Buffett Rule vs. Trump RuleAmerican investor Warren Buffett is the third-richest man in the world with a net worth of $62.3 billion. Even in the low interest-rate era, his interest income is over $3.38 million a day. But Buffett shocked the world by exposing that his total income tax rate, 17.4 percent, is lower than his secretary’s - not just by a little but by roughly half.
How could this happen? There are seven income tax brackets in the United States, from 10 percent to 39.6 percent. So people would naturally assume that Buffett would be in the highest tax bracket. But wealthy Americans have huge incomes from capital gains, which have relatively low tax rates, between 15 and 20 percent. So when capital gains make up a greater portion of your total income than earned wages, your aggregate tax rate becomes lower.
President Barack Obama has been working hard to correct the situation. He pushed for the so-called Buffett Rule, urging Congress to apply a minimum tax rate of 30 percent to the wealthy. But it did not happen. The income tax schedule that does not allow the Buffett Rule symbolizes the social order led by wealthy white Americans.
The Buffett Rule discussion led to another strange phenomenon in the United States called the “Trump Rule.” The more one derides non-mainstream groups, such as immigrants, the more support one gains from the mainstream. The Trump Rule is based on white Americans’ fear of challenges to the existing order. What changes is American society going through?
First of all, the demographic composition has changed drastically. The Hispanic population in the United States grew from 9.6 million in 1970 to 55.4 million last year, from 4.7 percent to 17.4 percent of the total U.S. population. According to the Pew Research Center, the Hispanic population will reach 106 million in 35 years, and Caucasians will make up less than 50 percent of the U.S. population.
Economically, the white-oriented middle class has collapsed. The middle class was large in 1960, making up 61 percent of the population. Now, it has fallen to below 50 percent. The white Americans who have fallen out of the middle class feel anxious and angry, and their anger is directed at other ethnic groups.
It is clear that the age of racial discrimination against minorities by white Americans is over, and American society is entering a stage of conflict between equal races. The Trump phenomenon is not a coincidence.
The Buffett Rule would change the existing order, while the Trump Rule rejects change. Their clash signals a collision in American society. In fact, clashes are not limited to the United States. Diversity is growing in Korea, and the same turmoil could happen in 10 or 20 years from now. Therefore, we need to observe the situation with more attention.
*The author is the Washington bureau chief of the JoongAng Ilbo.
JoongAng Ilbo, Dec. 15, Page 34
with the Korea JoongAng Daily
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