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tax the rich
To Stop Billionaires’ Wealth and Power From Metastasizing, Close This Tax Loophole
A gaping U.S. tax loophole I like to refer to as “buy-hold for decades-sell” allows the investment gains of the ultra-rich to compound for decades without facing taxation.
Feb 02, 2025
For decades now, the growth rate of America’s largest fortunes has dwarfed the growth rate of our total national wealth. The political power those massive fortunes can now buy has pushed us perilously close to oligarchy. Billionaires, as we now see, are dominating the new Trump administration.
America’s total household wealth, since 2014, has roughly doubled, increasing from about $80 trillion in 2014 to about $160 trillion today. Over that same period, the wealth of America’s eight richest individuals—average net worth, over $200 billion—has more than quadrupled, jumping from $390 billion in 2014 to $1.7 trillion today.
In other words, over just the last decade, the ultra-billionaire share of our nation’s wealth has more than doubled. If you’re an American citizen, your chance of becoming a billionaire? Less than 1 in 42 million.
The gains flowing to the holders of these assets—billionaires like Jeff Bezos and Elon Musk—currently enjoy some of our tax system’s lowest tax rates.
Back in 1982, the year the annual Forbes list of America’s 400 richest made its debut, the entire 400 did not hold, collectively, even a full 1% of the nation’s wealth. Today just our top eight richest alone now hold that 1%.
At the root of this march to oligarchy sit two factors. The first, the simple formula the French economist Thomas Piketty made famous a decade ago in his masterworkCapital in the 21st Century: r > g. The basic truth here: The rate of return on the investments of our richest, Piketty’s r, regularly runs greater than the rate of overall economic growth, his g.
The second factor: A gaping U.S. tax loophole I like to refer to as “buy-hold for decades-sell” allows the investment gains of the ultra-rich to compound for decades without facing taxation.
Let’s put these two factors together. The reality of r > g means that if our taxes don’t adequately trim the rate of growth in the wealth of the richest Americans, their share of the nation’s wealth will inevitably increase, with no upper limit to that increase. Left unchecked by taxation and other policy choices we might choose to make as a nation, the share of our wealth that America’s top 1% hold—currently about 34%—could easily reach 50%.
That 50% happens to be the share of our nation’s wealth that our top 1% held on the eve of the Great Depression way back in 1929.
To prevent undue wealth concentration, stats like these make clear, our tax system must operate to reduce the pre-tax rate of return on capital to an after-tax rate of return that doesn’t cause wealth to concentrate. But unless we close the buy-hold for decades-sell loophole, that will be next to impossible.
Why? America’s largest fortunes rest on assets that have appreciated over time at a rapid clip. The gains flowing to the holders of these assets—billionaires like Jeff Bezos and Elon Musk—currently enjoy some of our tax system’s lowest tax rates.
How could that be? Consider an investor who purchased $100,000 of Microsoft shares in 1986, after the company went public. That investment would be worth about $430 million today. The ample return on that investment would be nowhere near the return flowing to Bill Gates and his pals who received Microsoft stock before the company went public. But that $100,000 investment would still show an awesome rate of return, some 23.9% per year, compounded annually.
So, for that lucky investor holding those Microsoft shares from 39 years ago, Piketty’s “r”—before tax—would be over 23%.
Over that same period from 1986 to today, our nation’s total household wealth, adjusted for population growth, has increased at a rate of between 5 and 6% per year. This growth rate—calculated after taxes—doesn’t quite give us an exact apples-to-apples comparison with that Microsoft investor’s 23.9% wealth growth rate. To make the comparison apples-to-apples, we would need to account for our investor’s tax liability.
How impactful would that tax liability turn out to be? A lot less than you might think.
Take the absolute worst-case scenario, tax-wise, for the investor: a sale today of the entire holding of Microsoft shares purchased way back in 1986. That would trigger a federal income tax liability of 23.8% on the investor’s $429,900,000 gain, about $102 million in total tax. That tax would reduce our investor’s annual rate of return to about 23.1%.
Wait, what? The income tax on a long-held, highly profitable investment only reduces the pre-tax rate of return by a single percentage point?
Yup. Think about our investor’s situation this way. If the growth in the value of the investor’s shares faced an annual tax of just 3.3%, and the investor sold 0.65% of the shares each year to pay the tax, the investor would be in the same exact position at the end of the 39 years. Put another way, that 23.8% tax at the end of a 39-year holding period translates to an effective annual tax rate of 3.3%.
Over 39 years, to put things in still another way, our investor’s share of the nation’s wealth would have increased over 300-fold.
Now consider what would happen if we increased the tax rate applicable to long-term capital gains to the maximum rate applicable to ordinary income, currently 40.8%. That one-time tax at the end of 39 years would leave our investor with an after-tax return on investment of 22 %.
What does this still quite robust 22% return tell us? Simply this: We need to look elsewhere for the biggest weakness in our tax system. So let’s try considering the tax end-game if our hypothetical Microsoft investor faced an annual tax rate of 23.8% on the increased value of his investment. That would leave him with an after-tax wealth pile at the end of the 39 years totaling about $68 million . To achieve the same result with a one-time tax on the gain from the sale of the shares at the end of 39 years would require a tax rate of 84.2%.
Few investors ever achieve an annual 23.9% growth rate over the long-term. But the wealth of some American billionaires has actually grown at twice that rate. These billionaires are achieving enormous rates of growth in their wealth, a growth that goes untaxed for decades. The tax they eventually do pay—when they sell their assets—translates into a minuscule effective annual rate of tax on their investment gains.
We can and we should do away with the current preferential rate of tax applicable to investment gains. But unless we close the buy-hold for decades-sell loophole, the wealth of our nation’s billionaires and their political power will both continue to metastasize—and obliterate our pretensions to democracy.
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Trump and His GOP Allies Are Preparing a Tax Scam 2.0
Trump campaigned on a promise to lower costs for Americans, but instead, Republicans are laser-focused on passing another round of massive tax breaks for the ultra-wealthy and corporations.
Jan 19, 2025
As U.S. President Donald Trump takes office, his Republican allies in Congress are already hard at work readying his legislative agenda.
Trump campaigned on a promise to lower costs for Americans. But so far, the GOP hasn’t proposed a single plan to do that. Instead, Republicans are laser-focused on passing another round of massive tax breaks for the ultra-wealthy and corporations.
It’s shaping up to be 2017 all over again.
If Trump and the GOP get their way, we know exactly what to expect: Income inequality will worsen, crucial government programs will be starved, and corporations and the ultra-wealthy will amass even more outsized power over our economy and democracy.
Trump made a lot of promises on the campaign trail in 2016 too—and quickly broke most of them. But he did fulfill one: His 2017 Tax Cuts and Jobs Act, his only signature legislative accomplishment, was a field day for the oligarchs and CEOs who helped elect him.
That law delivered a tax cut for the richest 0.1% of Americans that was 277 times larger than the one teachers and firefighters got, nearly doubling billionaire wealth in this country and spiking inequality.
Meanwhile, corporations got a 40% discount on their taxes, which they used to send record stock buybacks to their wealthy shareholders and pad their profits while they overcharged consumers on everything from gas to groceries.
The bill never delivered the wage gains or economic growth Trump promised. But it did add $1.9 trillion to the deficit.
Key provisions of this tax scam expire next year. That would be welcome news for the vast majority of Americans, who are sick and tired of tax cuts for the wealthy. But Trump and his Republican colleagues are readying a supersized set of high-end tax breaks that would make his 2017 legislation look like child’s play.
Republicans plan to give the richest Americans a fresh round of individual tax breaks, slash the corporate tax rate yet again, and cut taxes on capital gains and dividends, which would let their Wall Street friends keep even more of their winnings when they sell a stock or are showered with dividends.
Then they’ll move to step two: draconian budget cuts for the programs Americans rely on.
GOP leaders will point to falling revenues from their own tax cuts as evidence for the need to cut spending on life-saving programs that families rely on, like Medicaid and the Supplemental Nutrition Assistance Program (SNAP), which helps more than 42 million families afford their groceries.
In fact, Trump is putting unelected and unaccountable billionaires—Elon Musk and Vivek Ramaswamy—in charge of the “Department of Government Efficiency” (DOGE) to decide the painful cuts we’ll have to face. And surprise, surprise: They’re almost exclusively targeting programs that help working people, veterans, students, families, and other non-billionaires.
If Trump and the GOP get their way, we know exactly what to expect: Income inequality will worsen, crucial government programs will be starved, and corporations and the ultra-wealthy will amass even more outsized power over our economy and democracy.
But we can learn something else from our experience in 2017. Democrats united in their opposition to Trump’s tax cuts for the wealthy, pushing Trump’s approval rating to the lowest point in his presidency and ousting supporters of his corporate tax cuts in the next year’s midterms.
Tax giveaways for the wealthy and corporations were deeply unpopular with voters in 2018—and that’s only intensified after this recent wave of corporate price gouging that has squeezed American families. Lawmakers must make it as difficult as possible to enact this next tax giveaway.
This year, we need to make sure every single member of Congress understands that supporting Trump’s tax plans means turning their backs on working Americans.
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Pro-Rich Tax Loopholes Are Turning the American Dream Into the American Nightmare
Those with the power to act need to finally wake up, to insist that corporations and the wealthy pay their fair share.
Jan 18, 2025
We’ve been told all our lives that America is a land of equal opportunity. We’ve been told that everyone has an equal chance of getting ahead—of landing a good job, making decent money, having a place to call their own.
This ideal has long been called the American Dream. It’s a pleasing phrase, but it runs head-on into an un-pleasing fact. The late comedian George Carlin said it all with a memorable wake-up call: “The reason they call it the American Dream is because you have to be asleep to believe it.”
Politicians have been proving Carlin right for decades, Republicans consistently and Democrats all too often. The GOP and the second Trump administration seem bent on doing what they’ve always done, sometimes even turning the American Dream into the American Nightmare.
Less revenue from the top means either higher taxes for those down below, making it harder for them to get along; or it means fewer dollars period, threatening the safety net programs that so many Americans depend on.
Taxes are a major contributor, especially the billions upon billions that the rich and corporations don’t pay. Trump and his fellow Republicans are committed to keeping it that way—and, if their slim congressional majorities can stick together, to do even more for those who need it the least. As one small example, the overall corporate tax rate could drop to 20%; domestic manufacturers could do even better, ending up with an effective corporate rate of 15%.
The federal tax code is famous (and infamous) for its huge handouts to those with the highest incomes, the most egregious being the cap on Social Security taxes.
Most workers pay the 6.2% Social Security tax on every dollar they make. Big earners, though, avoid that tax by the billions. There’s a dollar cap on earnings subject to the tax, and it rises yearly at the same rate as average wages. Last year’s cap was $168,600, for 2025 it’s $176,100.
For those in the earnings stratosphere, the cap means that Social Security taxes can literally begin and end on January 1. In 2024 Elon Musk hit the earnings cap at 12:04 am on New Year’s Day; for Tim Cook of Apple, it took all of two hours.
Lower taxes on income from wealth than income from work amount to another giant giveaway to the rich. Taxes on long-term capital gains top out at 20%; the corresponding rate on income from work is nearly twice as high at 37%.
The tax code is also chockful of loopholes, many of them so complex that ordinary Americans can’t even begin to understand them. The wealthy don’t understand them either, but they don’t have to. They’re able to pay small fortunes to have their tax accountants and lawyers handle it: “You have an army of well-trained, brilliant people who sit there all day long, charging $1,000 an hour, thinking up ways to beat” this tax, that tax, any tax.
One way or the other—whether it’s lawyers working loopholes, whether it’s the tax laws themselves—the rich somehow avoid paying tens of billions in taxes. All those lost billions lead inevitably to one result or the other, both of which gnaw away at The Dream. Less revenue from the top means either higher taxes for those down below, making it harder for them to get along; or it means fewer dollars period, threatening the safety net programs that so many Americans depend on.
Medicare is one of these programs, and its trust fund is set to run dry sometime in the 2030s. Wouldn’t you know it, part of the blame lies with some of the richest men in America. While paying Medicare taxes is routine for workers, a gilded few have been paying not a penny. ProPublica laid it all out in a piece published just last month, “How a Decades-Old Loophole Lets Billionaires Avoid Medicare Taxes.”
The Internal Revenue Service (IRS) acts as the nation’s steward for tax collection and enforcement. It’s long been GOP gospel to do whatever it can to lower collections and lessen enforcement.
Despite the fact that cutting IRS funding “doesn’t save money, it costs money,” Republicans have repeatedly slashed away. Between 2010 and 2021 alone, the GOP managed to reduce the IRS enforcement budget by nearly a quarter. The cutting is endless and relentless—and it’s not likely to change under Billy Long, Trump’s choice as an early replacement for the reformer Danny Werfel as IRS commissioner.
Summing up, you have to be in slumberland (or not paying attention) to believe in the American Dream. Taxes are a major downer, lopsidedly favoring those at the top. Those with the power to act need to finally wake up, to insist that corporations and the wealthy pay their fair share.
Fat chance, obscenely fat. With the GOP in control, America’s taxes will just keep on mocking the American Dream.
This piece was originally published by the New York Daily News on Wednesday, January 8, 2025.
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