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:
- Buffett’s consumption is the resources he takes out of the economy for his own personal enjoyment.
- Taxes paid are what he contributes to the common good.
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