The Rich Pay Less Taxes Than You. Here’s How They Do It
The wealthiest Americans pay almost no income tax
Warren Buffett is one of the richest people in the world. That’s thanks to his company, Berkshire Hathaway, which is a holding company that owns other companies.
You’ve probably heard about some of them — Duracell, Geico, Dairy Queen. They also own stocks in other companies, like Coca-Cola and Apple.
When those companies do well and their stock goes up, Berkshire Hathaway’s stock goes up.
Buffett took over the company in 1965 when a share used to cost $19. Today, at the time of writing this story, it’s worth over $427,000. Warren Buffett is known to own about 240,000 of these shares, and that’s where his wealth is.
But just like he pointed out himself, he still pays a lower tax rate than his secretary. It may surprise you to find out that she pays twice his rate in taxes, which even Warren admits that it’s outrageous.
Types of taxes
But how is that possible? Well, they pay different types of taxes
- His secretary pays income taxes on her salary (maximum rate 37%)
- Warren Buffet pays mostly capital gains taxes on the stock that he sells (taxed at 20%)