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Warren Buffett’s Secretary – An Open Letter

Dear Ms. Warren Buffett’s Secretary,

First, and on behalf of everyone who feels as I do, please accept our heartfelt condolence that you have been thrust onto the stage of national demagoguery and class-warfare.  I can’t imagine being constantly referred to as: “Warren Buffett’s Secretary” on the national news and in speeches by the President of the United States of America.  Having your personal income tax rate not only held up for scrutiny, but co-opted as the basis for raising taxes on someone else (someone who’s done you no harm that you are aware of), must also be an uncomfortable position indeed, made all the more so by the fact that your own boss put you there.  Having said that… I feel compelled to answer the question that has thrust you into the hot spotlight of public scrutiny and in so doing, I hope to stop this before you become, like Farrah Fawcett before you, the poster child of prurient interest.

The question: Why do you, Warren Buffett’s Secretary, pay a greater tax rate than your boss Warren Buffett?

This was less than ably restated by the President of the United States of America today in his speech on raising taxes… I mean taming the deficit: “Warren Buffett’s secretary should not pay more in taxes than Warren Buffet.” You see, this is how demagoguery can get out of hand and the next thing you know, you are thumbtacked on bedroom walls all over the nation.  So, before we can explain why you pay a higher rate than your boss, we must first help POTUS understand the different between a tax rate, and taxes paid.  Mr. President, Warren Buffett’s Secretary pays a higher rate (a higher percentage) of her income in income taxes.  This in no way suggests she pays more… as a matter of fact, Warren Buffett pays a great deal more taxes than his Secretary does; he just pays a lower combined rate.

To answer the specific question then: You, Warren Buffett’s Secretary, pay a higher rate of tax on your income because you, even being the hard working and integral part of Warren Buffett’s operation that you most assuredly must be, are trading time for money… That is to say, you show up each day willing to trade a certain number of your hours working for Warren Buffett, in exchange for money.  If anyone hears a negative connotation in that statement, you are mistaken.  There is absolutely nothing negative about working for a salary or on an hourly basis and, as it so happens, it’s quite necessary: one person may figure out a new sprinkler system that saves substantial water, but it means nothing if there isn’t someone else to dig the ditches.

In your specific case, Ms. Warren Buffett’s Secretary, you are taxed for collecting a salary.  (The validity and morality of that coerced confiscation of your income by the government is another conversation altogether.)  Mr. Buffett, on the other hand, is taxed for collecting a profit on an investment (again, we’ll leave the validity of that confiscation alone for purposes of this discussion), and that tax rate is lower.  This is beginning to make sense now, right?  The tax rate for return on investment is lower than that on ordinary income because investment is what creates our economic engine.  When a person is willing to trade their time for money, they are taxed one rate.  But if a person is willing to trade their capital and their expertise… if they are willing to risk that which is theirs, and invest in creating more, they merit a lower tax rate.  You see, to the degree that tax policies are used to influence behavior, one wants to incentivize entrepreneurs over income collectors.  Put another way: those who take risk are wealth producers, whereas everyone else (e.g. salaried employees) are… overhead.  As a matter of smart economic policy, we encourage production and note its impact on the economy as superior to that of overhead.  (Present administration excepted…)

I hope this letter has helped you understand why you, as Warren Buffett’s Secretary, pay a higher income tax rate, but much less in actual taxes.  And if despite this explanation, you do find yourself trapped in the class warfare demagoguery being advanced by the President, remember to wear a red bathing suit… it worked for Farrah Fawcett!

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  • 12 comments

    12 Comments so far

    1. Don Reedy September 19th, 2011 10:15 am

      Dear Mr. Don Reedy’s Guru,

      This piece has me in pieces of laughter and admiration. An example of clear thinking, wrapped in a simple analogy, penned for those of us who spend far too much time engaged in political demagoguery.

      Sorry I can’t stay long to talk. I have to go back to investing time and expertise into making money.

    2. Sean Purcell September 19th, 2011 11:27 am

      Thanks Don, for letting me know that I had written an example of “clear thinking.” I promptly went back in and edited the post to make it less clear… thus being more in line with the national dialogue. I appreciate the head’s up…

    3. Tim Riggins September 19th, 2011 12:13 pm

      I appreciate this article because I listen to some people how are upset with having to pay higher taxes then they’re employer, but people don’t take under consideration that the employer actually deserves the lower taxes.

    4. Ryan September 19th, 2011 4:41 pm

      Regarding paragraph #3: you misquoted the president. He did include the word “rate” in there. “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There’s no justification for it.”

      This is according to the Christian Science Monitor and the Washington Post.

      Additionally, this quote is not from today’s speech, as you stated it is. There was no mention of Buffett’s secretary (or receptionist) in today’s speech.

    5. Greg Swann September 19th, 2011 4:54 pm

      I agree with Ryan. No American has the right to make Obama look even stupider than Obama himself does. I’m reporting you to @attackwatch.

    6. Sean Purcell September 19th, 2011 5:00 pm

      @Ryan – the speech was, in fact, delivered today, at the White House, as you can read here.

      I did misquote him afterall though. I went with what I heard combined with only 1 quick Google search… should have been more diligent. As Greg pointed out above, kicking a man when he’s already down is poor form.

    7. Ryan September 19th, 2011 5:03 pm

      I think it would be useful to include some hard numbers here. Sean, I like your point about the difference between taxing salaries and taxing profits from investments. But, regardless, I bet a lot of people would shut up if someone posted, “even though Buffett’s tax rate is lower than his secretary’s, he still pays $xx,xxx in taxes per year, while his secretary pays $xxx. Because, as I pointed out, while the President pay not be confused about the difference between taxes paid and tax rates, I imagine that a lot of people are. Having those hard numbers out there (rather than obscure “rates”) might alter the discussion a bit.

    8. Ryan September 19th, 2011 5:10 pm

      Sean – Ah, I was looking at this transcript of the speech, and didn’t see a mention of a secretary. http://tpmdc.talkingpointsmemo.com/2011/09/full-text-president-obamas-buffett-tax-address.php

      Uh, guess that’s not a full transcript.

    9. Jim Klein September 19th, 2011 5:51 pm

      Who needs a transcript? Can’t we just vote on it?

    10. Greg Swann September 19th, 2011 7:29 pm

      > As Greg pointed out above, kicking a man when he’s already down is poor form.

      This is not what you’re doing here, I’m just lobbing spitballs. You have my apologies.

      I do think, though, that the shitstorm that is only just now brewing will be hugely unfair to Obama — who, after all, is just a congenital apple-polisher fallen victim to the Peter Principle.

      But: Not since King Lear has anyone been quite so insistent in asking for a shitstorm to befall him. True justice would be ignominy followed by obscurity — but Obama will not be that lucky.

      The most reliable imprimatur of democracy is satire. It doesn’t matter which politician you have the right to vote for, if you don’t also have the right to mock that jackass in office.

      The ugly parts of human history occur when every other jackass gets in the game. All satire is cruel — all comedy turns on pain. But satire in the service of nothing but groupthink is nothing but cruel. It is cruelty as an expression of group identity — just like any scourging — or human sacrifice.

      Even so: Heat/kitchen, dogs/fleas, pots/kettles, etc. Every insult is actually an ad hominem appeal — as much as I might try to claim otherwise when it’s me cracking the jokes — but no one is so enamored of the “argument” of comic dismissal as Obama.

      That much might be more fun if he were funnier, like Clinton, or if he were funniest in self-deprecation, like Reagan. Obama is funny like a a congenital apple-polisher — not funny.

      Too bad for him. The rationalization known as “He hit me first!” is the conflation of the fallacies tu quoque and two-wrongs-make-a-right. This comes down to invalidities rationalizing invalidities, preachy jokes without end, amen.

      To think of this as philosophy, we are literally ladling calculation upon comedy. But in the end, just or unjust, this is Obama’s unhappy fate. I hope for his sake he is a stronger man than he seems to be.

    11. Chris September 20th, 2011 12:43 pm

      “The validity and morality of that coerced confiscation of your income by the government is another conversation altogether.”

      Ohhh, when is this conversation going down because I want to be there. =]

      @Sean – Kudos for a very well written article that highlights a fraction of the almighty spin machine.

    12. Missy Caulk September 23rd, 2011 4:18 pm

      Love it!!