The Obama / Buffett Tax Lies

Obama now likes to do math, but his math must come straight out of Orwell — 2+2=5.  If you do real math, the truth is that the funds from which Buffett gets ‘paid’ always get taxed at a higher rate than his overpaid secretary.

Let’s say Buffett and 5 friends invest $1M each in Acme Roadrunner & Job Killers, Inc.  In 2010, the company has income of $1M and expenses of $750,000.

Included in the expenses is the $50,000 salary (median salary for the U.S.) for Sally Secretary that is taxed as below:

Sally pays the $5,944 in taxes, and Sally’s effective tax rate is 11.8% — below the 15% Capital Gains tax that Buffett pays when he takes dividends from the Company.  Sally would have to make more than $84,500 to get above a 15% effective tax rate.  Pretty good salary if you can get it.

The 2010 taxable income for Acme is $250,000.  Assuming we divide the $250,000 evenly between the 5 investors when we pay Corporate Taxes, take Dividends, and Pay Taxes on the Dividends, we would see that the total tax for Mr. Buffett is $22,375.

Again, the amount of tax the Federal Government gets from Sally’s $50,000 is $5,944 and the amount from Mr. Buffett’s $50,000 is $22,375.

If Sally Secretary is the best secretary on the planet, her $1,000,000 salary still only gets taxed at a 32.4% effective rate!  No matter what the earnings for the corporation, when Buffett takes his Dividend, the total tax to the government will be 44.75%.

As usual, Obama’s rhetoric belies the truth and reality.  Tell your friends, if you want less of something, tax it; if you want fewer jobs; tax the job creators more.

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