SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
taxes
America Needs To Tax Its Own 'Second Estate': Billionaires
The United States has no nobility, according to our Constitution. But our tax code does protect the very rich.
Dec 04, 2025
Pre-revolutionary French aristocrats—the “Second Estate”—didn’t pay taxes. Amazingly, America too has a second estate, billionaires who pay virtually no taxes. In her very outstanding recent book, law professor Ray D. Madoff shows how they get away with this.
The United States has no nobility, according to our Constitution. But our tax code does protect the very rich.
Federal taxes on income and estates—intended to fund government and prevent development of a hereditary financial aristocracy—were enacted early in the 20th century and originally worked well.
But since about 1980, the estate tax—infested with loopholes—has been nearly abolished for practical purposes and now produces trivial income.
Madoff wants to get rid of the ability of ultra-rich people—billionaires—to avoid having any taxable income in the first place.
Madoff suggests that the estate tax should be completely eliminated because its existence deceives the public about what is really going on. People falsely think that billionaires who pay no federal income tax will at least pay the estate tax when they die. In fact, they are paying neither kind of tax.
Billionaires avoid the income tax by arranging to have no taxable income.
Before 1982 ultra-rich people could not avoid paying income tax. Their income consisted of dividends and capital gains harvested by selling shares of stock, the price of which had increased. Dividends and capital gains are taxable income.
But in 1982 federal regulators weakened a rule prohibiting corporations from buying back their own stock. Since then, many corporations have used profits to buy back stock shares instead of issuing dividends. With fewer shares of stock outstanding and the value of the corporation increasing, the value of each share of stock began increasing dramatically.
What used to be taxable dividends turned into large capital gains benefiting the stock owners, including very rich ones. If shareholders need cash and sell appreciated stock, of course they would owe income taxes on the capital gains (selling price of the stock minus how much the shares cost them). But capital gains are taxed at a much lower rate than normal income like salaries, bank interest, and returns on bonds.
As Madoff points out, however, billionaires need not sell any stock to get cash to live on. Instead, they can borrow the money, using their stock as collateral. Borrowed money is not taxable income, so they owe no tax while living extravagantly.
And when they die, the stock they bequest to their heirs gets a stepped up “basis,” so if their heirs sell the stock they will owe no taxes because the stepped up basis leaves no taxable capital gains.
And inherited money is not considered taxable income. Someone who earns $50,000 pays significant income (and payroll) taxes on it, while someone who inherits $1 billion pays no income or payroll tax on it.
Madoff rightly objects to this situation, but she is not arguing that we should “soak the rich” with higher income tax rates at the top. She points out that there are two kinds of “rich” people. One is the working rich, skilled professionals earning high salaries and, usually, already paying very high taxes. A high percentage of all income tax receipts come from these people.
Increasing the high tax rates these “rich” people are already paying would produce insignificant extra revenue for the government.
Instead, Madoff wants to get rid of the ability of ultra-rich people—billionaires—to avoid having any taxable income in the first place. She wouldn’t tax them while they are alive, but would tax whoever inherits from them.
Rather than trying to fix the estate tax, Madoff would abolish it, eliminate the stepped up basis for inherited stock, and make inherited money and other gifts received taxable income for the recipients.
Assuming an exemption for small gifts (to allow birthday presents and the like), this could be a reasonable reform. It would bring in very large amounts of taxes while reducing today’s extreme economic inequality.
For further details, see Ray D. Madoff, The Second Estate: How The Tax Code Made An American Aristocracy. This is one of the two best books I have read since retiring in 2000.
Keep ReadingShow Less
After Lobbying Blitz, Trump IRS Formally Kills Direct File Program That Would've Saved Americans Billions
"It was never about efficiency, it's about Trump and his billionaire allies taking money from our pockets to make the tax system worse and line the pockets of big business elites in this predatory industry," said a spokesperson at Americans for Tax Fairness.
Aug 01, 2025
In a move backed by private tax-filing corporations, the administration of U.S. President Donald Trump officially announced the shut down of the government's free Direct File service this week.
For two years under the administration of former President Joe Biden, the IRS allowed taxpayers in some states to file their taxes online using public software under a pilot program.
A report published in March by the Economic Security Project found that:
At maturity in five years, Direct File would save the average user $160 in filing fees and hours of their time each year, which saves Americans a total of $11 billion annually between filing fees and time costs. By breaking down barriers to filing, Direct File would also deliver up to $12 billion each year in additional tax credits to low-income families currently missing out.
In January, the direct file system was rolled out to 30 million Americans across 25 states, to rave reviews. According to a memo circulated within the Internal Revenue Service (IRS), the program was "beloved by its users," with a 94% satisfaction rate among those who used it.
But according to IRS Chairman Billy Long, who spoke at a tax summit Monday, it will not be made available again in 2026.
"You've heard of direct file, that's gone," Long gloated. "Big beautiful Billy wiped that out."
"I don't care about Direct File. I care about direct audit," he added, referring to his efforts to make it easier for businesses and individuals under tax audits to get updates on their status.
The budget legislation that Trump signed into law last month did not formally end Direct File, as Long suggested. However, it did allocate $15 million to the Treasury Department for a task force to study public-private partnership alternatives to replace Direct File. "Big beautiful Billy" likely referred to Long himself, whose IRS formally ended the program.
Long's announcement was the culmination of a months-long scheme by private tax-filing corporations like Intuit and H&R Block, and Republicans in government to kill Direct File.
As early as December, following Trump's reelection victory, GOP congresspeople began calling for the program's demise. Twenty-nine of them, who'd accepted a combined $1.8 million in campaign donations from the tax prep industry over their careers, signed onto a letter written by Reps. Adrian Smith (R-Neb.) and Chuck Edwards (R-N.C.) calling on Trump to issue a "day-one executive order" killing the program.
Long, himself a former congressman from Missouri, raised eyebrows in January 2025, shortly after he was named as Trump's nominee to lead the IRS. According to The Lever, he received a curious $137,000 worth of donations that he then used to pay himself back for a $130,000 loan he'd made to his failed 2022 campaign for the Senate. Around a third of the money came from tax consultancy firms.
In March, following mass layoffs at the IRS by Elon Musk's Department of Government Efficiency (DOGE), staff working on the Direct File system were told to halt their work. Prior to that, Musk wrote on his social media app X that he had "deleted" 18F, the government agency working on the project.
Right after tax day in April, The Associated Press first reported that the administration was planning to end the program.
While consumer advocacy groups called the change a "big loss" for the public, the American Coalition for Taxpayer Rights, an astroturf group backed by tax-filing companies, thanked Smith, Edwards, and other GOP congresspeople "for their leadership" calling for the termination of the program.
The program was effectively dead for months, but Long's gleeful coroner's report this week made it official.
"Last year, Direct File saved taxpayers $5.6 million in tax preparation costs by allowing people to file their taxes for FREE," wrote Rep. Alexandria Ocasio-Cortez (D-N.Y.) Friday on X. "That's why tax preparation companies like... Intuit lobbied to get rid of it. Trump just gave them their wish."
Despite claims by GOP congresspeople that the program was "wasteful," it actually saved taxpayers much more money than it cost. According to the Economic Security Project's study, "For every dollar invested in the program, Direct File delivers $106 in benefits to American taxpayers, between savings on tax preparation fees and access to untapped tax credits."
"This move exposes what's really happening in Trump's administration," said David Kass, the executive director of Americans for Tax Fairness. "It was never about efficiency, it's about Trump and his billionaire allies taking money from our pockets to make the tax system worse and line the pockets of big business elites in this predatory industry."
Keep ReadingShow Less
Why Does Trump Really Hate Internationalism? It’s Bad for Billionaires
As he has thrown international rules to the side and tried to strong-arm other countries into concessions, his list of demands has resembled Wall Street’s much more than Wisconsin’s.
Jul 12, 2025
If you take U.S. President Donald Trump’s word, his foreign policy will finally make American workers great again. Where weak-willed attempts to work with other countries hollowed out the American economy, his belligerent nationalism will push the U.S. up and the rest of the world down. The globalists are for them; Donald Trump is for you!
But taking Donald Trump at his word is never a good idea. As he has thrown international rules to the side and tried to strong-arm other countries into concessions, his list of demands has resembled Wall Street’s much more than Wisconsin’s. He has fought Japan’s car safety standards and India’s price cap on coronary stents. He has gotten Canada and India to drop taxes on tech giants. And in perhaps his biggest victory, six major countries recently caved to his escalating threats and hollowed out a global plan to enforce a minimum tax on big corporations.
That Trump has fixed his ire on this international agreement reveals a broader truth: Internationalism is bad for billionaires. The misguided approach of neoliberal globalization opened up a lane for nationalists to claim that they defend the working class. But in reality, Donald Trump and his billionaire buddies would like nothing more than to play governments against each other. Billionaires can take fragmented countries to the bank—only international cooperation can build a united front strong enough to beat them.
Trump’s Revenge on the Global Corporate Minimum Tax
The global corporate minimum tax is a good example of this. (The details are a little complicated, but the super-rich would like to keep it that way, so bear with me as I explain.) In recent decades, major corporations have gotten spectacularly effective at avoiding taxes. Last year, Tesla made a profit of $2.3 billion in the U.S. but paid zero federal income tax. Neither did Merck, Pfizer, and Johnson and Johnson, despite making $45 billion around the world.
Two global dynamics help them achieve this. First, corporations use sophisticated accounting tricks to make their profits show up in countries where they do little actual business, like Ireland and the Cayman Islands—which just so happen to have very low taxes. Second, when countries attempt to raise taxes, corporations threaten to move elsewhere, creating fears of job losses and economic slowdowns that can convince governments to keep taxes low.
Trump’s global bullying successfully beat back two things he hates: international cooperation and taxing the rich.
In 2021, most of the world’s countries agreed to a tax deal that aimed to counter these dynamics. It was highly imperfect, with too many exceptions and rules skewed against developing countries, but it was still an important step forward. One of its key rules was a global minimum corporate tax of 15%. Suppose a Brazilian company paid just 10% in tax for income earned through its Swiss subsidiary. The deal would allow Brazil to apply a top-up tax and collect the remaining 5% itself. This 15% floor meant corporations could no longer drive a race to the bottom in tax rates, as any tax haven with a rate below 15% would just be leaving money on the table—someone else would tax it anyways.
And because congressional Republicans blocked the U.S. from implementing the deal—instead relying on a weaker U.S. version of the minimum tax—that’s what could have happened to American companies. This was how the agreement was supposed to work: If a country like the U.S. was too silly to make sure its companies paid at least 15% in tax, other countries would.
But Donald Trump hated the idea that countries could work together to make sure the likes of Apple, Facebook, and Eli Lilly would pay a fair share of taxes toward schools, hospitals, and roads. In an attempt to spook other countries out of making the corporate minimum tax work, Trump’s tax bill included a “revenge tax” provision that would have hiked taxes on companies from countries that applied it.
In a moment of deep cowardice, Canada, France, Germany, Italy, Japan, and the United Kingdom folded: they agreed to exempt American companies from the minimum tax in exchange for Congress removing the revenge tax provision. While the exact details are not yet clear, it is certain to give a leg up to American corporations avoiding taxes at home and abroad. It will also create a perverse incentive for foreign companies to relocate their headquarters to the U.S. in order to avoid taxes—or at least to hang that fear over countries that consider raising taxes on them. Trump’s global bullying successfully beat back two things he hates: international cooperation and taxing the rich.
Building the International “We” That Can Beat the Super-Rich
The way big corporations have played countries off each other to avoid taxes echoes a tried-and-tested strategy of advancing the interests of the rich. Corporations threaten to move investment out of countries that raise minimum wages or strengthen environmental standards. When countries reject austerity, financial markets often sell off their currency or demand higher interest rates on government bonds.
Rather than falling into this trap, some countries are demonstrating the unity needed to advance a more equitable economy. Last week, Spain, Brazil, and South Africa launched an alliance for wealth taxes on high-net-worth individuals, while eight countries took steps toward taxing first-class plane tickets and private jets. A major United Nations conference led to an initiative that could coordinate developing countries as they borrow funds, rather than leaving them isolated against their lenders.
These efforts model an internationalism different from the form of globalization that dominated the past few decades. Neoliberal globalization advanced a web of agreements that coordinated countries to place a ceiling on taxes and labor standards, not to raise the floor. Developing countries were markets to be opened, not publics to work alongside.
Corporate globalization needed to end—but the problem was that it was corporate, not that it was global. Nationalists promised to reverse this globalization and take back the spoils unjustly taken by others. But Trump has been far more successful int expanding American corporations’ ability to pillage than enabling everyday Americans to prosper. A balkanized world ensures no one is ever powerful or coordinated enough to subordinate the interest of the super-rich to the interests of the public. It doesn’t have to be that way. We can beat the super-rich, but only if that “we” is big enough to include those beyond our borders.
Keep ReadingShow Less
Most Popular