Our Tax System Should Make You Furious

What It Covers

Boston College Law professor Ray Madoff explains how America's wealthiest — Bezos, Musk, Buffett — legally pay near-zero taxes by avoiding taxable income through stock appreciation, borrowing against assets, and dynasty trusts, while wage earners pay up to 52% combined income and payroll taxes, and why the estate tax collects almost nothing despite a 40% rate.

Key Questions Answered

• •The "Borrow, Don't Sell" Strategy: Billionaires like Bezos take salaries capped at $82,000 and never sell stock, instead borrowing against it from private lenders at favorable rates. The loan proceeds are entirely tax-free. Since their wealth vastly exceeds lifestyle costs — even $100M annually is negligible against $150B — loans simply roll over indefinitely, creating a permanent tax-free income stream with no taxable event ever triggered.
• •The "40% Pay No Income Tax" Statistic Is Misleading Both Ways: The widely cited figure that the top 1% pay 40% of income taxes refers only to high-income earners — surgeons, lawyers — not the ultra-wealthy. Meanwhile, the 40% of "non-payers" still pay payroll taxes starting at dollar one, up to 15.3%. Today, 80% of Americans pay more in payroll taxes than income taxes, making the code far less progressive than commonly portrayed.
• •Stock Buybacks Eliminated Dividend Taxation: Before a 1982 rule change, over 70% of corporate profits were distributed as dividends, taxed at ordinary income rates. After the change, dividend distribution dropped below 20% permanently, replaced by buybacks that inflate stock values tax-free. The Dow Jones sat near 3,000 from the 1920s through 1982; it now exceeds 45,000. This structural shift redirected trillions away from taxable income into untaxed appreciation.
• •The Angel of Death Loophole Wipes Out All Gains: When appreciated assets like stock are inherited rather than sold, the recipient's cost basis resets to current fair market value — erasing all accumulated gains permanently. A $30M NVIDIA position bought cheaply can transfer to heirs who immediately sell it for $30M and owe zero capital gains tax. Selling during life would trigger roughly 23.5% tax on the full gain.
• •Dynasty Trusts and Minority Discounts Gut the Estate Tax: The estate tax raised only $30B in 2024 against $50 trillion in wealth held by the top 1% — effectively 0.06%. Planners use minority discounts to shrink a $100M asset to $50-60M for tax purposes, then dynasty trusts to pass wealth to unlimited future generations tax-free. The number of taxable estate returns fell from 122,000 in 2000 to just 2,584 in 2021.
• •The Practical Reform Path: Tax Gains at Transfer, Eliminate Capital Gains Preference: Madoff argues the most constitutionally durable and administratively feasible fix is taxing unrealized gains at the point of transfer — sale, gift, or death — as Canada does, rather than a wealth tax. Simultaneously, eliminating the capital gains rate preference and taxing investment income at ordinary rates (with an inflation adjustment) would close the core mechanism enabling billionaire tax avoidance without the valuation and constitutional problems of a wealth tax.