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Monday, October 17, 2011

Buffeting Cain

Herman Cain is campaigning on the 9-9-9 tax reform plan. Certainly anybody who does their own taxes will appreciate the need for simplification and tax reform.

 

 

But Cain’s plan is a giveaway for the rich. Warren Buffet, who feels the rich are undertaxed, would pay even less taxes – perhaps zero income tax.

 

 

http://news.yahoo.com/blogs/lookout/warren-buffett-likely-pay-no-income-taxes-under-215446867.html

 

 

“If the "9-9-9" tax plan promoted by Herman Cain, a leading Republican presidential candidate, had been the law of the land last year, Warren Buffett would very likely have paid no income taxes, according to an analysis prepared for Yahoo News and The Lookout by the American Institute of Certified Public Accountants. At most, Buffett would have paid taxes on just 1 percent of his income.”

 

 

Why?

 

“…the bulk of Buffett's taxable income came from capital gains. Cain's 9-9-9 plan would eliminate taxes on capital gains.  According to Labant's rough calculation, Buffett's ordinary income, outside of capital gains, comes to around $4.9 million. At Cain's proposed rate of 9 percent, Buffett would pay around $440,000 in income tax--1.1 percent of the approximately $40 million in taxable income, after deducting for charitable giving and local taxes, Buffett earned last year.”

 

But won’t Buffet pay those other “9” taxes?

 

One of the 9’s is corporate income taxes.  His companies would pay these, but not him.

The other 9 is a sales tax. Sure, he’ll pay that, but in general as you get richer you spend a lower percentage of your income on taxable items, so as a percentage of his income or wealth the 9% sales tax isn’t that much.  For someone who spends everything they make, 9% is essentially 9% of their income.