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Warren Buffett has now released a few more details about his 2010 tax bill which show he paid just 11.06% of his adjusted gross income in federal income taxes last year---considerably less than the rate for the 400 highest income taxpayers, or for folks earning $100,000 to $200,000 a year.
According to a letter Buffett sent to Rep. Tim Huelskamp (R-Kansas) that the Congressman posted here, the billionaire had adjusted gross income in 2010 of $62,855,038, taxable income of $39,814,784, and a federal income tax bill of$6,923,494. That makes his effective tax rate, as a percentage of AGI, just 11.06%, compared to an average effective rate in 2008 (the most recent year available) of 18.1% of AGI for the 400 taxpayers with the largest incomes, according to figures reported by the Internal Revenue Service. (Huelskamp has echoed The Wall Street Journal editorial page's demand that Buffett release his full return---a step Buffett says he'll happily take when Rupert Murdoch, chairman and CEO of WSJ owner News Corp., releases his tax return too.)
Buffett, the founder and CEO of Berkshire Hathaway, has made himself into a poster boy for tax reform by arguing in a New York Times op-ed and elsewhere that he is taxed at a far lower rate than his office staff and by calling for the “super-rich” to be coddled less and taxed more. That, in turn, has led President Barack Obama to call for tax reform to follow a “Buffett rule” ---namely that millionaires should pay taxes at a higher rate than their secretaries and plumbers.
The new figures don’t suggest anything untoward on Buffett’s part and, if anything, strengthen his case. Previously, he had said he paid 17.4% of his taxable income to Uncle Sam, including payroll taxes for Medicare and Social Security. It’s not surprising that Buffett’s rate, as a percentage of AGI, is significantly lower than as a percentage of taxable income. Taxable income is the smaller number you get after claiming deductions for charitable contributions, state and local taxes and the like. Moreover, since Buffett pays himself a salary of just $100,000 a year, most of his income comes from investments---long term capital gains and dividends--taxed at a special top rate of 15%. By contrast, some of the highest income taxpayers operate their businesses as privately held S corporations, which means that the businesses themselves pay no taxes, but pass through all their profits to their owners’ 1040s, where it is taxed at the ordinary top rate of 35%. (For example, that explains why, according to the government, billionaire Andrew Beal tried to stockpile more than $4 billion in artificial tax losses from the now disallowed DAD tax shelter to offset his future personal income---all the profits from Beal Financial Corp. were landing on his tax return. Beal insists the losses were proper.)
Here, for 2008 (as reported by the IRS and calculated by Forbes) are the average effective individual income tax rates, as a percentage of adjusted gross income, for various income groups.
| Size of AGI | Average Tax |
| (in $) 2008 | % of AGI |
| 1-25,000 | 1.76 |
| 25-50,000 | 5.32 |
| 50-100,000 | 8.41 |
| 100-200,000 | 12.59 |
| 200-500,000 | 19.50 |
| 500-1,000,000 | 23.92 |
| 1-10,000,000 | 24.47 |
| 10,000,000 + | 20.89 |
| 109,736,000+ | 18.11 |
| (top 400) |
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