The Op-Ed That Started It

In 2011, Warren Buffett wrote an op-ed for the New York Times titled "Stop Coddling the Super-Rich." In it, he revealed that his own secretary, Debbie Bosanek, paid a higher effective tax rate than he did. He wasn't confessing to anything. He was making a structural point about the US tax code, and it's a point any investor can use.

The mechanism is not exotic. Buffett's income comes overwhelmingly from long-term capital gains on Berkshire Hathaway stock and other investments, plus a base salary that was famously fixed at $100,000 a year for the decades he ran the company as CEO — a figure so unchanged for so long it became a running joke in shareholder letters. Berkshire's leadership changed in January 2026, when Greg Abel took over as chief executive and Buffett moved to chairman; what Buffett draws in that role today isn't something we can confirm from public reporting, so treat that specific number as history rather than a current fact. What hasn't changed is the shape of his income: overwhelmingly capital, barely any wages.

Bosanek's income, like most working people's, was ordinary wages. And under US law, those two income types are taxed on entirely different schedules.

Two Tax Schedules, One Code

Long-term capital gains in the US are taxed at 0%, 15% or 20% federally depending on income, plus a 3.8% net investment income tax for high earners — so a ceiling near 24% for most wealthy investors. Wages are taxed on a progressive schedule that runs up to 37% federally, and then wages get hit again with 7.65% in payroll taxes that capital gains never see at all.

Run the numbers and the gap is concrete. Someone realising $10 million in long-term capital gains in a given year lands at an effective federal rate around 20–24%. Someone earning $500,000 in wages lands around 35–40%, once payroll tax is added in. Buffett's famous complaint wasn't rhetorical. It was arithmetic, and it was public, because he chose to make it public.

This isn't a loophole in the sense of an oversight someone exploited. The capital gains preference is deliberate US policy, built to encourage long-term investment over short-term consumption. It's the structure of the code, not a crack in it.

The Same Gap, Elsewhere

The gap between capital and labour taxation shows up in most developed economies, though the exact numbers vary and it's worth being precise about what's current rather than reaching for a stale figure.

• United States
  Long-term capital gains: 0–20% federal, +3.8% NIIT for high earners
  Ordinary income (top rate): Up to 37% federal

• United Kingdom
  Long-term capital gains: 18% basic rate, 24% higher/additional rate
  Ordinary income (top rate): Up to 45%

• Germany
  Long-term capital gains: 25% flat
  Ordinary income (top rate): Up to 45%

• Canada
  Long-term capital gains: ~25% effective (50% inclusion rate)
  Ordinary income (top rate): Up to 33% federal

• Australia
  Long-term capital gains: 50% discount on gains held over one year
  Ordinary income (top rate): Progressive, no separate CGT rate

The UK figure deserves a note, because it moved. Until October 2024, UK capital gains were taxed on a lower schedule than they are now; the rates were increased in that Budget, and the current position — 18% in the basic-rate band, 24% above it — applies uniformly rather than as the wide, dated range some older summaries still quote.

Why Founders End Up Here Too

The Buffett-scale version of this involves a fortune built almost entirely from Berkshire stock he has held since the 1960s. The founder-scale version looks the same in miniature. Value that sits in equity — a growing stake in a company you own — is taxed as a capital gain only when you eventually sell it. Value paid out as salary or dividends is taxed as ordinary income every single year it lands in your account. Hold and sell once, after twenty years, and the tax outcome is dramatically better than twenty years of dividends taxed annually along the way. This is the quiet reason founder wealth tends to compound faster, after tax, than salaried executive wealth: founders defer and convert; executives receive and pay as they go.

Layer in residency and the gap widens further. A handful of jurisdictions — Singapore, Hong Kong, the UAE, Panama on foreign-source gains — charge no capital gains tax at all. Combine residency in one of those with a long equity build and a single realisation event, and you get a legal outcome that would make even Buffett's structure look conventional. The more common version, for someone still resident in a standard-rate country, is timing: building the equity, then relocating before the sale crystallises the gain, rather than after.

What This Means for You

None of this requires owning a company the size of Berkshire Hathaway. It requires structuring how your income arrives — as equity growth rather than salary, realised as a gain rather than distributed as a dividend — and being deliberate about where you're resident when that realisation happens. Most people build the business first and think about the tax character of their income as an afterthought. The gap Buffett described rewards doing it the other way round.

On a scoping call, we look at where your income currently sits on that spectrum — wages, dividends or gains — and what changing that mix, or your residency, would actually do to your effective rate.

Disclaimer: this article summarises general tax principles for illustration. It is not personal tax or investment advice, and rates change; confirm current figures for your jurisdiction before acting on any of them.