Warren Buffett Would Most Likely Pay No Income Tax Under Herman Cain's '999' Tax Plan: Analysis

Warren Buffett might want to pay more taxes, but if Republican presidential candidate Herman Cain gets elected, Buffett might not pay any taxes at all.

If implemented, Cain's "999" tax plan would eliminate taxes on capital gains, significantly reducing Buffett's tax rate because his ordinary income, outside of capital gains, comes to about $4.9 million. Cain's plan would cap corporate, income and sales tax at 9 percent. According to an analysis prepared for Yahoo's Lookout by the American Institute of Certified Public accountants, the 999 plan would leave Buffett paying around $440,000 in income tax, or 1.1 percent of his approximate $40 million in currently taxable income.

As ThinkProgress notes, after deducting charitable deductions, which Cain plans to preserve in his tax plan, Buffett would likely pay no income taxes at all under 999. While the Berkshire Hathaway CEO hasn't disclosed all of charitable donations, it seems likely they would surpass his taxes.

The prospect of Buffet paying no taxes might shock, especially in the face of his recent commentary. In his August New York Times op-ed, he stated that the $6,938,744 (or 17.4 percent of his taxable income) he paid in taxes last year wasn't enough.

Melissa Labant, the accountant who prepared the analysis for Yahoo, did note some potential flaws in the calculations. However, the rough estimate is pretty accurate, based upon the information Buffett has released, and the scarce details of the plan Cain has touted:

For instance, Buffett may or may not be subject to the alternative minimum tax, and he may or may not have foreign tax credits created by taxes he paid in other countries. We also don't know the exact amount of his charitable giving. Nor do we know whether Cain's plan would exempt all such giving, or make distinctions between different types of contributions, as some tax systems do.

This latest revelation is just one of the ways critics have derided the 999 plan as Cain has risen in the polls. Critics have been quick to point out that under this plan, some, especially less affluent Americans, would see a rise in taxes.

Currently, tax cuts for the rich cost Americans about $11.6 million every hour. Under "999" it's possible that that expense could get even larger wealthy, though federal corporate and sales tax percentages set at 9 percent may offset the number to some degree.

The possibility that millionaires and billionaires such as Buffett may pay no income taxes is coming at a time when many Americans are calling for higher taxes on the wealthy. A recent study showed that a quarter of millionaires actually pay less in taxes than some of the middle class.

Comments

[GAstorino]

04:40 PM on 10/19/2011

I guess what the authors contention is since Warren Buffett is a Democrat that he would have the only exemption in the nation from paying the 9% tax on his income and that every time he makes a purchase he would be exempt from the 9% sales tax? He purposely doesn't take a paycheck to get the loophole of captial gains lower tax rate unlike the majority of capital gains earners who are retired or on a fixed income or people who just sell their small portfolio of stocks who benefit from the lower rate because it might be a one time thing like cashing in your 401-K. I can't belive this guy is held up as a role model for what to do in regards to taxes as he is the biggest phoney out there. The government accounting office said even if you taxed the people 100% of their entire gross earnings each year we would never have enough to pay off the debt. That is why we need to cut spending and restructure the tax code. The fact they jump on Cain, the only person with a plan is because the power of the government is in the power of the Code. They can control all aspect of your life with different code rules and if you simplify and take it down and change it they all lose power in Washington.

[ivotedabsentee]

05:37 PM on 10/19/2011

[He purposely doesn't take a paycheck ]

Most reports are that Warren Buffett indeed gets a pay check.

http://www.wealthdaily.com/report/warren-buffetts-dividend-stock-strategy/568

He also earns income from books and magazine writing.

[dknowles60]

06:23 PM on 10/19/2011

well said

[siegfried728711]

01:13 PM on 10/19/2011

do not vote for herman cain, even though our votes mean nothing because its the electoral college vote that counts and the are controlled.

[Brent Christiansen]

11:44 AM on 10/19/2011

A Sales tax is the only Fair Tax! Why you ask.... Because all pay the same percentage.

Another question Why do some believe that people making more than they do should pay a higher percent of income tax ?

Some say that Clinton raised income taxes and the economy grew, Yes that is so but it wasn't Bill Clinton nor his 2 year demo controlled house and senate and later the GOP controlled House and Senate It was Bill Gates, Steve Job's, Mike Dell and a Thousand of others who created new high tech products and services......

If you want to live in a tent, and heard goats for a living revolt and get rid of Capitalism That is Obama dream for American!

[Validusername]

01:07 PM on 10/19/2011

First, you are just like lots of Republicans equating capitalism with democracy. One is a economic system; the other is a system of governance. Obama does not want to and cannot destroy the economic system. He has done quite well in the system himself.
Now for my answers to your questions; First of all a sales tax is punitive for the poor. By virtue of the small amount of income they back (thus being the poor), they must use it to sustain life. An additional 9% of sales tax (Cain could not prove in yesterday's debate that it would not be an additional tax) would seriously limit the amount of money they have to spend.
My question to you: Why is it okay to raise the taxes of the poor but not the rich?

Answer to second question: The rich will feel it less. They are not using their money to live day to day. If they are really rich, they are using their money to make more money. This country needs the revenue. Why not get it from the least vulnerable especially since it has been documented that many of them do not currently pay their fair share.
My question to you: Why are they the sacred cows?

[09Rusty]

01:28 PM on 10/20/2011

Here's an answer as to why. Because they're the ones who use the system, medicaid, welfare, food stamps and subsidized housing. They contribute nothing. Maybe it's time they did and just maybe most of them would realize they need to earn income outside of the government subsidies they've become dependent on!!

[Artr]

02:50 PM on 10/19/2011

The problem isn't capitalism. Rather the problem is the current mix of capitalism, tax policy and politicians who repond to the rich and corporations instead of the middle class. If the trend of a widening gap between the rich and the middle class continues, there's going to be a lot more people living in tents. Of course the righties have no interest in discussing the increasing gap - they wouldn't care if the middle class disappeared altogether. The irony is that the righties in the middle class are gradually going down the economic drain along with the rest of the
middle class.

[Brent Christiansen]

11:33 AM on 10/19/2011

Mr. Buffett, If you cannot sleep because you feel you pay too little tax please feel free to send the IRS a check... their is a box you can check on IRS form 1040....

When this question is asked to those who feel the tax rates should be higher they all have the same answer.... NO! Why is that?

[dknowles60]

05:25 PM on 10/19/2011

good one

[Hiker54]

01:49 AM on 10/20/2011

They say no because it's ridiculous. It's like the wealthy are people standing around a burning building with buckets of water. Then Buffet says "If we all pour a little water on the fire, we could put it out. And they say if you want to go ahead, I'm not."

The point is that you need a little water out of all the buckets. Water from one would not help.

[themrtea]

09:19 AM on 10/19/2011

Yawn. Dean Praetorius, you must have been the dumbest kid id in your class. Driving a cab is a more suitable profession for you.

[lunkenco]

07:52 AM on 10/19/2011

s.
we are dealing with large scale corruption,
But that's humans nature,
if all humans do not lie, cheat, take bribes and lie,
lie to get money,
kill and lie about justifiable killing or homicide[while some idiots cheer, waiting for their turn to be killed, hung or slow killing via economic or intellectual starvation]

for the rich to create the 4-10 million jobs,
start with 300-400 for each unemployed person, while rescuing them from ts slavery and getting better pay,[add some freebies to make it effectively more,but better than starvation or indignity]
keep lowering costs, so that the dollar means something[not the devalued useless dollar ,compared with 1970 or 80]
we get more dollars ,but its moreBarbageLess buying power, more inflation]AKA ,less for the buck, eroded dollar of the congress declaredDeadBeatCountryThatCongress created][we areNoyBankrupt ourCongress,PoliticiansAre]
Jobs that congress refuse to create[allowed them to dissapear in the past 10 yrs, with some recovery now]

If the rich create jobs, force them to do it,
or be taxed ,1-2 trillion[refund if they create the 4-10 million jobs[wait for the next Marsh land in Florida]

[lunkenco]

07:52 AM on 10/19/2011

Tookus 400 yrs plus, maybe 3000 yrs, if we look at theOrigin
of ourImmigrant investors andWealthBuilders,
not really intelligent to attack them, and seek elimination,
only a few ,have inherent, capacity to buildWealth,
its less than2%.
we must find a balance,
theyDoNot reallyCreateJobs, that s a myth,
like theFlatEarthKillPeopleLikeGallileoForSpeakingTheTruth],
wholeUniverseSpinningAround theEarth,
parting theSea[for what ? to getDrowned when theTsunami returns??]
or creating the light and forgetting theSource of light forMillions orBilllions ofYears[as someClaimTheDay inTheBibleCould beBillionYears[AsProposedByTheChurh]

taxes or investment[greaterThanTaxes]
could be anAlternative,
do not allowMassFirings, until all attempts toCreatePartTimeJobs, reduce some benefits[at least temporarily] are clearly, non politically ,evaluated.
politicians will vote yes or no,
for any bribe,
never read or understand the bills they pass[jut do it, to get home or collect the pay check and the bribes[] please the party and the corporations that pay he cost of election

[Me Joe]

07:19 AM on 10/19/2011

Umm.... the IDIOT who wrote this article obviously does NOT get it. Warren Buffett will NOT pay any income taxes. Neither will you, and neither will I. Because, 999 ELIMINATES income taxes!!! DUH!
It also eliminates all other kinds of business taxes... so the refrigerator you just bought, which takes 5 or 10 different suppliers to produce, will cost LESS. For every product you buy, it takes multiple companies and vendors to make. Each company increases their costs as their tax burdens increase, which means that the store you visit has to set ITS prices higher.
When you get rid of all these business taxes, products become CHEAPER.
You pay the 9% sales tax on NEW goods only. A nice, simple, and FAIR tax plan. Everyone pays equally, proportionate to their spending, and everyone contributes.

[Hiker54]

08:41 AM on 10/19/2011

A 9% flat tax rate on income is an income tax. He didn't get rid of it, just flattened it. (no longer a progressive rate) DUH!

Also, when has a company passed on it's savings to the consumer. If they're saving money, it goes to their bottom line, not your pocket.

[jdavies77]

10:25 AM on 10/19/2011

Not true, if all companies are saving, then once one company lowers it's prices, they all following. That's the nice thing about a competitive market.

The gas market is a perfect example, how often do you pay $0.20 more per gallon at one station than the other? Not very often, why? Because they all want your business and compete for it by taken less profit.

[Z06-2008]

03:04 PM on 10/22/2011

In addition, most people complaining about 9-9-9 don't understand. Last year my effective tax rate was 22% on 100% of my income. Under Cains plan I would pay 9% on 100 % percent of my salary and 9% on my purchases. That being said I never spend 100% of my income on goods. My mortgage payment would not be taxed, nor would my utilities. Lastly, even if I did spend 100% on goods, I still would pay less than I did last year, a full 18%. Get a clue people. In my world I will have more to live on and spend if I choose.

[Hiker54]

04:47 PM on 10/22/2011

From what I've heard from Cain's explanation, his plan is revenue neutral. That means no more or less revenue coming in. So every dollar you're saving will be paid by someone else.

I saw the first change analysis on the tax plan. The tax on the bottom 4 levels (don't recall what they were) were expected to rise. The tax on the top 1% was expected to decrease in the low 6 figures and the tax for the top .1% was expected to decrease in the low 7 figures.

So, the wealthy get their tax break and the lowest earners make it up again.

So you can call it a 9-9-9 plan if you want. The rest of us just call it what it is. Another tax break for the wealthiest Americans.

[scromolie]

06:50 AM on 10/19/2011

If Warren Buffet really wants to pay then he should. nobody will refuse his money. He could start writing checks. Send one to every person in the country. Nobody is stopping him.

[Validusername]

01:10 PM on 10/19/2011

Why are you mad at Buffet? He didn't come up with 9-9-9 nor did he write the article. Geeez.

[scromolie]

01:17 PM on 10/19/2011

I'm not mad at Buffet, I'm just saying if he wants to pay more he could.

[dknowles60]

05:26 PM on 10/19/2011

very good point

[Chris Morrison]

04:28 AM on 10/19/2011

9-9-9 is a beautifully handwoven woolen sham of the highest order being pulled over the eyes of the common man. Yet another gift to the rich and burden on the poor, it fits nicely in line with modern neoconservative sociopolitical views and policy.

[jdixi]

03:35 AM on 10/19/2011

Do these idiot conservatives realize that the %51 of people 'not paying taxes' are people whose income is so low that they don't make the break to get taxed? The gulf between the rich and those below them is ridiculous. How can a blind eye be turned to that?

Are they so desperate as to think that they'll get a cut or something when they vote in these rich people that don't care about them? Sad times we live in.

[gr8bsn]

03:05 AM on 10/19/2011

No one owes you anything in this world.

[Validusername]

01:17 PM on 10/19/2011

But do we owe the children of the poor a chance? When I was in elementary school a well-traveled classmate told me that European children pretty much could not exceed their parents' station in life. We were taught that as Americans we could. Now we are behind some other countries in upward mobility and many of our children are not doing as even well as their parents. That means something to me because too many people don't seem to care. We do better as a country when all our people do better. It has been proven over and over again. Why don't we get it?

[jenniferlrothe]

02:00 AM on 10/19/2011

Does anyone consider that the wealthy consume more, dollar wise? Where the lower income might buy a car for $10,000 and the middle class might buy a car for $25,000, the 1% will buy cars for $50,000 or more! They'll buy yatchs and planes and furnish their homes in luxury goods. And pay 9%. Perhaps that 1% will revolt and decide not to buy anything in protest...nah. Won't happen. They are to used to getting what they want, when they want it...

[dknowles60]

05:28 PM on 10/19/2011

well said

[ivotedabsentee]

05:17 AM on 10/21/2011

When you look at the number of Escalades and Navigators parked in front of many houses, hard to believe all of those owners are in the 1%.

[my3geez]

01:30 AM on 10/19/2011

If they insist on continuing to plunder main street - they will have a class_war_on_thier_doorsteps. One thing for sure ,,, there are a whole lot more of us (99%ers) than them .... so ..... no sweat from where my vantage point is!

[my3geez]

01:08 AM on 10/19/2011

Cain creeped_me_out since the beginning. This tax plan sounds like a german_yelling NO NO NO. I am not surprised that main street will get the shaft YET AGAIN from a RePukeLieCain ....

He is so smug .... I was not in the least surprised to find out his_Baptist_roots run exceedingly deep.

RUN AWAY CAIN IS NOT ABLE ........... to really care about the main street americans.