Jeff  Carter

Mr. Buffett has had a great career buying companies and integrating them into his empire. He ought to stick to that. His recent editorial in the New York Times shows the flaws in many arguments that come from the left.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.

Last time I checked, it was an all volunteer force. Since we stopped picking winners and losers by ending the draft, our force has matured into the best fighting force in the world. The rich kids that walk the hallowed halls of the top universities in the US didn’t even have ROTC until last year. I suppose if a Republican is elected President again, they will find a way to pull the rug out of ROTC again. Rich kids can join the armed forces at any time up to age 26, same as everyone else. Our tax code ought to be applied in the same way.

Buffett is upset at the way the mega rich are taxed. People respond to incentives and his argument and behavior clearly show why taxes are simply incentives to behavior. Mr. Buffett doesn’t draw much of a salary, and lives off his capital appreciation and dividends. Most of us can’t do that, but we all aspire to that. Why? 15% tax rate. I notice that when it comes time to dissolve his empire, he is donating most of the money to charity to avoid the onerous estate taxes the little people get to pay.

Mr. Buffett goes on in his folksy manner. Don’t underestimate him, he is a genius.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

Guess what. Most people in the US pay an effective rate of 19% no matter what their marginal rate is. I don’t know the particulars of how Mr. Buffett pays his office employees, but if they are paying 36% on average it’s far higher than most Americans’ effective marginal rate.

Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.