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books at the end of 1986, including $1.2 billion of unrealized gains on equities. Liquidating before the reform, Berkshire itself could have avoided paying any taxes, with the shareholders paying their 20% tax on the gain, or $244 million. If BRK liquidated after the Tax Reform Act took effect, Berkshire would be paying $414 million in corporate taxes (more than $185 million of which would have accrued to Buffett), before handing over the net proceeds to investors to pay a double tax, adding up to a maximum of a 52.5% tax on the $1.2 billion unrealized appreciation, or $640 million. Thus the total effect was $400 million. See also James D. Gwartney and Randall G. Holcombe, “Optimal Capital Gains Tax Policy: Lessons from the 1970s, 1980s, and 1990s,” A Joint Economic Committee Study, United States Congress, June 1997.

55. Berkshire Hathaway annual report, 1986. Notably, Buffett phrases the statement in terms of the costly consequences if Berkshire liquidated after the act, not the huge benefits that would have resulted from liquidating before the act went into effect.

56. This measuring stick has pros and cons, which are covered in investing books. Bottom line, it is a reasonable, conservative measure that can be distorted by acquisitions (something Buffett had discussed; see General Re).

57. Interviews with Walter Scott Jr., Suzanne Scott; also Jonathan R. Laing, “The Other Man From Omaha,” Barron’s, June 17, 1995.

58. Interview with Walter Scott Jr.

59. Interview with Clyde Reighard.

60. Jerry Bowyer, in National Review, August 11, 2006, wrote that Reagan’s “supply-side policies have helped Warren Buffet [sic] amass the world’s second-largest pile of wealth, which he routinely uses as a stage on which to stand and denounce the very supply-side measures that helped lift him to incredible prosperity.” It is true that like any investor, Buffett has benefited from the supply-side policies that reduce his personal taxes on investment income and capital gains. Notably, much of that benefit is effectively offset by Berkshire Hathaway’s taxes. Since the Reagan years, Citizens for Tax Justice and the Institute on Taxation and Economic Policy have been studying the annual reports of the top 250+ companies in the U.S., always coming to the conclusion that they are severely underpaying. See Robert S. McIntyre and T. D. Coo Nguyen, Corporate Taxes & Corporate Freeloaders (August 1985), Corporate Income Taxes in the 1990s (October 2000), Corporate Income Taxes in the Bush Years (September 2004). The top 250 companies in the U.S., while growing profits substantially, have consistently been shown to pay a fraction of the actual corporate tax rate throughout the 1980s, ’90s, and today, due to breaks for depreciation, stock options, research, etc. Berkshire, however, has averaged a 30% effective tax rate (net earnings before taxes, divided by the taxes paid currently) since 1986—offsetting Buffett’s personal tax benefits. Regardless, Buffett’s taxes are irrelevant to whether he is entitled to criticize supply-side policies.

61. Robert Sobel, Salomon Brothers 1910–1985, Advancing to Leadership, Salomon Brothers, Inc., 1986.

62. In other words, current partners were paid a premium above their invested capital by Phibro, in which retired partners who had already withdrawn their capital did not share.

63. Anthony Bianco, “The King of Wall Street—How Salomon Brothers Rose to the Top—And How It Wields Its Power,” BusinessWeek, December 5, 1985.

64. In the “Night of the Long Knives,” June 30–July 2, 1934, Hitler executed at least eighty-five perceived enemies of his regime and arrested a thousand others.

65. James Sterngold, “Too Far, Too Fast: Salomon Brothers’ John Gutfreund,” New York Times, January 10, 1988.

66. Paul Keers, “The Last Waltz: He had the power, she craved the position. Life was a ball until he had to resign in disgrace and an era ended,” Toronto Star, September 1, 1991.

67. Roger Lowenstein, Buffett: The Making of an American Capitalist. New York: Doubleday, 1996, who did not identify the executive giving this description.