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 (BRK.A)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.

About Larry M. Elkin 552 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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

  1. Berkshire doesn’t pay dividends. Check the facts. Yes, he gets most of his income from investments but not dividends from Berkshire Hathaway stock.

  2. So let me get this straight!

    A right person earns money that is taxed at 36% at the federal level.

    That same person takes remainder of that money that was taxed at 36% and then invests it in something like a small business or a stock.

    That person realizes that the invested money could be lost totally but also could make money.

    That person sells the stock or the company years later for profit and OBAMA wants to tax that at 30%….Making the effective tax rate on that money 66%?

    In what world is that balanced?

    66% tax is ok if you rich but not ok if you not?

    That is socialism people. OBAMA is therefore a socialist.

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