The “Buffett Rule” is the idea that really rich people like Warren Buffett shouldn’t pay lower effective tax rates than middle-class people, like their secretaries. This sometimes happens when the really rich people in question make much of their money via capital gains, which are taxed at a much lower rate than typical salaries/wages. Buffett has been making this point since the Bush administration.
Today, Warren Buffett said this:
“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 pay a very low tax rate, like me, it would be changed by a minimum tax that would only bring them up to what other people pay."
What Buffett is -- very clearly -- saying is that if you make $50 million in salary as a baseball player or television star, your taxes wouldn’t change under the Buffett Rule, as you’re already paying higher effective taxes than a secretary. If, however, you “make a lot of money and pay a very low tax rate” like Buffett does, because that money comes not from your salary but from, for example, capital gains, you might pay higher taxes.
That is very clearly what Buffett is saying, because that is the whole point of the Buffett Rule in the first place: Certain types of income, like capital gains, are taxed at a low rate, allowing a small number of super-rich people who have a great deal of capital gains income to pay lower effective taxes than middle-class people who don’t have much capital gains income. I can’t state clearly enough: This is the whole point of the Buffett Rule.
Now, here’s how ABC reported Buffett’s comments:
“Later on CNBC Buffett said if it were up to him, people earning $50 million would not see any tax increases, only people who ‘make a lot of money and pay a very low tax rate, like me.’ Buffett did not put on a number on what he considers a ‘very high income.’”
This is absolute nonsense, and suggests a complete misunderstanding of what the Buffett Rule is and how tax rates differ for different types of income. Buffett absolutely did not say that “if it were up to him, people earning $50 million would not see any tax increases.” It simply didn’t happen. He said that people who earn $50 million in salary and therefore already pay (relatively) high taxes wouldn’t see increases. But if they “pay a very low tax rate” on $50 million in capital gains income, they would see tax increases if it were up to Buffett.
Buffett was very clearly talking about types of income, not levels. This is obvious from the fact that he mentioned two specific professions -- athletes and television stars -- and from the fact that, again, this is the whole point of the Buffett Rule. So ABC’s statement that “Buffett did not put a number on what he considers a ‘very high income’ misses the point entirely. And ABC’s claim that Buffett said “people earning $50 million would not see any tax increases” is simply false.
And, again, this is a point Buffett has been making for several years. It isn’t new. It isn’t particularly complicated. Anyone who has any knowledge of either the point Buffett has been making for years or the disparate taxation of capital gains and income from wages should have immediately understood what Buffett was saying today. And anyone who doesn’t have that knowledge probably shouldn’t be in charge of producing reporting about those topics.
There are other problems with the ABC report. The most fundamental problem is that it suggests Buffett does not support the Buffett Rule, which is absolute nonsense. He has for years, he did today, and he will tomorrow. I focus here on the $50 million part because it’s simply a flagrant misquote, and one that suggests that the people responsible simply have no understanding of the topic they’re covering.