Let's suppose Buffett's secretary is a single person, a renter, no kids, and makes no IRA contribution (or any other gross income adjustments) and claims the standard deductions. This scenario places the secretary in the highest possible income tax bracket. But after the standard deduction ($5,150) and one personal exemption ($3,300), the secretary's taxable income becomes $51,550 -- the 25 percent tax bracket. This means the secretary pays $9,439 in taxes -- or 15.7 percent of the $60,000 annual income. Assuming the secretary lives in Nebraska (where Buffett is headquartered), with its highest income tax bracket at 6.84 percent, the secretary pays $2,663 to the state, or another 4.4 percent of the $60,000. Altogether, this gives the secretary a total tax rate of 20.1 percent.
Throw in one kid under 17 years of age, and a $4,000 contribution to an IRA, and this single parent secretary -- still renting and claiming the standard deduction -- now has a taxable income of $41,850. With one child tax credit, secretary pays $4,814 in federal income taxes, just 8 percent of the $60,000-per-year income. Single-parent secretary also pays $2,076 in income taxes to Nebraska, for a total of 11.5 percent of the $60,000 per year annual income.
Now suppose we're talking about a married secretary, with a stay-at-home spouse. They file jointly, pay a home mortgage and have two kids under the age of 17. They place $4,000 in an IRA and itemize $15,000 in deductions. Here the tax picture changes dramatically. Taxable income drops to $27,800 -- the 15 percent tax bracket. With child tax credits, secretary now pays $1,419 in federal taxes, or 2.4 percent of $60,000. Add in another 2 percent for $1,218 in state taxes, and secretary pays a grand total, state and federal, of 4.4 percent on the $60,000-a-year salary.
An online search of Buffett's comments found not a single news story (as opposed to an editorial) questioning his assertion that he pays a higher tax rate than does his secretary.
During his speech, Buffett also explained why he became a Democrat. Republicans, he says, think, "I'm making $80 million a year. God must have intended me to have a lower tax rate." Interesting. Does Buffett know that Republicans donate more money to charity than do Democrats? In his book "Who Really Cares," author Arthur Brooks explains why. Republicans believe in limited government, and therefore feel the responsibility to help the needy falls on their shoulders. Additionally, the Republican Party contains more religious people than the Democratic Party, and the religious give more than their non-religious counterparts.
Maybe God wants lower income tax brackets in order to provide more disposable income. That way people can -- as Buffett does -- give more to the needy.