Inequality's pair most iconic,
Mr. Buffett and Mrs. Bosanek,
Have talked up the facts
Of the rates of his tax,
Which are lower than hers – most ironic.
"But investors like Buffett," says Mankiw,
"Have firms that pay tax as well, thank you;
We must add the taxation
Of each corporation
To see in which bracket we rank you."
So taxation's not simple as "one-two",
You can argue the point if you want to,
But unequal or not,
Ms. Bosanek ain't got
Someone else she can pass the tax onto.
Harvard's famed Professor Greg Mankiw, who chaired President George W. Bush's Council of Economic Advisers (and may someday do the same for Mitt Romney, if things should take such a turn), has made his voice prominent in rebutting the claim of Warren Buffett that he pays a lower income tax rate than his secretary. Debbie Bosanek pays roughly 33% of her income in taxes, while her billionaire boss pays 19%. The difference is due to the 15% rate of taxation on capital gains, which liberals argue is unfair. Professor Mankiw has argued that one must consider the shareholder's stake in the corporate income tax paid by the companies he owns.
Along comes a new and intriguingly anonymous blogger to put meat on the bones of Mankiw's argument. "PrometheeFeu" points out that, if Buffett pays 15% tax on his dividends and the company paying the dividend has already paid 25% income tax, then this is the same as a 35% income tax between Buffett and the original source of the income. Furthermore, one must distinguish between the person who pays the tax and the people on whom the burden of the tax ultimately falls. In other words, corporate tax burdens can be passed along to customers, vendors and employees as well as shareholders. However, this second point undermines the first, since it suggests that the companies owned by Berkshire Hathaway may spread the burden of their taxes, while Mrs. Bosanek would be hard-pressed to do so.