The Age of Entitlement: America Since the Sixties

by Christopher Caldwell

Americans were remarkably un-cynical about the wealth of the wealthy, even after the financial crash of 2008. In 2010 the investor Warren Buffett won praise for backing President Obama’s suggestion of a 30 percent minimum income tax for those making over a million dollars a year, a guideline that Obama tried to endear to the American public by attaching Buffett’s name to it. Buffett admitted he paid a rate of only 17.4 percent (about $6 million) on his income of $40 million a year. It took the supply-side economist Arthur Laffer to point out—correctly—that in 2010 Buffett’s net worth had actually risen not by $40 million but by $10 billion, a figure that was 250 times as large as the one Buffett cited. And, because it was in the form of unrealized capital gains, it was almost completely sheltered from income tax. Buffett’s effective tax rate was not 17.4 percent but 6 one-hundredths of 1 percent. He was proposing to raise it to 12 one-hundredths of 1 percent. The so-called Buffett rule was a means not of tapping Buffett’s wealth but of sheltering it.