Tax Fairness

Greg Mankiw notes how Warren Buffett

slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.

Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

Mankiw points out in response:

You might wonder how Mr Buffett managed such a low tax rate. Most likely, it arose because corporate dividends and capital gains are taxed at only 15 percent. But the corporate income that funded those returns was already taxed at the corporate level, where the tax rate is 35 percent. Mr Buffett seems to be ignoring the first round of taxation.

I think that's a pretty good point. Here's another. Assuming that the receptionist has a very generous salary of 100,000 dollars a year, she would have paid 30K in taxes. By contrast, by my rough calculation Buffett paid 8,142,000 dollars. If that's not clear enough, let me spell it out: The rich pay most of our taxes.