Here’s an article of mine on rich guilt, positing that Warren Buffett perhaps (emphasis on perhaps) could harbor that emotion. He famously says that his tax rate is lower than that of his secretary. My instinct was to give him the benefit of the doubt on that, because based on what I’ve read about the man, he seems of high moral character.
But in researching the article, I looked into his claim. First there’s the well-known observation that if you take his corporate taxes into account, his tax rate is a lot higher than that of his secretary. Technically he’s referring to individual tax rates so we’ll put that aside for now.
But who is this secretary that he talks about so much? He doesn’t say. Is that her or his official title? Or is it “executive assistant” or something along those lines? If the latter, why doesn’t he refer to her or him as “my executive assistant”?
In any event, in order for her or him to have an effective tax rate higher than Mr. Buffett’s claimed 17.4 percent rate, the secretary must be one very highly paid secretary – much more highly paid than a typical secretary.
Mr. Buffett’s reportedly said that his secretary makes $60K a year. But as Chris Edwards at the Cato Institute points out, at that salary it’s difficult to see how she can be paying a higher tax rate than Mr. Buffett. Could it be that she’s married to a high-earning spouse?
A typical secretary in the U.S. makes on the order of $30K-$40K a year. So when people hear Mr. Buffett and President Obama talk about Mr. Buffett’s “secretary”, they naturally think that her income is modest. The title “receptionist” also has been used in Mr. Buffett’s tax rate comparison, and people certainly associate receptionists as people with modest pay as well.
So Messrs. Buffett and Obama are leading Americans to believe that $35K-a-year secretaries and receptionists are paying a higher tax rate than billionaires.
But the effective tax rate on people making that salary is very low; near zero in many cases. Here’s what the left-leaning PolitiFact had to say:
Most secretaries don’t make that much. Salary.com put the average salary for an entry-level secretary at $33,249. The top marginal rate for the secretary would be 15 percent, and then typical deductions and exemptions would reduce the tax burden even more. If the secretary had children and no other income, the likely income tax burden would be zero.
In order for Mr. Buffett’s secretary to pay a higher effective tax rate than him, she would have to be earning on the order of at least $100K to $200K a year. And at that rate, she’s almost in Mr. Obama’s infamous “top 1 percent” – the folks who Obama wants to tax more based on Mr. Buffett’s secretary tale!
Mr. Buffett, you do realize, don’t you, that when you talk about secretaries, the vast majority of Americans think you’re talking about people making on the order of $30K-$40K? They are therefore being misled into believing that Americans of modest incomes are paying higher tax rates than the wealthy.
For example, MoveOn.org made an “I’m Warren Buffett’s Secretary” ad in which someone saying they have three kids and make $40K a year has a higher tax rate than millionaires and billionaires, which is clearly false. (That’s particularly false vis-a-vis millionaires, many of whom pay more income taxes than dividends or capital gains taxes.)
You’re a man of high moral character, and I can’t imagine that you deliberately would want to leave Americans with this misconception. So I recommend that you state exactly how much your secretary earns, his or her exact title, and whether his or her salary is vastly above what typical secretaries in America make.