Monday, September 12, 2011

T/C and T/(C+T)

...are better notions of a person's average tax rate than T/I or T/(I+T). Here T is tax, C is consumption, and I is income. Scott Sumner estimates that Warren Buffett has a 90% tax burden in the sense of T/(C+T). In the sense of T/C, it would be about 1000%. Sumner makes the case for C instead of I succinctly and eloquently at the end of the post:
  1. Buffett’s consumption is the resources he takes out of the economy for his own personal enjoyment.
  2. Taxes paid are what he contributes to the common good.

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