TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, September 27, 2011

WSJ: Warren Buffett Should Release His Tax Returns

Wall Street Journal editorial, Mr. Buffett's Tax Secrets:

Warren Buffett has forcefully injected himself into the U.S. political debate, with President Obama using the billionaire's anecdote that he pays a lower tax rate than his secretary as a bludgeon in favor of raising taxes on millions of other Americans.

The Omaha stock-picker has every right to do so, and his foray may even do some good. His tax claim has already had the educational benefit of prompting the press to report that, as a general matter, the Buffett-Obama premise is false. CEOs don't typically pay lower rates than middle-class secretaries.

As data from the IRS make clear, the vast majority of those earning more than $1 million per year typically pay tax rates two to three times higher than people making less than $100,000. In 2008, the average tax rate for millionaires and above was 23.3% and for those earning between $30,000 and $50,000 it was 7.2%.

But the opportunity to educate the public would be even greater if Mr. Buffett would let everyone else in on his secrets of tax avoidance by releasing his tax returns. Going only by Mr. Buffett's unverified claims, his federal taxes in 2010 amounted to 17.4% of his taxable income, probably because much of his income was from capital gains and dividends. It's also likely that he took significant deductions for charitable donations. No doubt the millions of Americans who could end up paying more because of this claim would love to see the details. ...

If Mr. Buffett's anecdote is going to be the main political basis for rewriting the U.S. tax code, Americans have every right to know the basis for the anecdote. We called Berkshire Hathaway last week to see if Mr. Buffett would release his 2010 return, but we haven't heard back.

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I look forward to a similar request demanding every private person advocating lower taxes for job creation release a full report detailing how many jobs they will create if certain tax cuts are extended or enacted.

Posted by: KLB | Sep 27, 2011 12:46:22 PM

I picked this up here

Buffett told Rose his 2010 adjusted gross income was $62 million. He implied that most income came from long-term capital gains and qualifying dividends currently taxed up to 15%. Only a small portion of his gross income – a few million dollars for Buffett – is ordinary income, like wages and interest income, taxed at higher ordinary income tax rates currently up to 35%.

From there I was able to do this analysis

Taking my source as accurate Buffett has around 60,000,000 in AGI almost all capital gain. From the Bill and Melinda Gates foundation you can see that he essentially has an infinite 30% carryover, which gives him a taxable income in the vicinity of $42,000,000 (Most of the rest of the return has to end up being noise). I confirmed it by running a mock-up in pro-fx.

Posted by: Peter Reilly | Sep 27, 2011 1:49:23 PM

Its right there in the IRS Statistic of Income site. The top earning 400 taxpayers are taxed at about 17%. Buffet's return would be right in the pack. Why in the world would WSJ question this, other than to try and embarrass Mr. Buffett.

Posted by: jim harper | Sep 27, 2011 4:59:28 PM

Don't forget his secretary. We need to see that return also.

Posted by: Jim D | Sep 28, 2011 5:23:31 AM

Jim, why in the world would Buffett be embarrassed unless the actual tax return did not show what he claimed? Trust, but verify.

Posted by: Rick Caird | Sep 28, 2011 5:33:24 AM

His tax returns would only be of significance if we also got to see those of his secretary. Somehow I suspect she's not a single mother of 4 trying to eke out a living on $24k per year. Wouldn't it be curious if he's demagoguing based upon a comparison to a taxpayer in the "wealthy" category of those earning >$200k/year?

Posted by: Jeffrey Techentin | Sep 28, 2011 6:25:42 AM

"Why in the world would WSJ question this, other than to try and embarrass Mr. Buffett."

How about that and show him to be false and facetious in his defense of 'Tax the Rich' arguements?

Posted by: Bill Johnson | Sep 28, 2011 6:48:40 AM

Let's call Warren's Bluffett. ;-)

Posted by: Constitution First | Sep 28, 2011 9:15:05 AM

Why does ultra rich multi-billionaire Buffett pays his secretary so little so she pays more taxes than he does? Unlike the ultra rich who spends most his life amassing money and finding ways to hide them from the taxman, the low pay Buffett employees will spend each additional cent to consume. The least Buffett can do is to stop hiding his money behind so-called chariities and gives his employees a hefty raise.

How about support buddy Obama, pay each employee $200,000 so they can pay the Obama-Buffett millionaire tax?

Posted by: icc | Sep 28, 2011 10:00:55 AM

Sure, and the WSJ will publish an apology when the 17% claim is subtantiated after they, without any cause whatsoever, implied that he was a liar.

Posted by: jim harper | Sep 28, 2011 11:24:20 AM

It should not just be Warren Buffet and his secretary, people within his group should also be included. This is pure bluff.

Posted by: JG Larvan | Sep 28, 2011 8:23:41 PM

Its right there in the IRS Statistic of Income site...The least Buffett can do is to stop hiding his money behind so-called chariities and gives his employees a hefty raise.

Posted by: web design Landon | Sep 28, 2011 10:38:03 PM

Actually, what Buffett should do is to pony up "the net unrecognized tax benefits of $1,005 million" that's reported in Berkshire Hathaway's annual report. You know, the back taxes that they've owed and evaded since 2002.

Until then, Buffett can help himself to a steaming plate of STFU.

Posted by: orthodoc | Sep 29, 2011 11:44:07 AM