American Republic Online

Warren Buffett has issued a challenge to his fellow billionaires:

“I’ll bet a million dollars against any member of the Forbes 400 who challenges me that the average (federal tax rate including income and payroll taxes) for the Forbes 400 will be less than the average of their receptionists.”  

I don’t think I’d take that bet.  As Phillip Ruffin points out, “He is forgetting about the 55% estate tax at death that goes along with making the money…”  and with that it is probably more than the receptionists’ combined lifetime earnings.  However, Buffett makes a very good point: the very rich don’t really pay taxes.  It comes down to a pesky little thing that politicians don’t really bring up.  The whole “raise taxes on the rich” really means “raise taxes on the high income earners.” You see, our system of taxation is based on income, not wealth.  Once you reach a certain amount of wealth, you tend to not bring in as much income, and as a result tend not to pay much income taxes.  It is a fine line, but a big difference.  So when politicians promise to raise taxes on the rich, they are really raising taxes on those in higher income brackets.  It really has little to do with the really really rich.  When they point to people like Paris Hilton and Bill Gates and say we need to raise taxes on the rich, they do so with a wink.

On the other hand, there is a way to better tax these super rich: the Fair Tax (yup, you knew this was coming).  You can tax every single dollar they spend, without having to worry about all the crazy different ways they keep from paying income taxes.  That is, if taxing the rich like crazy is what you’re really after…