Why Buffett pays less than his secretary



The payroll tax -- a.k.a. the Social Security tax, the Social Security and Medicare tax, or the Federal Insurance Contributions Act (FICA) tax -- skims around fifteen per cent from the payroll of every business and the paycheck of every worker, from minimum-wage burger-flippers on up, with no deductions. No exemptions, either -- except that everything above a hundred grand or so a year is untouched, which means that as salaries climb into the stratosphere the tax, as a percentage, shrinks to a speck far below. This is one reason that Warren Buffett's secretary (as her boss has unproudly noted) pays Uncle Sam a higher share of her income than he does.

One reason, yes, but by no stretch of the imagination is it the main one. The main reason Warren Buffett pays less than his secretary is that his dividends and capital gains are taxed at a lower rate than his secretary's salary income. (Warren says he pays 17.7% of his total income in taxes.) You can watch Warren explaining this here.

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Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.

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