Obama's Tax Plan Tackles 'Warren Buffet Problem'
President-elect Barack Obama's tax plan, which would increase the tax on capital gains for higher income taxpayers, is designed to combat what Emory Law federal tax expert Dorothy Brown calls "the Warren Buffet problem."
"In 2006, Warren Buffett had $46 million of taxable income and his secretary earned $60,000. Warren Buffett’s tax rate was 17.7 percent and his secretary’s was 30 percent," explains Brown. "Even Warren Buffet thinks something is wrong with this picture."
The reason that Buffett pays a lower rate when compared with his secretary, says Brown, is due to the tax code taxing wages at higher rates than capital gains (income from the sale of stocks or capital gains and qualified dividend income). "Warren Buffet has significant income from capital gains and dividend income taxed at the low capital gains rate.
Obama's tax plan, with numerous tax breaks for low and middle income taxpayers, would make the tax code more progressive," says Brown, "which means higher income taxpayers ($250,000 and above for a married couple) will pay higher tax rates on their wages and capital gains."
Brown, professor of law, specializes in federal tax law and critical race theory and is known for her work examining the racial implications of federal tax policy. She has been an adviser to J. Stephen Swift of the U.S. Tax Court, an associate with Haynes & Miller in Washington, D.C., and an investment banker at New York’s Drexel, Burnham & Lambert. She also was a special assistant to the Federal Housing Commissioner at the U.S. Department of Housing and Urban Development.
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