Question

Warren Buffet, one of the richest men in the United States and the head of Berkshire Hathaway Corp., a profitable investment company, complained in 2007 that he was paying a smaller percentage of his income in federal taxes (17.7 percent) than was the receptionist in his office (about 30 percent). Assuming that he was not cheating on his taxes, what factors might account for this solution? Does this information itself suggest that the federal tax system is regressive?

Answer 1

HI

The answer for 1st part is that

As the income of tax payer increases, tax rate decreases and also there are many tax saving schemes for people who are having higher income. Because of these 2 factors there can be chances that Buffet is paying lesser percentage of tax than his receptionist.

The answer for 2nd part is that:

Meaning of regressive tax system is that, as the income level increases tax percentage decreases. Based on the given example and condition it can be said that federal tax system is regressive because as the here tax percentage decreases as income level increases.

Thanks