Warren Buffet Pays a Lower Tax Rate Than His Cleaning Lady

"I probably pay a lower percentage of my income in taxes than my cleaning lady does."

- Warren Buffett

 "If you earn money with money, as opposed to earning it by your own labor, you pay a far lower tax rate." - Buffett

 How does he keep his taxes so low?

1. He avoids taking a salary, thereby avoiding income taxes.
2. He rarely sells investments but when he does, they're taxed at long-term capital gains tax rates (0%, 15% or 20%)- vs 37% for high earners.
3. He's pledged to give 99% of his wealth to charity through the Giving Pledge, avoiding taxes, and setting himself up for tax deductions.
4. He holds stocks for a long time (aka forever) and rarely sells.

Taxes are our heaviest financial burden, and we need to understand how they work in order to minimize them.

"The tax code is not meant to be fair. It's meant to be used."
- Buffett

Surprisingly, despite benefiting from the tax system, Buffett has advocated for higher taxes on the wealthy, including his "Buffett Rule," which proposes that anyone making over $1 million per year should pay at least 30% in taxes—a stance that contrasts with how he personally minimizes taxes.

Buffett's argument for raising taxes on Politico.