This piece of journalistic sleuthing by Forbes' Paul Gregory is almost too good to check. The headline alone made me laugh out loud. Wherein Barack Obama's poster child "victim" of American income inequality turns out to be a "millionaire," by his own definition:
We can get an approximate answer [of how much she earns] by consulting IRS data on tax rates by adjusted gross income, which would approximate her salary, assuming she does not have significant dividend, interest or capital-gains income (like her boss). I assume Buffet keeps her too busy for her to hold a second job. I also do not know if she is married and filing jointly. If so, it is deceptive for Obama to use her as an example. The higher rate may be due to her husband’s income. So I assume the tax rate Obama refers to is from her own earnings. Insofar as Buffet (like Mitt Romney) earns income primarily from capital gains, which are taxed at 15 percent (and according to Obama need to be raised for reasons of fairness), we need to determine how much income a taxpayer like Bosanek must earn in order to pay an average tax rate above fifteen percent. This is easy to do.
The IRS publishes detailed tax tables by income level. The latest results are for 2009. They show that taxpayers earning an adjusted gross income between $100,000 and $200,000 pay an average rate of twelve percent. This is below Buffet’s rate; so she must earn more than that. Taxpayers earning adjusted gross incomes of $200,000 to $500,000, pay an average tax rate of nineteen percent. Therefore Buffet must pay Debbie Bosanke a salary above two hundred thousand.
Gregory's methodology and assumptions seem pretty reasonable to me. If most of Bosanke's income flows from capital gains or dividends, she's taxed at the same rate as her boss. If she and her husband combined bank well into six figures (in Nebraska no less), it's completely disingenuous for President Obama to hold her up as a archetype of the supposedly downtrodden, betrayed middle class. Hell, if Warren resolves Berkshire Hathaway's lengthy dispute with the IRS in a favorable manner and celebrates by offering good old Debbie a generous raise, who knows? She might actually be subjected to the "Buffett Rule" herself! Imagine that. Of course, the dopey rule is really just an election year ploy by our Class Warrior In Chief. The plan has been likened to an Alternative Minimum Tax by the White House, which offers us a great opportunity to revisit how well Congress' last AMT "millionaires" worked out:
Congress created the AMT in 1969 to prevent 155 wealthy taxpayers from using deductions and credits to avoid paying any federal income taxes. Here’s how it works. Taxpayers subject to the AMT must calculate their tax liability twice: once under regular income tax rules and again under AMT rules. If liability under the AMT proves higher, taxpayers pay the difference as an add-on to the regular tax. The difference paid is their AMT.
When the regular income tax was indexed for inflation in 1981, however, Congressthe AMT. So the AMT’s reach has expanded over time to hit middle-income people it was never intended to tax. As a result, the AMT affects a growing share of the population. And it could get worse.
I'm sure this Congress wouldn't be quite so sloppy, right? A few parting thoughts: First, the indispensable Jim Pethokoukis reminds us what a crock Obama's "fair share" nonsense is in the first place:
1. The top 1 percent pay 36.7 percent of federal income taxes and earn 16.9 percent of adjusted gross income (as of 2009).
2. The top 0.1 percent pay 17.1 percent of taxes and earn 7.8 percent of adjusted gross income.
3. The average income tax rate for the top 1 percent is 24 percent. The bottom 50 percent? Just 1.85 percent.
4. The bottom 50 percent pay just 2.3 percent of income taxes.
Click through to discover just how impactful jacking up taxes on millionaires would be in alleviating our debt burden. (Hint: almost nil). Pethokoukis also points out that average taxpayers pay a much lower overall effective tax rate than the wealthiest Americans. Also, since the 1970s, median incomes and quality of life standards for average Americans have improved steadily. More than half of households in the bottom tax bracket in 1996 had crossed into a higher one by 2005 -- a sign of income mobility. Even as the rich got richer, so did everyone else, on the whole. Wealth is not a zero-sum game, and taxing successful people does not foster growth -- which is the key to growing the pie that Leftists are so eager to carve up and redistribute.
While a slim plurality of Americans believe our economic system is "unfair," the vast majority of the public (especially Democrats!) say the system is fair to them, personally. Very interesting.
UPDATE - I've gotten a few tweets and comments from Lefties accusing me of hypocrisy for attacking Ms. Bosanke's wealth. I'm not doing that at all. I'm underscoring the irony of President Obama trotting out a "millionaire" (under his parameters) as a political pawn to showcase how tough middle class folks have it in America. I've also heard bellyaching about the Right targeting a private citizen because of her politics. Sort of like Joe the Plumber? Except in this case, no one illegally raided Ms. Bosanke's confidential data to dig up dirt. Also, this private citizen knowingly allowed herself to be used as a prop by the President of the United States on national television. So aside from those points, the two examples are exactly the same.
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