Ask The Wizard #213

Thank you for that information; I will keep it in mind. Generally speaking, the house advantage with the standard rules at Palace Station (using a double deck where the dealer hits on soft 17, doubles after splitting, and allows re-splitting aces) is 0.40%. However, with this new rule, it increases to 0.86%. The table below illustrates how this regulation affects the house's edge.

The formula to determine this is combin(n+5, n) = (n+5)!/(120 × n!). Here's the breakdown for the number of combinations with dice ranging from 1 to 20.

Credit to Alan Tucker, author of Applied Combinatorics .

That's an experience I've had before. If you get asked to leave, you're simply prohibited from playing any longer at that casino. If you're banned, entry is off-limits entirely. If you were to ignore this request and were caught, they could require you to disembark at the next port and prevent you from returning to the ship. On my last cruise, they had notice stating that they would enforce this against anyone caught using illegal substances.

I assume each of your come bets was set at $5. Under this assumption, it sounds like you actually made put bets, which are permitted at casinos that allow them. Generally, put bets can be made in Nevada, whereas they are typically not allowed in Atlantic City. Personally, I usually advise against put bets because you forfeit the chance to win on the come out roll of the come bet, which has a 22.2% winning chance, compared to an 11.11% losing chance. My suggestion would be to start fresh with new come bets.

Normally, I would steer clear of commenting on such topics. However, having worked as a government actuary for eight years, I have some knowledge about taxation. From what I gather, most of Warren Buffet's income falls under capital gains, which are taxed at a lower rate of 15%. The tax laws permit this arrangement, whether it seems fair or not. What's puzzling is why his secretary is taxed at a rate as high as 30%. According to a source, this video the secretary's calculation included 'payroll and income taxes.' When he referred to 'payroll taxes,' he meant contributions to Social Security and Medicare. It's worth examining if the 30% tax rate for her is reasonable.

In 2007 the highest tax bracket was taxed at a 35% rate, applicable only to incomes exceeding $349,700. Income beneath this threshold is taxed at lower rates. Assuming the secretary is single, without children, and earns $100,000, we first need to account for standard deductions. In 2007, the deduction for single filers stood at $5,350, with a personal deduction of $3,400. This leaves us with $100,000 - $5,350 - $3,400, resulting in $91,250 subject to income tax. For single filers in 2007, the tax rates were 10% on the initial $7,825, followed by 15% up to $31,850, 25% up to $77,100, and 28% up to $160,850. Consequently, her income tax would tally up to: 0.1 × $7,825 + 0.15 × ($31,850 - $7,825) + 0.25 × ($77,100 - $31,850) + 0.28 × ($91,250 - $77,100) = $19,660.75. This accounts for just 19.7% of her income, suggesting that my assumptions regarding her earnings, filing status, and not itemizing deductions negatively impacted the estimated tax rate. standard deduction Now let’s analyze the Social Security and Medicare contributions. In 2007, the

rate for Social Security was 6.2%, applicable to earnings up to $97,500, and was capped beyond that limit. The Medicare tax rate at that time was 1.45%, with no maximum limit. Therefore, her overall contributions for Social Security and Medicare would total 6.2% × 97,500 + 1.45% × 100,000 = $7,495. Including these taxes, her total tax rate would be ($19,660.75 + $7,495)/$100,000 = 27.2%. Even so, we still fall short by 2.8% of the claimed 30%. Social Security tax I suspect that she might also be factoring in the employer's contribution to her Social Security and Medicare taxes. For those unaware, the Social Security and Medicare taxes essentially double the amounts deducted from employee paychecks. Employers are responsible for matching these contributions. Yet, some individuals, including myself, argue that ultimately, the employee absorbs this cost. If an employer no longer had to pay these taxes, they would likely have additional funds to compensate their workers better. This perception often arises, especially for self-employed individuals like myself who must cover both portions. If we consider both parts of the Social Security/Medicare tax, the effective tax rate becomes ($19,660.75 + 2 × $7,495)/$100,000 = 34.7%. I assume the remaining 4.7% discrepancy can be attributed to a combination of her earning a lower income, being married, having dependents, itemizing deductions, or some other factors.

Warren Buffet is unlikely to be impacted by Social Security and Medicare taxes. First, the Social Security income cap of $97,500 is inconsequential for him. Secondly, his income primarily comprises capital gains, which are exempt from these taxes.

That summarizes what I believe to be the underlying calculations regarding Mr. Buffet's claims.

Update: Shortly after this article was published, I received a response that presents an alternative view, arguing that Mr. Buffet actually pays too much in taxes.

I found your response to the individual who expressed indignation about Warren Buffet's lower tax percentage compared to his secretary quite intriguing. However, I was disappointed that it did not clarify the inaccuracies suggesting that Mr. Buffet pays a lower tax rate than his secretary.

First, as you mentioned, investment income is indeed taxed at 15%. This situation amounts to double taxation because the earned income that Mr. Buffet originally invested was taxed at his marginal rate of 36%. This is akin to comparing two entirely different scenarios (earned income and investment income).

Secondly, rather than focusing solely on the tax rate, one should examine the actual tax payments made. It's clear that Mr. Buffet likely paid millions in taxes the same year his secretary paid thousands. Shouldn't we be more concerned that one citizen contributes significantly more in taxes compared to others who benefit from the same governmental services? One could likewise argue, 'It’s astounding that Warren Buffet paid 1,000,000 times more in taxes than his secretary!'

I just wanted to underline that solely focusing on 'percentage' instead of 'actual payments' is misleading. This is akin to many of your

mathematically valid strategies and insights for various casino games, including blackjack, craps, roulette, and many others one can engage with. gambling fallacies .

Best Regards,

Kevin A. (Dallas)