Thanks to countless deductions and credits, the federal income tax brackets are ruined.
Few people pay 10%, 15%, 25%, 28%, 33% or 35% of even their “marginal” dollar in income taxes. So, Monday’s proposal from President Barack Obama is really about average tax rates.
The plan picks up on one of Warren Buffett’s frequently cited notions — that the richest Americans pay a lower percent of their income in taxes than those earning far less. A progressive tax system, such as the one purportedly used in the United States, is designedto do the opposite.
The Obama Administration has posited the “Buffett rule”to guarantee that “people making more than $1 million a year should not pay a smaller share of their income in taxes than middle class families.” Monday’s announcement also calls for the expiration of the 2001 tax cuts, which lowered income tax ratesacross the board, and the2003 tax cuts, which reduced tax rates on dividends and capital gains .
Based on effective tax rates alone, Buffett’s contention is true. Of the 400 largest individual taxreturns in 2008, 243 had an average tax rate under 20%. Similarly, the top 0.1% of tax filers by adjusted-gross income have had lower average tax rates relative to the top 1% of returns since 2004. Why does this happen? A mix of deductions, qualified dividends and capital gains (taxed at 15%) have helped even WarrenBuffett cut his tax bill .
Here’s how it works using tax returns from 2009:
*. For returns reporting$100,000-$200,000 adjusted gross income, an average return had$135,000 in total income, of which$115,000 was from salaries and wages, taxed at marginal tax rates. The average return reported just over $3,000 in qualifieddividends, $16,000 in net gains and $800 of tax-exempt interest. So,15% of the income mix pays no more than a 15% tax rate.
*. For returns reporting$500,000-$1,000,000 adjusted gross income, an average return had$688,000 in total income, of which$440,000 was from salaries and wages, taxed at marginal rates.The average return reported $25,000 in qualified dividends,$179,000 in net gains and $31,000 in tax-exempt interest. So,34% of the income mix pays no more than a 15% tax rate.
As qualified dividends, capital gains and tax-exempt interest makeup more of total income, the effective tax rate declines.*
How you view your own taxes, net of deductions and credits, may help youdetermine where you come down in the debate. Is it possible that with smart tax planning and deduction, you couldwhittle your effective rate down to the levels ofthe mega-rich. Our effective tax rate calculator will tell you how much tax you might owe and what your average tax rate is on total income. (Use your 2010 return as a guide.) And if you’re still confused by the seven numbers at the beginning of this post, our marginal tax rate calculator will help you determine how much more you’d have to earn to get to the next bracket.
* For 2009, the average tax rate on a return claiming $100-$200k in adjusted gross income (the basis for the first example) paid an effective 13% tax rate. The average tax rate on areturn claiming$500k-$1m in adjusted gross income (the basis for the second example) paid an effective 25% taxrate.

Warren Buffett Does Not Endorse WH's "Buffett Rule"


CNBC: "Let’s talk about the Buffett Rule for a moment."

Buffett: "Uh-huh."

CNBC: "Talk to you about how it came about in terms of the White House getting in touch with you and you putting your name to this."

Buffett: "Well Gene Sperling called and said 'can we use your name' and I said 'yes.'"

CNBC: "Are you happy you said 'yes?'"

Buffett: "Sure. I mean I wrote about it."

CNBC: "Are you happy that the way it is being described. Is the program that the White House has presented a million dollars and over your program? "

Buffett: "Well, the precise program which will -- I don't know what their program will be. My program would be on the very high incomes that are taxed very low. Not just high incomes. Somebody making $50 million a year playing baseball, his taxes won't change. Make $50 million a year appearing on television, his income won't change. But, if they make a lot of money and they pay a very low tax rate, like me, it would be changed by a minimum tax that would only bring them up to what the other people pay."

CNBC: "Does that mean you disagree with the president's new jobs proposal which would be paid for by raising taxes on households with incomes of over $250,000?"

Buffett: "That's another program that I won't be discussing. My program is to have a tax on ultra-rich people who are paying very low tax rates. Not just all the rich people. It would probably apply to 50,000 people in a population of 300 million."

CNBC: "So that means you disagree with the president on the $250,000?"

Buffett: "No, no. You may disagree with him."

CNBC: "So you agree, $250,000 is the right number?"

Buffett: "I will look at the overall plan that gets submitted to Congress, and which they are voting on, and decide net, “do I like it or do I not like it”. There is no question, there will be parts I’ll disagree with."

CNBC: "And are you a supporter of his jobs program right now?"

Buffett: "I am supporter of the action he is trying to get the Congress to join him in taking to really do something, rather than sit there and go in different directions."

CNBC: "Do you agree with all the details?"

Buffett: "I haven’t looked at all the details."

CNBC: "Ok, fair enough."

url]http://www.realclearpolitics.com/video/2011/09/30/warren_buffett_does_not_endorse_buffett_rule.html

Where is that thumbs up when you need it?
I like the Republican "Buffett Rule"...Warren Buffett does not have to take the deductions, but he does...Then he whines about the ultra wealthy not being taxed enough...Kind of hypocritical isn't it?
The Republican "Buffett Rule" ..Starting next year, taxpayers can donate $1 to the Treasury fund for the purpose of deficit reduction...Warren can donate as much as he pleases, maybe even offset what he thinks he is not paying but should pay...Come on Warren, phony, I MEAN PONY up...

he could send a little bit extra to the Treasury every year!

Yes, of course...But would anything less than 20% of what he made on Goldman be newsworthy enough?

I wish they did have a voluntary tax, I think the balance between those that want to help and those who want to pinch every dime would still come out to a pretty big deduction in the deficit


or a voluntary deficit deduction fund,,