Email L. Henry Platt, Jr.
THE TRUTH REMAINS TRUE
To better understand this posting the reader is suggested to read a very early post in Political Commentary: "To Tell The Truth".
The truth in this article is an explanation of the statement of Warren Buffet that he pays a lower income tax rate than his secretary. The statement is entirely true, and it simply shows how shrewd Mr Buffet is for using the tax code to legally minimize his tax responsibilities.
When Ronald Reagan was President of the United States, a new program to help Americans save for their retirement was inaugurated. Today almost everyone with money is familiar with the Investment Retirement Account (IRA). Warren Buffet had the funds available to invest the maximum amount allowed by law in his fund, "Berkshire Hathaway" as well as other profitable companies.
Under the terms of the IRA Law he amassed a substantial personal fortune of untaxed wealth. In 1997 Congress passed, and President Clinton signed the Bill creating the Roth IRA. Mr. Buffet saw a tremendous opportunity, as did so many other Americans, to pay the capital gains taxes on his IRA investments and move them to the new, tax exempt Roth IRA account. By paying these CAPITAL GAINS taxes in tax years 1998, 1999, 2000,and 2001 he (and everyone else who took advantage of the Roth IRA program) excused himself from any further taxes on these investments.
Now Warren Buffet's entire, gargantuan Roth IRA portfolio earnings are not taxed on his personal income tax returns. His secretary only has normal income which is taxed at prevailing rates. This is not a common situation; it is clearly an anomaly. This writer's best guess is that Bill Gates does not have as much money in a Roth IRA.
© L. Henry Platt, Jr.