Possibly. Like Supa says, he didn't provide the details. A secretary making 200,000 to 400,000 bucks isn't a typical secretary.
It really makes the point less valid if it isn't true. And it is a point that has lots of traction as part of our recent political discourse. I hear it constantly. If it isn't true why isn't the point immediately dismissed by the media and the president as a lie?
But to be paying a rate of 34% she would have to be makeing between 2.5 and 3 million. Unless he is adding employee and employer share of payroll tax at which point she would only have to make about 1.5 million for his "parable" to be accurate.
Because the lie is in line with the narrative of the administration, that the rich are getting away with something. CBO data indicates the rich pay the highest effective rate, and that the portion of the tax burden they pay is higher than the portion of total income they receive. Meanwhile the working poor and the lower middle class have negative effective tax rates.
Lets talk about that "effective" tax rate. There has always been something confusing about it and I can't quite put my finger on it. According to Wikipedia . . . The term effective tax rate has significantly different meanings when used in different contexts or by different sources. Generally it means some amount of tax divided by some amount of income or other tax base. In International Accounting Standard 12, it is defined as income tax expense or benefit for accounting purposes divided by accounting profit. In Generally Accepted Accounting Principles (United States), the term is used in official guidance only with respect to determining income tax expense for interim (e.g., quarterly) periods by multiplying accounting income by an "estimated annual effective tax rate," the definition of which rate varies depending on the reporting entity's circumstances.In U.S. income tax law, the term is used in relation to determining whether a foreign income tax on specific types of income exceeds a certain percentage of U.S. tax that would apply on such income if U.S. tax had been applicable to the income. The popular press, Congressional Budget Office, and various think tanks have used the term to mean varying measures of tax divided by varying measures of income, with little consistency in definition. An effective tax rate may incorporate econometric, estimated, or assumed adjustments to actual data, or may be based entirely on assumptions or simulations. That last line is the one that I have a problem with. It allows people to "adjust" the standard rates in a number of different ways including estimates, simulations, and "assumed" numbers. Suddenly we're comparing apples and oranges.
So the reality is that the rich pay much more of a percentage of their wealth in taxes. Glad that is settled.
The problem is "effective rate" has no real purpose. The IRS doesn't use it and businesses don't use it. It's used by pundits and pissed off people at tax time (ie, "I paid 25% of every penny I made in taxes. Screw the IRS"). Effective rate can be used however you want but effective federal income tax rate cannot as it pertains just to federal income taxes. This is your tax burden divided by your income. Quite simple. It's all about the message someone is trying to deliver and Buffett has an agenda. Like I said before, the only way Buffett's story can be true is if he is lumping in items such as payroll and state taxes and perhaps even property and estimated sales tax. I don't have time to do a full analysis but I bet it would be pretty damn hard to come up with the numbers he is coming up with, even with being misleading.
When speaking in terms of GAAP an estimate or assumption is not a wild ass guess. The reasonableness of these assumptions is subject to several tests and there are differnt accounting pronouncements which offer guidance on how the assumptions should be determined and evaluated. This is espescially necessary for the purpose of quarterly reporting when you have to make projections on future earnings to determine the appropriate rates to use. For example, in agricultural machinary the bast majority of business is done in the second quarter. So John Deere has to make a slew of adjustments in the first quarter to avoid under-reporting and another slew in the third quarter to avoid over reporting.
