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November 05, 2007

The Tax Grrrl writes:

I’m been following the conversations on Warren Buffet and his concerns about the tax system and have to say that I find it fascinating. When one of the wealthiest men in the world criticizing our tax system as “tilted towards the rich,” it’s time to take notice.

I think it does, but not in the way he seems to mean:

Click to enlarge

The "rich" actually pay more taxes in both percentage terms and in the share of total taxes paid, except for a falloff for the top 5,000 or so taxpayers, as we have discussed.

Mr. Buffet likes to talk about how his effective federal tax rate is only about 17%. That's because he gets most of his income from dividends, which are taxed at 15%. That is, they're taxed at 15% after the corporations that distribute them to him are taxed at 35%. That means the income is really taxed at a 44.75% combined rate, ignoring state taxes (and you can bet Nebraska doesn't). But if Warren wants to pay more to the government, he is free to make his check payable to the Bureau of the Public Debt.

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I fear you vastly understate the "true" tax rate at 44.75%. Each dollar flows through the economy numerous times before it is literally worn out and replaced. The cumulative effective tax rate must be at least hundreds of percent. The only way I can see to avoid multiple taxation of the same dollar is to tax it once, at the time it is printed by the Treasury. This not only ensures each dollar is taxed just once, but will also vastly simplify the tax system and increase compliance.

While I slightly disagree with you in that I don't think it is entirely fair the average dentist pays a higher tax rate than the average billionaire, I most definitely concur that the horror of double, or greater, taxation is grossly unfair and must take priority.

Cheers, comrade!

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