Unlike the traditional Buffet line rule about tasting and putting food back, the Warren Buffet rule would encourage double dipping. Warren (and his poor secretary) certainly knows this, but yet he continues to argue that he’s taxed at an unfairly lower level. Apparently, his corporate taxes are too high for his liking, since Berkshire Hathaway likely paid too little in taxes for years.
This goes back to the fact that different money is taxed differently. Capital gains are considered one-time income adjustments and are taxed at the low rate of 15%. This is great if you sell a house. Would you really want to pay 35% income tax because a house you sold increased your income by 400% in one year? The problem comes in when capital gains are abused with annual disbursements that effectively become a salary. This is outrageous and must be stopped!
Well, hold on there. People like Warren Buffet are provided these gains by investments and investment firms. Since it represents the increased revenue of a corporation, that profit is taxed at the current corporate income tax rate of 35%. People like Buffet get what’s left after the taxes. Then he pays 15% taxes on that.
Look at it this way. If you make less than $100,000 per year, 12% of your income goes to Social Security taxes. Usually, your employer pays 6.2% before your salary. That means you don’t even see this on your paycheck. You pay the other 6% (or 4% while Obama de-funds Social Security). If you are a private contractor and fill out a 1099, then you get the privilege of paying 15% out of your income by yourself. So, the employee who makes $50,000 a year saves $3,000 compared to the independent contractor. The government gets the same amount, but the screw job is redistributed.
Some people like Bill Clinton have proposed lowering the tax on job creating corporations while increasing it on the less job creating billionaires. Billionaires could potentially pay the same amount if capital gains were 35% and corporate tax rates were 15%. It would be about the same amount going to the government, but it would hurt them more.