June 17, 2008

Gift of Gaffe: Barack Obama Thinks Income and Net Worth Are the Same Thing

Filed under: Consumer Outrage,Economy,Education,Taxes & Government — Tom @ 4:19 pm

Not only that, the ignorance in on display is in what appears to be an official campaign video (HT Real Clear Politics):

(Excerpted comments begin at about 7:10 into the vid)

While you, most of you here have Social Security tax on every dime you’ve ever earned, you’ve got billionaires and millionaires who are paying on only a tiny ….. fraction of their income.

I’ve got a friend in Omaha, you may have heard of him, named Warren Buffett. He’s worth $56 billion. Y’know, if he’s only paying the first $100,000, that is .000001% of his income as he’s paying Social Security. I may have lost a couple of zeros in there.

The point is, it’s negligible to him, it’s not even noticeable. I think that’s why the best way forward is to first look to adjust the cap on the payroll tax, so that people like me, because I’m earning a bit more than $102,000, pay a little bit more and people in need are protected.

Folks, I cleaned up what Obama said as much as I could. Somebody ought to call Joe Biden and see if he wants to take back his comment about how articulate this guy is, instead of apologizing for having said it.

Anyway, here’s a translation of the bolded paragraph above I can (sort of) work with:

I’ve got a friend in Omaha, you may have heard of him, named Warren Buffett. He’s worth $56 billion. Y’know, if he’s only paying Social Security tax on the first $100,000, that is .000001% of his income on which he’s paying Social Security tax. I may have lost a couple of zeros in there.

You lost more than a couple of zeros, pal. You wanted your audience to mentally divide $100,000 by $56 billion (if you’re keeping score, that’s 0.00018%) — as if Warren Buffett’s income, which Obama never disclosed and probably isn’t known in total, is the same as his net worth. O,M,G.

Someone ought to tell Obama that:

  • Income is what you earn.
  • Net worth is what you have (after subtracting what you owe).
  • Warren Buffett probably earns most of his income, which he said was more than $46 million in calendar 2006, from capital gains and dividends, against which there is no Social Security tax (yet).
  • People pay Social Security tax on their income from work or self-employment, not on their net worth (yet).
  • If Warren Buffett currently has earnings from work of $5.6 million (my recollection is that it’s probably lower than that), Obama was “only” off by a factor of 10,000 ($56 bil divided by $5.6 mil) in that element of his attempted “calculation.” Also, the current taxable earnings limit of $102,000 would be 1.8% of Buffett’s earnings from work, not “.000001%.”
  • Under Obama’s proposal for Social Security, if Buffett’s earnings from work really is $5.6 million, he will pay over $663,000 more into the system —

    ObamaSocSecPropBuffett0608

  • Warren Buffett, whose net worth is $56 billion, might indeed see this tax increase as “negligible to him …. not even noticeable.” I would suggest that someone with little previous net worth earning $5.6 million for the first time might more accurately see being forced to cough up an additional $663K as theft by government.
  • Pile the 12.4% marginal tax just shown on top of the top federal income tax rate of 39.6% that would return if the current tax law isn’t extended, the 2.9% Medicare tax on all earned income, and at least 5% for state and local income taxes, and you’re at a marginal tax rate of just under 60%. That’s ridiculous.

Whether Barack Obama actually understands any of this is questionable.

This is the same guy who says that his earnings of roughly $4 million in 2007 (including book royalties, which are subject to Social Security taxation up to the current limit) is “a bit more” than $102,000. Some “bit.”

This guy is one election win away from being in charge of a $3 trillion-plus budget and responsibility for steering US economic policy.

O. M. G.

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6 Comments

  1. And why pray tell would Warren Buffet want to be in the Social Security System when he has his retirement already secure with BILLIONS of dollars in net worth????

    Apparently, the point of Social Security is totally missed on Obama, it is for low and middle income people, not rich people, hence the $102k cap on which the SS 12.4% tax is levied. How stupid can this man be? Of course if he isn’t stupid, that means he is being intentionally deceptive. What this liberal Democrat is proposing is to drag into the SS system a whole group of people who don’t NEED SS retirement! Anyone making more than $102k is smart and financially secure enough to manage their own retirement and doesn’t need big brother to guarantee a minimum of income so you don’t end up drawing welfare or government assistance in your old age.

    Comment by dscott — June 17, 2008 @ 5:02 pm

  2. That is the biggest problem with the leftist frequent cries of soak the rich. Income taxes don’t touch the rich. Income taxes attack those trying to get to rich (or well off). A fix to that stupidity is to have a national sales tax replace the income tax. People cry that that would be regressive, but that is easy to address. Exempt groceries and utilities or something. Have a higher rate on luxury items such as cars over X value, boats, etc. Illegal aliens currently pay little or no income tax but would pay sales tax. Same with drug dealers and other crooks. Sorry for rambling, but the stupidity of the current systems bugs the crap out of me. Biggest problem with the sales tax idea is congresscritters won’t vote for it since it removes a great deal of their power. If they lose power it reduces the need to bribe them. Can’t have that.

    Comment by largebill — June 17, 2008 @ 7:09 pm

  3. Yeah, GWB and McCain never mispeak.

    Comment by Citykin — June 17, 2008 @ 7:28 pm

  4. #3 —
    A. Not at the rate at which Obama generates them. Not, even, close.
    B. Not that betray the amazing level of ignorance Obama possesses. Not, even close.

    There’s almost a much material on Obama as the press was able to scare up in 4 years of Dan Quayle (who, by the way, was so dumb that he kicked “genius” Al Gore’s butt in the 1992 vice-presidential debate).

    Add all of that to the fact that Obama unscripted makes GWB look like Einstein.

    Comment by TBlumer — June 17, 2008 @ 10:05 pm

  5. If Buffet winds up paying that much into SS, I’m afraid to see what his payout will be. That check will be big enough to choke a horse.

    Comment by Mark McNally — June 18, 2008 @ 2:27 pm

  6. #5, the payout would be about $85,000 a year more in his case, or roughly $110,000 in total.

    I wrote in a PJM column going up soon that this won’t be politically palatable, and will never pass. It will turn into a pure money extraction from high-earners to low- and middle-earners.

    Comment by TBlumer — June 18, 2008 @ 2:58 pm

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