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Taxation in the USA

Buffett decries his tax rate as less than cleaning lady’s
• From: The Australian
• October 07, 2010 12:00AM

Is the Australian taxation any better or just favouring the very rich?

THE US should tax the wealthy more, says billionaire investor Warren Buffett.
“We’re going to need 20 per cent or thereabouts of GDP to fund the kinds of things that we all believe are right to have in this country, and we’ve got to get it from somebody,” the world’s third-richest man told a gathering of high-powered women at Fortune’s Most Powerful Women Summit in Washington.
“If you’re not going to get it from guys like me, why should you get it from the guy who serves lunch to them?”
Thanks to tax cuts passed under former president George W. Bush, Mr Buffett said he paid the lowest tax rate of anyone in his office, including “secretaries who answer the phone” and the cleaning lady.
Mr Buffett said the US tax system should be reconfigured to make it fairer.

“The tax system should do something, in my view, when you have an enormously prosperous economy — and bear in mind we have over $US45,000 of GDP per capita in the United States — so that the people who go to Iraq and Afghanistan and get the short straw in life benefit in this cornucopia of prosperity that we have,” he said yesterday.
“I pay a lower tax rate than probably the cleaning lady that comes in” thanks to the Bush-era tax cuts, said Mr Buffett, chief executive of Berkshire Hathaway, a conglomerate holding company based in Omaha, Nebraska.
“And that just isn’t the way the system should work.”
Mr Buffett also said Wall Street was like a church that benefited society, then faltered by operating a gambling venture on the side.
Wall Street did a lot of good things and then it had this casino, Mr Buffett, 80, said.
“It’s like a church that’s running raffles on the weekend,” he said.
Mr Buffett has also faulted Wall Street for excessive bets on US housing. People had a propensity to gamble, and it was being made easier and easier for them, Mr Buffett said.
“One of the problems we still have is we have unbalanced incentives for managers of huge financial institutions,” he said.
Mr Buffett has called for greater accountability from bank executives whose risk-taking produces losses for shareholders and imperils the economy.
The use of derivatives had allowed banks to add risk and made a mockery of federal rules designed to limit losses, he said.
“You should go broke,” he said of chief executives whose firms required government bailouts to protect society.
“And I think your wife should go broke, too.”
Berkshire Hathaway weathered the financial crisis without taking a capital injection from the US government.
Some of Berkshire’s biggest investment holdings took bailouts, including Goldman Sachs, the most profitable Wall Street firm, which received $US10bn in taxpayer

This is how the Australian system discriminates between retirees.

Take retiree: 1)
Worked for 45 years and paid taxes, but did not accumulate enough assets to be completely independent of the age-pension. For every dollar of extra income for him and his wife above $6,500, the couple loses $0.50 of age pension, and if their income exceeds $45,000 per annum, the couple will pay tax of $0.315 in the dollar including medicare levy, leaving them with an income of $0.185 from every dollar extra income. For the defined benefit income a 10% tax-offset applies if paid from an Australian super fund, but not if the income comes from an overseas fund.

Retiree 2)
Has accumulated assets of $1.5million and the assets are in a so-called taxed Self Managed Super Fund. To be very conservative, the assets are in a term deposit earning 7.0% income of $122,500 per annum and even if the retiree is single, he/she will not pay a cent of tax.
Now if the assets are in fully franked shares, like banks and return $100,000 worth of franked dividends, he/she will again pay no tax on the dividend, and the government will send him/her a cheque of $30,000 for the franking credits.

Retiree 3)
Is an ex-politician or highly paid public servant, in receipt of a defined benefit pension of $100,000, on which he/she will have to pay tax, but he/she gets a 10% tax offset, which equals %10,000 after reaching retirement age, but before retiring, the public servant can establish a SMSF and contribute into it extra with tax concessions if the $25,000 total for under fifty and $50,000, if over fifty is not exceeded and in addition he/she can contribute $150,000 from after tax income, and the earnings from the SMSF will only attract 15% tax, and when the person reaches the age of 60 even the income will be completely tax-free from the SMSF.

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