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What We Don’t Know About America’s Most Famous Secretary

OMAHA, Neb. - Most Americans had never heard of Debbie Bosanek until she agreed to serve as a human prop for President Obama’s State of the Union speech last week.

Bosanek, as millions of us now know, is Warren Buffett’s secretary. She was seated near the First Lady when the president called for a “Buffett rule” that would require people making more than $1 million to pay at least 30 percent of their income in federal taxes. White House image-makers were eager to use Bosanek to symbolize a middle class that is being relentlessly squeezed by a system that favors the wealthy and well-connected.

This raised questions that we usually have no reason to ask about a corporate chieftain’s assistant. Exactly how well does Bosanek fit into the president’s definition, or anyone’s definition, of “middle class?” Does she feel squeezed? Does she endorse the president’s message that her boss should pay higher taxes?

Buffett, the multi-billionaire chairman and CEO of Omaha-based Berkshire Hathaway Inc., brought Bosanek into the public conversation last summer when, in a New York Times op-ed piece, he observed that the share of his income that goes to federal taxes is the lowest among the 20 people, including Bosanek, who work in his office. (The original op-ed column did not mention his secretary specifically, but her circumstances became the focus of many follow-up interviews and much commentary.) Wealthy people, Buffett argued, should pay more than others, not less - a point with which the president heartily agrees.

A funeral on my wife’s side of the family brought me to Omaha last Thursday, just after Bosanek’s moment in front of the cameras. The online world was buzzing about the suddenly famous administrative assistant, and she was front-page news in her hometown. “Buffett calls criticism of his secretary ‘ridiculous,’” the Omaha World-Herald newspaper, which is owned by Berkshire Hathaway, reported. Coincidentally or otherwise, the adjacent story above the fold reported on a hearing in the Nebraska Legislature: “Counties rip plan to drop inheritance tax.”

By raising the topic of his secretary’s income taxes, Buffett inevitably led people to ask how much she is paid. But he and Bosanek both refused to answer that question, saying her personal business is personal. This was true, until Buffett decided to make it the country’s business too.

Buffett apparently disapproved of online speculation about Bosanek’s income and about her and her husband’s recent purchase of a second home in Arizona. “They can’t attack the facts, so they attack the person,” Buffett told the World-Herald. “It’s ridiculous.”

No serious person is attacking Bosanek. Asking about her income, which is necessary to understand and critique Buffett’s argument about taxes generally, is not an attack. Many administrative assistants to top executives (unlike the 82-year-old Buffett, most of us don’t call them secretaries nowadays) earn six-figure incomes, and in my experience, they deserve every penny. If Buffett wants us to address the facts underlying his opinions, he ought to provide some.

Here are a few facts we can deduce without getting too personal. Buffett derives most of his income from Berkshire Hathaway dividends, which are taxed at 15 percent - because the income has already been taxed at the corporate level at rates up to 35 percent. Buffett and Berkshire Hathaway also pay state taxes, which he does not address in his argument. If we consider the total tax burden on income earned by Berkshire Hathaway and passed on to Buffett, it is almost certainly larger than Bosanek’s.

Bosanek and her husband, a delivery truck driver, presumably earn most of their income from wages. Their overall tax rate includes not just income taxes, but Social Security taxes. Social Security will replace a much larger share of their income than it would replace for Buffett, and Bosanek is looking forward to collecting it. “Hopefully in 10 years, when I turn 65 and Warren turns 92, I will be able to convince him to finally retire so I can retire, after working 47 years, and spend some time where the sun shines in the winter,” she told the World-Herald. Buffett and Obama are drifting steadily toward an argument that Social Security taxes should just be folded into the regular income tax system, breaking any ties between what an individual earns, what he or she pays in taxes, and what he or she ultimately receives as a retirement benefit.

Long-term capital gains are also taxed at 15 percent, well below the top rate on ordinary income. The president and many in his party would be happy to see that rate raised, at least for upper-income taxpayers. They seldom mention that most middle-class families pay little or no tax on their lifetime capital gains, which for average Americans arise mostly from of their homes. A married couple can avoid tax on up to $500,000 of gain from selling a principal residence, and can do so multiple times. Other assets get a stepped-up basis when acquired from a decedent.

Middle-class families also do not pay federal estate taxes, for which married couples now have a combined $10 million lifetime exemption. Someone in Buffett’s position could expect to see hundreds of millions, or even billions of dollars of his lifetime wealth accumulation taken after his death, if he wanted to pass that wealth on to his heirs. As it happens, Buffett is a proponent of the estate tax, but he does not actually expect his family to pay much. He has said publicly that he will leave only modest wealth to his heirs, devoting the rest to charity - and thus avoiding the tax. His advocacy of the tax, therefore, amounts to arguing that other wealthy people (though almost none are nearly as wealthy as he) pay a tax that he personally has no intention of paying.

This is as close to a fact-based argument as I can make with the limited facts that the Buffett and his loyal assistant have chosen to share with us.

Like most financial professionals, I respect Buffett’s business acumen. Like most Americans, I take as a given that he, and his secretary, are basically honest and decent people, because most of us are honest and decent, even if we forget to acknowledge this in the heat of our disagreements.

But Buffett did not make an intellectually honest argument by insisting that his formerly anonymous secretary ought to retain her privacy after she let herself be used as a political poster child. We can only guess that Debbie Bosanek is better-paid than most administrative assistants. We know for a fact that the average assistant does not get camera time at the State of the Union address.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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3 Responses to "What We Don’t Know About America’s Most Famous Secretary"

  • Brent Hambleton
    January 31, 2012 - 11:36 am

    BRK does not pay a dividend – I think you need to get your facts straight. WEB is a shareholder of BRK stock (albeit a huge one) just like me, so using the Corp tax argument is silly; he pays his CFO 950k (no options or stock), which is very low relative to the size of the Co.; it is doubtful that he pays his secretary 6 figures… He and Munger only pay themselves 100k as a salary. Anyway, I could go on, but…

    • Larry M. Elkin
      January 31, 2012 - 2:40 pm

      Mr. Hambleton is correct; Berkshire Hathaway does not pay a dividend. Warren Buffett has not released his personal tax returns. However, Forbes reported last fall that Buffett provided some details of his 2010 return in a letter to Rep. Tim Huelskamp (R-Kan.). Buffett said he had gross income of approximately $63 million, taxable income of about $40 million, and paid federal taxes of $6.9 million. Most of his income came from dividends and capital gains, Forbes reported, but apparently not from income or gains directly attributable to Berkshire Hathaway, since I could find no reported sales by Buffett of Berkshire Hathaway shares. The Forbes article is at http://www.forbes.com/sites/janetnovack/2011/10/12/warren-buffets-effective-federal-income-tax-rate-is-just-11/ .

  • Thomas F. Simpson
    January 31, 2012 - 1:51 pm

    I’ve followed Buffett for 30 years and have heard him in person several times discussing taxes and income disparity. He has always included payroll taxes in the calculation for this argument. His secretary’s income is not six figures, as Fox TV and the usual right wingers have speculated. If nothing else, the debate over carried interest seems to be gaining momentum. As I recently told a Republican friend of mine, who is a big sports fan, income disparity is no good for a healthy society. In pro football, where teams are owned by red-blooded capitalists, the drafts each year give the worst team the best pick and vise versa, a form of Socialism. Why do the owners agree to this? It keeps BALANCE for the good of everyone. Societies need the same balance, as Buffett argues.