How Buffett's Plan Cuts Taxes for Some of the Wealthy
In fact, it could potentially cut taxes for many high-income households.
Under Buffett's plan, households that make $1 million or more per year would pay an overall tax rate of 30%, and families that make $10 million or more would pay 35%. These tax rates are significantly lower than the current levels: In the 2011 tax schedule, the 33% tax rate kicks in at $174,401 and the 35% bracket starts at $379,151. In other words, people who bring home $1 million or more per year are already supposed to pay 35%, so Buffett's proposed 30% rate would be a 5% cut.
But actually, the cuts are even deeper: On Squawk Box, Buffett claimed that the tax rates he was proposing would include payroll taxes. Normally, these taxes -- which are about 1.4% of income for the wealthiest earners -- are added to regular income taxes, so an executive with a $1 million salary pays 36.4% of his salary in taxes. Under Buffett's plan, however, that executive would pay just 30% -- a tax cut of 6.4%, or $64,000.
Buffett himself fits into the second group: In 2010, he made most of his money through investments, and paid income taxes of just 17.4%. By comparison, the 20 employees in his office -- who derived most of their income from their salaries -- paid taxes at rates ranging from 33% and 41%. Under his proposal, Buffett's rate would increase to 35%, more than doubling his taxes and putting his payout to the IRS more in line with those of his employees.
Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at email@example.com, or follow him on Twitter at @bruce1971.