate helps the economy because it rewards investors for risk-taking and entrepreneurship. They also argue that taxing dividends amounts to double taxation because corporations pay taxes on their income before investors are paid dividends. We won't settle the argument here, but there's no doubt that investors get lower tax rates on their income than workers.
Hmm...
So when it comes to Buffett's statement, there are two categories: the rich and the really rich. And the evidence tends to point to the conclusion that the really rich pay less in taxes as a percentage of income then their merely well-to-do counterparts -- if their income comes primarily from investments. Overall, we rate Buffett's statement True.
Discuss.
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