William Driscoll is a DSA member and the author of Your Arteries — An Owner’s Manual
CONGRESSWOMAN ALEXANDRIA OCASIO-CORTEZ famously emblazoned “Tax the Rich” on the back of her dress at the New York City Met Gala in 2021.
Years later, the proposal to tax the rich has gained real momentum. In May 2026, New York City Mayor Zohran Mamdani secured a state policy imposing a tax on second homes in the city with high property values. Two months back, a California referendum to impose a 5% tax on the state’s billionaires qualified for the November ballot. In June, Senator Bernie Sanders introduced in Congress the American AI Sovereign Wealth Fund Act, which would tax the largest artificial intelligence companies in the amount of 50% of their equity, effectively cutting in half the value of the equity held by existing shareholders and provide the public a 50% ownership in these companies. “A 5% annual dividend from this fund could provide a direct payment of more than $1,000 to everyone in America,” wrote a press statement from the senator’s office.
These are welcome developments, but they are limited to particular slices of wealth. An approach to taxing the rich that would access other forms of wealth by comprehensively reforming United States tax law would also be welcome.
Fortunately, Ray D. Madoff, a tax law professor at Boston College Law School who could earn a small fortune advising the wealthy on how to avoid taxes, has instead written a short book — The Second Estate: How the tax code made an American aristocracy — showing the rest of us just how the wealthy do avoid taxes, along with her advice on how to fix that problem.
Surprisingly, one fix Madoff recommends would be as simple as changing a single line of the 7,000-page US tax code, to make gifts and bequests subject to income tax, with certain exemptions. (A bequest is also known as an inheritance.) That change would yield substantial tax revenue that could be used for federal social programs, tax cuts for those with low or moderate incomes, or deficit reduction. The annual amount of tax revenue would be unknown until the change was made, Madoff says, because the total amount of gifts and bequests each year is unknown, given that gifts and bequests are not currently taxed.
But the change would certainly shift wealth away from the top 1%, which now stands at $48 trillion according to government data presented in the book. That compares to $6.8 trillion in federal spending and a federal deficit of $1.8 trillion in 2024.
Madoff explains the book’s title in an epigraph: “The Second Estate was the official designation of the aristocracy of prerevolutionary France. Members of the Second Estate enjoyed special privileges, including the right to hunt, carry a sword, and not pay taxes.”
The epigraph launches a key theme of the book: that it’s bad for democracy to allow inequality to become more extreme by not taxing the richest members of society.
Madoff describes in plain English the ways in which many of the wealthiest Americans manage their wealth to avoid almost all federal taxation. She puts that class in a different category from high-income “working rich people,” whose income is subject to income tax.
One core strategy used by the wealthy to avoid taxes is called “buy, borrow, die.” A wealthy person using this strategy buys an asset (which they expect to appreciate in value), and then borrows money as needed to cover their expenses, using the asset as collateral. When the person dies, their heirs inherit the asset at a valuation (set for tax purposes) equal to the current market value. (In tax lingo, this is known as a “stepped up” valuation.) As a result, no capital gains are ever recognized, and no capital gains are taxed.
Through that strategy and others, many of America’s wealthiest people have “paid little or nothing in taxes,” including Michael Bloomberg, Jeff Bezos, George Soros, and Elon Musk, says Madoff, citing a 2022 series of ProPublica stories based on data leaked by Internal Revenue Service employee Charles Littlejohn.
Madoff’s telling of the history of US tax policy notes that a progressive estate tax — whereby larger estates were taxed at higher tax rates — was enacted in 1916, while the income tax rate on top earners reached as high as 73% in 1917. Those early moves to reduce inequality came at a time when the Socialist Party “had attracted the support of a broad swath of the public,” Madoff says.
But the wealthy have been winning ever since, especially recently.
Congress stopped closing tax loopholes in the 1990s, Madoff notes, resulting in an “alphabet soup” of arcane tax strategies employed by the wealthy: “SLATs, SLANTs, GRATs and GRUTS, CRATs and CRUTs, QTIPs and QPRTs and NIMCRUTs and Flip CRUTs.”
And the estate tax was whittled away from 1990 on, until in 2019 it applied only to 0.07% of all those who died, compared to 2.1% in 2001.
Gut-wrenching stories abound of how the wealthy have dominated debates over federal taxation. As a case in point, a fix proposed by Warren Buffett in 2011 would have placed a minimum 30% tax on all income in excess of $1 million. Former President Barack Obama endorsed the proposal, earning cheers from the public at his reelection campaign speeches. But under the “Buffett Rule,” Madoff notes, Buffett himself “would not have paid much additional tax” because while he had $47 billion in wealth, his taxable income that year “was only about 0.1 percent of that amount.”
The book also spotlights the regressive nature of payroll taxes — whereby those with the lowest incomes must pay high tax rates — and the significant burden payroll taxes impose on anyone with a modest income. Madoff notes that payroll taxes are applied from the first dollar earned, and that while other tax rates have declined over the past 50 years, payroll tax rates have more than doubled, from 7.5% in 1972 to 15.3% in 2024.
The combination of income taxes and payroll taxes, Madoff says, “is particularly burdensome for low- and middle-income Americans, many of whom are already struggling to get by.”
Madoff also critiques the “tax expenditures” — that is, the loss of federal revenue — represented by the tax-deductibility of donations to nonprofit organizations. Donations by a wealthy donor enable the donor to support their favorite organizations, build their personal reputation, and oftentimes give their children an advantage in their careers. But they often do nothing to benefit those who live paycheck to paycheck, or the public interest more broadly.
“Philanthropy is a rich person’s game,” Madoff says, “and the public often loses.”
Madoff makes three broad recommendations to fix the U.S. tax code:
Those fixes, Madoff says, would “reverse the damage that has been done” by a tax system that favors wealthy people and would “recalibrate the tax system as something other than an apparatus for consolidating wealth.”
Madoff’s book, at just 180 pages, gives the reader a good sense of how the wealthy avoid taxation, along with some comprehensive solutions, backed up by dozens of references. For those interested in transforming the slogan “tax the rich” into policy, the book is a welcome resource.
