Buffett and His Secretary Can’t Get Their Story Straight on Taxes

By: Michael_Patrick_LeahyJanuary 25, 2012

Chalk this up as the first strategic blunder of the Obama campaign. The poster-child of their class warfare narrative, Warren Buffett’s secretary, has just made a tax claim that, if true, reveals her to belong in the top 1% of income earners in America.

The Obama campaign communications team–in this case, ABC News–joined forces this evening with Warren Buffett and his secretary, Debbie Bosanek, to selectively release some information about their personal tax returns. Note that neither Mr. Buffett nor Ms. Bosanek took the transparent approach of  releasing their complete tax returns for the past four years for review by the entire public, as I called on them to do yesterday.

Here’s what they claimed in the ABC  report: “Bosanek pays a tax rate of 35.8 percent of income, while Buffett pays a rate at 17.4 percent.”

It’s hard to interpret this statement without additional information. Do they mean “effective tax rate” or “marginal tax rate” ?

When they say “income,” do they mean total gross income or taxable income?

Since the top marginal rate on taxable income (which kicks in when taxable income exceeds $379,150) is 35%, it’s impossible that Ms. Bosnak’s claim that she pays a tax rate of 35.8 % applies to her taxable income. Since taxable income is always less than total gross income, the claim is even less credible for that measure.

Despite these factual inconsistencies, Bosanek doubled down, putting herself forward as the face of Obama’s tax inequality mantra:

I just feel like an average citizen. I represent the average citizen who needs a voice…Everybody in our office is paying a higher tax rate than Warren.

If she’s really paying a marginal rate of 35%, she’s earning over $379,150 per year in taxable income, which places her in the top 1% of income earners nationally. If this is true, Ms. Bosanek is anything but an average citizen. An average citizen–say someone who earns the median salary of a secretary to a CEO, which is $67, 791, according to a 2011 survey conducted by Certified Compensation Professionals–pays a much lower effective tax rate on taxable income than Ms. Bosanek. Assuming this average citizen took about $15,000 in deductions, she would pay an effective tax rate of 17% on taxable income of $52,791, the same rate Mr. Buffett claims to be paying.

Whether Ms. Bosanek is in fact in the top 1% of earners, or her claims, along with those of Mr. Buffett, are simply not correct is something no one will know for sure until both Ms. Bosanek and Mr. Buffett release their personal tax returns for the last four years.

In either case, as the story continues to unfold it will be painfully obvious to most voters that the Obama campaign’s attempt to portray Ms. Bosanek as the sympathetic face of tax inequality has backfired badly.

Michael Patrick Leahy is the editor of the Voices of the Tea Party e-book series, co-founder of the Nationwide Tea Party Coalition, and co-organizer of Election Day Tea Party 2012. His new book,Covenant of Liberty: The Ideological Origins of the Tea Party Movement, will be published by Broadside Books in spring, 2012. He can be reached on Twitter at @michaelpleahy .

24 Responses to Buffett and His Secretary Can’t Get Their Story Straight on Taxes

  1. Pingback: Instapundit » Blog Archive » THE ONE-PERCENT: Warren Buffett’s Secretary Likely Makes Between $200,000 And $500,000/Year. “I ha…

  2. Steven Jens says:

    Do you suppose she’s including taxes other than federal income tax? Maybe she’s including FICA.

    • Tom says:

      Steven, they probably are including FICA but that doesn’t help very much. Take out 7.65% (and that’s only on the first $106,800) and you still have a claim of 28.15%. Check a tax calculator (here for example: http://www.moneychimp.com/features/tax_brackets.htm) and you literally can’t get to that rate without income of well over 200K (and that’s AFTER all of your deductions and exemptions). She and/or her husband have to be extraordinarily well paid…well into the top 5% and probably approaching 1%.

      • Janie4 says:

        You get to 35.8% then if you include the FICA tax paid by the employer, as well as FICA tax paid by the wage-earner.

      • Janie4,

        There’s no way we can determine how Ms. Bosanek really calculates this 35.8% number until she releases her tax returns for the past four years.

        • Tim Eriksen says:

          Please read Buffett’s editorial in the NY Times from last year. He tells you how he calculates the tax burden. He includes both the employee and employer portion of payroll tax. He also does not use salary but taxable income (salary less deductions and exemptions).

          I can guarantee that Buffett’s secretary pays lower income taxes than Buffett unless she is making a few hundred thousand per year. Reports have her making only $60,000. The only reason her rate APPEARS higher is the way in which it was caclulated.

  3. Steven,

    It’s impossible to determine how Ms. Bosanek arrived at the 35.8% taxation rate she claims she pays until she publicly releases her personal tax returns for the past four years.

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  5. mark l. says:

    so not only does buffet need to pay more taxes…
    his secretary needs to pony up as well.

    how much more is buffet’s secretary willing to pay?

  6. Tom Maguire says:

    As to FICA, it is hardly radical economics to assume that the employee bears the employer’s share of the tax. That means that the effective rate on her first dollar is 15.3%, subject to the cap on Social Security as mentioned above.

    If her gross income is $62,000 and she files as a single woman with the standard exemption and deduction, her Federal income tax (per the H&R Block website for 2011) is about $9,300 – that is an effective Fed rate of 15%. Add FICA, with the employer’s share, and she is at 30.3%.

    I haven’t yet checked the numbers for her claim of a 35% rate (any minute now!. And she is not single, and we don’t know whether she files jointly with her hubby. Still, $62,000 is a long way from $200,000.

    NOTE: This is from the CBO in their discussion of imputed taxes:

    “The burden of taxes levied on businesses actually falls on households. In line with most economists, CBO assumes that the employer’s share of payroll taxes falls on employees and thus assigns those payments to employees both as income and taxes paid. ”

    http://www.cbo.gov/doc.cfm?index=5746&type=0&sequence=1

    • The Other Tom says:

      Tom, there are perfectly good arguments for considering the employer FICA contribution as ultimately coming out of the employee’s pocket. (Although good luck finding the President and his allies describing a payroll tax cut on the employer as being a tax cut for the employee!) But surely that same logic would lead to the conclusion that Warren Buffett effectively bears the 35% corporate tax on his investments. In any case, we can’t have any of these arguments on a knowledgeable basis unless they…release the returns!

  7. Tom Maguire says:

    Does that crow come with fries? Getting to a 35.8% average rate is mighty hard when the top Federal rate is 35% and the uncapped, imputed Medicare is another 2.9%.

    My quick calc for 2010, which roughly jibes with H&R Block for 2011 brackets, is that she would need gross income of $240,000 to have an average overall imputed rate of $35.8%.

    That breaks down as $65,829 of Federal income taxes, $13,243 of Social Security taxes (capped at $106,800 and a 12.4% rate) and uncapped Medicare at 2.9% of $6,960.

    But the shorter answer – show us the returns!

  8. ml says:

    She has to be counting Nebraska State tax

  9. sk says:

    No matter what she earns, she pays too much in income taxes. Don’t we all?

    Saying “Ms. Bosanek is anything but an average citizen” is simply the flip side of Obama’s attempt at fomenting class warfare. Do we really have to go there?

  10. robrubin says:

    I wrote a satricial piece about this on my blog, The Mainland (http://themainland.net) this morning.

    I did my taxes last night and came out with an effective tax rate of 5.94%! So, I blow Buffett, Romney, and everyone else out of the water. And I only make $108,000 a year!

    I did donate a lot of used t-shirts though.

  11. Pingback: The Truth About Buffett and Taxes « Commentary Magazine

  12. Greg says:

    Including the employer portion of FICA is ridiculous. Whoever the CBO “assigns” the payments to, FICA is not a tax in the sense that you give the government a percentage of your income, never to see it again. Every contribution she makes increases her social security benefit in the future. With that logic she could also be counting her IRA and/or pension plan contributions as taxes (wouldn’t surprise me if she is).

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  17. Bill Wolffe says:

    Warren Buffet generated this leverage point issue which is now affecting all of us. It is seeming more likely that Warren and his secretary may have conspired to falsely cause this real damage to occur (like yelling FIRE in a theater when there is no fire).

    Warren and his secretary have an obligation to release their tax returns FOR THE LAST FOUR YEARS.

  18. Pingback: Obama’s Phony Tax Reform | Libertarios of America

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