What happens is people like Warren Buffett — and he says this himself...pay 15 percent on the millions of dollars that they earn from wealth income... while their secretary is paying a higher rate on her work income. It's not right.
Warren Buffett doesn't just make oodles of dollars, his tax rate on all that money is lower than that of his underlings. At a June 25, 2007 event supporting Edwards' presidential rival, Sen. Hillary Clinton, Buffett pulled out paperwork and told the crowd it was wrong that he pays a lower rate than his subordinates. On his $46.9-million income for 2006, he said, he paid a 17.7 percent tax rate. His secretary and other staffers had a tax rate that was 32.9 percent on average, Buffett told the crowd. The difference is because of the way the Internal Revenue Service treats different types of income. Most of Buffett's income is from investments such as dividend payments and capital gains on sales of assets, which are taxed at 15 percent. Taxes on capital gains and dividends are lower because corporate profits already are taxed at 35 percent by federal law. Some critics say any tax on individuals for capital gains and dividends amounts to double taxations that hurts the economy. Buffett's employees may end up paying at a higher tax rate because standard, earned income, which is the bulk of their income, is taxed at progressively higher brackets up to 35 percent. Edwards borrowed the Buffett moment at the Clinton event to bolster his argument that the capital gains tax rate is too low. Edwards wants the capital gains rate raised back to 28 percent for people earning more than $200,000, its level before President Bush won lower tax rates.
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