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

Thursday, January 26, 2012

Warren Buffett's Secretary Likely Makes Between $200,000 - $500,000/Year

SecretaryForbes, Warren Buffett's Secretary Likely Makes Between $200,000 And $500,000/Year:

Warren Buffet’s secretary, Debbie Bosanek, served as a stage prop for President Obama’s State of the Union speech. She was the President’s chief display of the alleged unfairness of our tax system – a little person paying a higher tax rate than her billionaire boss.

Bosanek’s prominent role in Obama’s “fairness” campaign piqued my curiosity, and I imagine the curiosity of others. How much does her boss pay this downtrodden woman? So far, no one has volunteered this information.

We can get an approximate answer by consulting IRS data on tax rates by adjusted gross income, which would approximate her salary, assuming she does not have significant dividend, interest or capital-gains income (like her boss). ... The IRS publishes detailed tax tables by income level. The latest results are for 2009. ... Taxpayers earning adjusted gross incomes of $200,000 to $500,000, pay an average tax rate of nineteen percent. Therefore Buffet must pay Debbie Bosanke a salary above two hundred thousand.

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Nice guess, but more than likely wrong, as she could pay 19% on a much lower salary if she didn't have the ability to reduce her liability through the 2 biggest methods. (Mortgage Interest or children)

I know peopl who make less than 6 figures and have a higher rate than that because they don't get any benefits and just take the standard deduction.

Posted by: Justin the part time lawyer | Jan 26, 2012 8:54:10 AM

I think Buffett has included her FICA tax in his analysis. That will have a dramatic impact on the result. He, of course, pays no FICA on dividends and capital gains.

Posted by: Bill | Jan 26, 2012 1:39:11 PM

This is stupid beyond belief. There is absolutely no way you can inpute an individual's gross income from their effective tax rate. In fact, we don't even know if the effective tax rate cited for the secretary includes the employee's FICA payment or the employer's FICA payment inputed to the employee. We don't know if the employee is filing as a single taxpayer, married or head of household. Also, are we talking about effective tax rate on gross income or AGI? There is a difference you know.

If for example you wanted to inpute the employers portion of FICA to the employee, then every person in American whose income is under $100,000 and has only income from wages and salary and who does not receive EITC or other credits pays a larger effective tax rate on gross income than Mitt Romney. Such an analysis would be "accurate" but equally rediculous.

Applying the concept of "average" to a single indvidual is also ludicrous. Gosh, let's say the average person is the U. S. is 5'8", 135 lbs and 48.7 years old. Then by the Forbes logic Mr. Buffet's secretary must be a 5'8" person who weighs 135 lbs and is 48.7 years old. Sure she is.

Of course if you are just trying to make ideological points instead of having a serious discussion about tax structure, then the analysis does work. It just doesn't shed any light on the subject.

Posted by: David R | Jan 26, 2012 2:02:02 PM

The other stage prop was the wife of Steve Jobs, whose husband's company uses essentially slave labor in China, as reported in the NYT.

Posted by: mike livingston | Jan 27, 2012 3:18:10 AM

@ David R. There are economists who think that the employer's share of FICA is borne by the employee. They believe it to be a cost of hiring an employee and that absent the tax, those dollars would be paid to the employee in a competitive wage environment. You can embrace or reject their line of reasoning but I do not think it is something that most would outright brand as ridiculous.

Posted by: Bill | Jan 27, 2012 11:28:34 AM