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How Buffett's Plan Cuts Taxes for Some of the Wealthy

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How Buffett's Plan Cuts Taxes for Some of the WealthyOver the past few months, as President Obama and congressional Republicans have battled over taxes, spending cuts and the deficit, billionaire Warren Buffett has repeatedly been cited -- both as a prime example of the country's unbalanced tax code and as the author of one of its most progressive tax proposals. Among tax reduction proponents, his name has become somewhat anathema, but Buffett's plan -- which he discussed on CNBC's Squawk Box last week -- is hardly radical.

In fact, it could potentially cut taxes for many high-income households.




Under Buffett's plan, households that make $1 million or more per year would pay an overall tax rate of 30%, and families that make $10 million or more would pay 35%. These tax rates are significantly lower than the current levels: In the 2011 tax schedule, the 33% tax rate kicks in at $174,401 and the 35% bracket starts at $379,151. In other words, people who bring home $1 million or more per year are already supposed to pay 35%, so Buffett's proposed 30% rate would be a 5% cut.

But actually, the cuts are even deeper: On Squawk Box, Buffett claimed that the tax rates he was proposing would include payroll taxes. Normally, these taxes -- which are about 1.4% of income for the wealthiest earners -- are added to regular income taxes, so an executive with a $1 million salary pays 36.4% of his salary in taxes. Under Buffett's plan, however, that executive would pay just 30% -- a tax cut of 6.4%, or $64,000.

So why is Buffett's plan so widely criticized by Republican policymakers? According to Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, the problem is that there are actually two very different types of high-income people -- those who are salaried, and those who make their money through investments. The first group already pays the full 35% income tax rate. The second group, on the other hand, pays most of their taxes at the steeply discounted 15% rate now charged on dividends and capital gains.

Buffett himself fits into the second group: In 2010, he made most of his money through investments, and paid income taxes of just 17.4%. By comparison, the 20 employees in his office -- who derived most of their income from their salaries -- paid taxes at rates ranging from 33% and 41%. Under his proposal, Buffett's rate would increase to 35%, more than doubling his taxes and putting his payout to the IRS more in line with those of his employees.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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Mark Goldstein

I'm curious to find out if Buffet's plan changes anything in the deduction catagory. I beleive what will actually be settled on that some deductions will done away with and that will automatically be like raising taxes..However I don't believe that it will fly unless you do this for everyone-not just the very rich. Then the catch 22 is that Charitie giving will be severly curtailed and home ownership will be also..You have to watch out what you ask for..The unintended circumstances.

November 23 2011 at 6:10 PM Report abuse rate up rate down Reply
shidelera5

"Under Buffet's Plan" ? Does Warren hold a senate seat now? Last I knew he gets one vote like everyone else. Who cares what his plan is.

What the heck does he waste time being on "Squak Box" at 4 AM? You'd think the richest man could get on primetime.
Maybe Warnen doesn't even know that CNBC empty calory show is not even owned by GE anymore- they sold it to lowlt Comcast. Anyone notice how CNBC stock coverage has slid 100% in the toilet and the crew is a bunch of monkeys? ANYWAY, who cares what Warren says anymore- why dont he go buy more US Gypsum - what ever happened to that one?

November 23 2011 at 11:28 AM Report abuse rate up rate down Reply
americandoo

"AMERI-CAN-DO"

REpublICAN DeMOcrAt


The Capitalized Letters in the above Words When Combined COULD & SHOULD SPELL: "AMERI-CAN-DO"


So Why Not Work Together & Lead By Good Example ! ! ! After all these are just words.. Important words to Leaders because they Represent Titles..But when these Titles become More Important than America's Problems..Then It Is Time For All Politicians To Take off their Red & Blue Ties..PUT ON THEIR AMERICAN FLAG PINS & GO TO WORK AS A TEAM..AS A UNITED NATION.. TO SOLVE AMERICAN'S PROBLEMS ! ! !

UNITED WE STAND..DIVIDED WE FALL..AREN'T JUST WORDS THEY ARE A FACTS ! ! !

TEAM UP FOR AMERICA..TEAM UP FOR OUR NATIONS FUTURE GENERATION..OUR CHILDREN.. ARE OUR
FUTURE..OUR CHILDREN ARE WATCHING US..


"LEAD BY GOOD EXAMPLE"



JUST SAY YES TO; TEAM WORK.. UTILIZING AMERI-CAN-DO ATTITUDE, UTILIZING MUTUAL RESPECT AS YOUR

GUIDELINES TO FOLLOW AT ALL TIMES ! !

SAY NO TO DISRESPECT & POLITICAL TITLE ONLY THINKING..THAT LEADS TO DIVISION ! !

SAVE YOUR POLITICAL TITLES & POLITICAL DISAGREEMENTS FOR A LATER DATE ...IN THE MEAN TIME TEAM UP AND TAKE CARE OF AMERICA'S BUSINESS..THIS IS WHAT WE ELECTED ALL OF YOU TO DO.. NOTHING MORE AND NOTHING LESS ! ! !


"WE THE PEOPLE" (which includes all non Parties and Parties).. Need All CURRENT ELECTED OFFICIALS TEAM UP TO:

" MAKE THE RIGHT CHOICES FOR OUR FUTURE..FOR OUR CHILDREN'S FUTURE "



"IT IS TIME TO REGROUP"

November 23 2011 at 10:05 AM Report abuse rate up rate down Reply
2 replies to americandoo's comment
darkcloudcoward4

Tell Obama that, send this Memo directly to his Office ( He still won't get it )

November 23 2011 at 10:22 AM Report abuse -3 rate up rate down Reply
rjohnwick

If you are suggesting that the Politicians do more, you've unfortunately got this wrong. Elected Officials have already teamed up - against the People. It is not that Government isn't doing enough, it's that they are doing way too much. Mostly in making Government larger, more intrusive, more powerful, and more comfortable for those very self-same Elected Officials. If you doubt this, take a look at the special privileges, and exemptions Congress has "Legislated" - for members of Congress only. And, we now have a President who considers the Executive Order the equivalent of Royal Decree when the process of Representative Government fails to give him his desire. (For those of you who hate Bush so much, please pay attention to this tendency.) "We the People" are dangerously close to absolute servitude owed the Government. Remember, everything Big G gives you, comes at very high price.
Finally, please don't use Caps Lock, you are capable of making the point without "yelling" at your audience.
Respectfully,
rw

November 23 2011 at 12:19 PM Report abuse +2 rate up rate down Reply
1 reply to rjohnwick's comment
savemycountry911

We need smaller government.

November 26 2011 at 2:30 PM Report abuse +1 rate up rate down
alscotti57

buffet is a tax cheat, still owes from years ago, they should take all his money and give it to someone who needs it...me lol

November 23 2011 at 6:57 AM Report abuse +3 rate up rate down Reply
gary

oh no,some of those people that hire usually but aren't right now because we have the second highest corporate tax rate in the world may get a break. how silly. nine percent unemployment and the answer is still taxation. why give the gov more to waste as has been the case for the last 3 years. cut spending stupid.

November 23 2011 at 6:09 AM Report abuse -1 rate up rate down Reply
Condley

DUH! Will the next sucker who realy thinks Buffet is proposing to pay more in taxes please step up to the microphone and make a fool of themselves? The 1% are already paying way more than their "fair share". It is the bottom 47% of the wage earners who pay nothing that are the problem. Since when is "Nothing" a "fair share"? To make matters worse many people who pay nothing get a "IRS tax welfare" check back when they file their return. It's time that Americans stand on their own two feet or get out of this country. The rest of us are sick and tired of supporting your worthless butt.

November 23 2011 at 1:10 AM Report abuse -1 rate up rate down Reply
2 replies to Condley's comment
firecicles

you live in a little bubble dont you....People who make minimum wage cant even pay their bills, get a house, or do anything other than work just to survive. So tax them? So thats like trying to get meat off of a starving cow.... So to answer your question, paying nothing in taxes is a fair share when you have nothing to pay in the first place.you cant tax someone if they have nothing!!! People who have 1 house possibly 2, 3 mercedes, swimming pool, go on vacations 4 times a year, those people obviously have extra money. Im not even going to go into how much corporate welfare the US govt hands out, and those welfare checks go to corporations that make billions..... So it makes sense that they pay more in taxes. You can thank the failed Bush tax cut policies for creating minimum wage jobs, and for extreme outsourcing of the rest of the mildly decent jobs out of the country for why you are upset.

November 23 2011 at 11:26 AM Report abuse -1 rate up rate down Reply
shidelera5

The bottom 47% start with nothing and run out of it buy mid-month . That's Why!!

November 23 2011 at 11:33 AM Report abuse rate up rate down Reply
Setanta

WASHINGTON — Two dozen “patriotic millionaires” traveled to the Capitol on Wednesday to demand that Congress raise taxes on wealthy Americans.

The Daily Caller attended their press conference with an iPad, which displayed the Treasury Department’s donation page, to find out if any of the “patriotic millionaires” were willing to put their money where their mouth is

Read more: http://dailycaller.com/2011/11/17/patriotic-millionaires-demand-higher-taxes-but-unwilling-to-pay-up-video/#ixzz1e8TzXRaS

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
patriotic morons reactions to being asked "why are they here " and to simply go to the treasury page and DONATE was hysterical---those asked REFUSED.......now why did the lame stream mediyuuh NEGLECT this pearl of wisdom and information ?

--------------------------------------------------------------------------------

November 23 2011 at 12:25 AM Report abuse rate up rate down Reply
jpark377

This is a joke. Just reduce spending to pre-Obama spending levels, and let's get some of the 47% of Americans who pay no income taxes at all to actually pay something. Basically, cut spending and broaden the base, and perhaps someday the US Gov't will not have a budget deficit (if the economy ever recovers!) About the $17 Trillion that's already been racked-up, I don't think we could ever pay that back; and Standard and Poor's is the only rating agency that is living in the real world.

November 22 2011 at 11:40 PM Report abuse +1 rate up rate down Reply
doc4fitness

We need to make a distinction between wealth and income. Huge difference. If someone works all his/her life, saves, invests, maybe builds up a business and sells it, then has $5,000,000, but makes 3.5% after taxes, $175,000 per years (or tax-free bonds), are they also the rich that are bashed and asked to pay more taxes? Or, maybe Obama will eventually move towards taxing your net worth...

November 22 2011 at 11:34 PM Report abuse +2 rate up rate down Reply
tomgold125

He's real good friends with Obama just like the ceo of GE that pays no taxes. Obama is a liar like no other.

November 22 2011 at 9:53 PM Report abuse +1 rate up rate down Reply