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article imageWarren Buffet reveals income & taxes to boost tax-the-rich case

By Joan Firstenberg     Oct 13, 2011 in Politics
Hutchinson - Buffett, Chairman and CEO of Berkshire Hathaway reveals he made almost $63 million last year, but paid less than $7 million in federal income tax. But critics say Buffett didn't reveal his tax return which would have explained several gaps in income.
Warren Buffett sent a letter to Republican Congressman Tim Huelskamp (R-Ks) a long opponent of taxing the rich, detailing that he earned almost $63 million last year, yet paid less than $7 million in federal income tax.
The Wall Street Journal reports that Mr. Buffett has long been a supporter of raising income tax rates on the wealthiest. He has argued that his secretary pays a higher tax rate than he does. President Obama liked the concept, and went along with Senate Democrats who proposed a 5.6% surtax on citizens making $1 million a year or more.
But prominent Republicans had wanted Mr. Buffett to release his income-tax return. And although Buffett stopped short of that, he did provide key details of his come in his letter to the Congressman.
The letter revealed that Buffett's adjusted gross income was $62,855,038 in 2010, while his taxable income was $39,814,784. He said he paid $15,300 in payroll taxes, and $6,923,494 in federal income tax. That came to an effective tax rate of 17.4%.
The Tax Policy Center, a nonpartisan group, says that the average tax rate for taxpayers in the middle-income range, those earning between $34,000 and $60,000 a year, is 12%. Those earning from $103,000 to $163,000, which constitutes the top 80% to 90% of earners, pay 18.2%. Those Americans who earn from $163,000 to $211,000 pay 19.8%, and those who are fortunate enough to be in the top tier, earn from $211,000 to $533,000 and pay 20.4%.
Robert Gordon, president of Twenty-First Securities in New York, a tax strategy brokerage firm took a look at Buffet's figures,
"Most of Mr. Buffett's income appears to be either long-term capital gain or qualifying dividend income. The top rate on both forms of income is only 15%."
And Lee Sheppard, with Tax Notes, a nonprofit group, says
"Mr. Buffett isn't paid like most chief executive officers. They would have higher salaries and more ordinary income from exercising stock options."
Tax experts say they see a mysterious gap of nearly $23 million between Buffett's adjusted gross income and his taxable income. And they say it is impossible to figure this out without having his tax return in front of them.
They do admit that a possibility for this is that Buffett made sizable charitable contributions, so those itemized deductions would be subtracted from adjusted gross income. Another possible scenario is interest expense. Mr. Buffett is well-known for not selling off investments outright, but rather borrowing money against them. So any interest paid on such loans would be deductible.
In the letter to Congressman Huelskamp Buffett wrote,
"I hope you succeed in getting the ultra rich, who, as a group, are paying less of their income to the federal government than their receptionists, to share in the sacrifice many millions of other Americans soon will be asked to do,"
Republicans have been fighting a Democratic proposal to pay for President Obama's $447 billion jobs bill by imposing higher taxes on the wealthy. They argue that such a proposal will punish investment.
Rep. Huelskamp has been demanding that Buffett release his tax return to prove what he was saying. But in response, the Oracle of Omaha said this,
If we could "get any of the ultra rich to release their returns simultaneously with mine, I will be willing to have a pre-release wager with anyone who wishes for any sum that they wish that the figures in my return will be exactly those used in my op-ed piece."
The Economic Times reports that Buffett included in his call specifically
"Rupert Murdoch, one of my ultra-rich colleagues"
Buffett targeted Murdoch after the latter's Wall Street Journal last week blasted Buffett's advocacy of higher taxes for the wealthy and said he (Buffett) should release his tax forms.
Huelskamp replied on his website that he was disappointed that Buffett still hasn't released his official tax documents.
More about tax the rich, Warren buffett, buffett's taxes revealed
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