The Wall Street Journal / By LAURA SAUNDERS And SIOBHAN HUGHES

According to a letter Mr. Buffett sent to a Republican congressman on Tuesday, the Berkshire Hathaway Inc. chairman and chief executive disclosed that he earned almost $63 million last year, yet paid less than $7 million in federal income tax.

Mr. Buffett long has urged lawmakers to raise income-tax rates on the wealthiest, arguing that his secretary paid a higher effective rate than he did last year. President Obama embraced the concept, and went along with Senate Democrats' proposal for a 5.6% surtax on those making $1 million a year or more.

Warren Buffett

Prominent Republicans have challenged Mr. Buffett to release his income-tax return. Mr. Buffett stopped short of that, but provided key details in his letter to Republican Rep. Tim Huelskamp of Kansas.

Mr. Buffett's adjusted gross income was $62,855,038 in 2010, according to the letter, while his taxable income was $39,814,784. He said he paid $15,300 in payroll tax, and $6,923,494 in federal income tax. That made for an effective tax rate of 17.4%.

According to the Tax Policy Center, a nonpartisan group, the average tax rate for taxpayers in the middle quintile—those earning between $34,000 and $60,000 a year—is 12%, including payroll and income taxes. Those earning from $103,000 to $163,000--the top 80% to 90% of earners—pay 18.2%. Those earning from $163,000 to $211,000 pay 19.8%, and those earning from $211,000 to $533,000 pay 20.4%.

Tax experts pored over the details of Mr. Buffett's letter hoping for a glimpse into his compensation and financial dealings. His salary has long been set at $100,000, with most of his income coming from other sources.

"Most of Mr. Buffett's income appears to be either long-term capital gain or qualifying dividend income," said Robert Gordon, president of Twenty-First Securities in New York, a tax strategy brokerage firm. The top rate on both forms of income is only 15%.

"Mr. Buffett isn't paid like most chief executive officers," added Lee Sheppard, an expert with Tax Notes, a nonprofit publication. They would have higher salaries and more ordinary income from exercising stock options.

Mr. Buffett didn't return phone calls seeking comment.

The biggest mystery is the nearly $23 million gap between Mr. Buffett's adjusted gross income and his taxable income. Without having his tax return it is impossible to know the reason for the gap for sure, tax experts say.

One possibility for the gap is that he made large charitable contributions, itemized deductions that are subtracted from adjusted gross income. Another possible element is interest expense. Mr. Buffett is known for not selling investments but rather borrowing money against them. To the extent that he has investment income, any interest paid on such loans would be deductible.

"I hope you succeed in getting the ultra rich—who, as a group, are paying less of their income to the federal government than their receptionists—to share in the sacrifice many millions of other Americans soon will be asked to do," Mr. Buffett wrote in the letter.

Republicans have been fighting a Democratic proposal to pay for President Obama's $447 billion jobs bill by imposing higher taxes on the wealthy. After Mr. Obama unveiled his plan to tax millionaires more, it became known as the "Buffett Rule," in a nod to Mr. Buffett's claims in an op-ed article that he paid taxes at a lower rate than people who worked for him.

The proposal for higher taxes on millionaires has angered Republicans, who complained that increasing such taxes would punish investment.

"The Buffett Rule … uses your anecdote to shape an entire nation's tax policy," Mr. Huelskamp wrote to Mr. Buffett in September. "Given the use of your name and your story as the guiding force for the President's policy prescription, it is my hope that the evidence to justify such a change in policy will soon be available for public review."

Mr. Buffett said that if Rep. Huelskamp could "get any of the ultra rich to release their returns simultaneously with mine, I will be willing to have a pre-release wager with anyone who wishes for any sum that they wish that the figures in my return will be exactly those used in my op-ed piece."

Read More

• Letter from Tim Huelskamp to Warren Buffett
• Letter From Warren Buffett to Tim Huelskamp