Why is it so hard to tax billionaires? (Part 1)
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Welcome to start ginger I P G O. Each week on the show, we answer a question, and we have about the world. No question too big. No question too small. Our question this week, why is IT so hard to text billionaire? The answer may lie in a USB key leaked by a rogue IOS worker to a journalist, a USB key containing private tax returns for the very wealthiest people in america, elon mask, Taylor swift, jeff basis, the story of that league and the question had answered after that.

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Am I supposed to put this honor doing?

It's totally up to you if you feel more or less comfort in either direction.

Scones me like podcast.

I was in the studio recently with a reporter who I know i've had the pleasure of knowing a lot of grumpy idea, few as grumpy idealistic as him. Can you say your name and what you do?

sure. Jesse einer and am a senior editor and reporter at proposal.

And you, as part of your jobs spend. I mean, other people spend more time saying about the taxes which people pay, no pay, but to be rich people and the people they hire year like in third place .

I think yeah I mean, like the ninety nine point five percent title of people think about rich people taxes.

yes yeah. How did that happen to you?

Um you know just growing up angry. I wake up angry in the morning every day. I've always gravitated IT was all was complete accident that I got into both journalism and especially business and financial journalism and then bihan stands I gravitated to conman and liars and charleton I went from you incredibly complicated stuff like accounting fraud and days sales outstanding, an account receivable to structured finance and clatters zed, dead obligations and all that up. But I was always very daunted about taxes because I thought that was actually, they really complicated itself that I could never understand. And and then IT fell into my .

lap through serendipity.

if telling to justice lap because of a stranger who would find him on the internet, a stranger presumably, who is inspired to reach out to him because of this series, just as colleague prop. A poko had reported back in twenty eighteen, he was called guiding the I, R S. Who wins when a crucial agency is.

I considers the most boring, investigative, serious ever written .

and what what made you so boring?

It's about a bureaucracy that's not doing anything and it's about the tax bureaucracy. There's not doing anything. So you're .

layer taxes on nothing right is hearing about exactly.

exactly. But I was very .

proud of IT.

We really got into the irs and was very important. We penetrated a wealthy person's tax audit. Explain why I was so difficult to hit the wealthy.

We wrote about, in the end, pretty outrageous things like paul figured out that you were more likely to be audited if you were a member of the working poor. If you are making twenty or thirty thousand dollars a year, then if you are making five hundred thousand dollars a year. And why was that the case?

The short hand way to think about IT is that over a decade, republicans, mainly with the kind of passive acceptance of democrats, gutted the irs to the point where the tax collection system of the united states was almost completely incapacity. So we had no ability to either oversee or audit or police the wealthy and CoOperations when they were trying to avoid or evade taxes. And we wrote that series of stories. IT was read by a few important people in washington, and then one person who was really stored to act. And they gave us all the taxes are the wealthy.

Capture one, the mysterious whistle blower in the fall of twenty twenty, nearly two years after that I R S series was published. The rogue leaker makes contact.

a signal message pops up and asks if this is Jessie ising er from pro public guy and the person says they want to give me something and you know, I always answer those things.

How much do you get the I would just say you as like a pakia star trust. Like why monkey do this? I don't get a lot of like people like .

I got something to get one. Do you get that a lot? I get IT a lot. And ninety percent of IT is that there? When I walked down the street on being .

monitored by the FBI.

people who are say, not well, so most people are unwell. And then nine out of ten who are not unwell have something that is of some importance in a local or you know modest setting but not doesn't rise the level of a public cup project yeah you of national importance, but you all get two, three tips like that a week.

And to why did what was the first time with this message that this was actually substantial?

IT took a while. So the person said that they send me something. And I said, sure.

Hoping IT wasn't going to be anthrax. no. And then a an envelope arrived, which is always kind of exciting. That doesn't happen.

I can it's never happened to me.

I feel juice and I put the envelope aside and forgot about IT. And a couple of months later, few months later, the signal message pops up again. And there's very a lot of broken digger stuff about how the plan is going to be activated now.

And like the plan is going.

yeah like i'm going forward, i've decided to go forward. I'm now ready to move to phase two or something you know something like that and .

are you kind of thinking like.

oh, i'm thinking crank, yeah yeah. But, you know, in addition to being angry, rams are hopelessly optimistic now. And so i'll always think like this, this a possibility, you know, so but the first problem was I had no idea where they got down, ended up with. So I been hours and hours going there. You know, I don't know if you you've never been to my apartment, but that's not that enjoyable thing to try to sift through the mountains of paper, desperately looking for this thing, I did find IT deep within the balls of our filing system, called on quote, and then got the password to the synchro pt, some drive. And I was looking at clearly something that smelled like something that come from the irs.

And what what made IT that way?

Like what did you know? IT had jargon. IT had fields and fields of numbers out to the the single digits, things that wouldn't be, you think the great fear is something that's fraudulent that you're gonna tricked .

into going to say like, hey, here's down trust returns cooked up on hot James .

of key is trying to trick you and to publishing something that would be catastrophic. Ally, embarrassing. yeah. But this just had very simple to IT the .

whistle lower at come back over fifteen years, grabbing the tax returns for thousands of the wealthy americans and dumped them into this file. Forbes every year publishes the forbes four hundred list, guessing at the Richard americans and their network. But this was the real thing, government certified. In practice. What this looks like was fields and fields of data spread cheese and spread cheese until how do you get in to understand what even given?

Well, that took months and months and months, but at that point, I think of, I called up paul and I said, this is either the biggest hopes of your career, the best day of your career.

IT wasn't a hoax. And for Jessie to say this was the best day of his career means something. He's been investigated reporter for decades.

He's one a polar. He is someone who has dedicated his life to understanding how the wealthy and powerful shape our society. But he'd never seen wealth.

This unmasked .

chapter two, the secret files.

we were looking at something that no one had ever seen before, something that would have been one of the most guarded secrets in all of the federal government. And we were pretty to this extraordinary secret. And when you say .

that this is one the most guarded secrets, like how guarded was IT, well.

you can go to prison for leaking any amount of private tax information. So is clearly a violation of the law just to leak one persons tax information. This was thousands of people.

So you were like seeing how much they make in a given year, seeing what kind of deductions they had. You could see their gambling winnings. You could see their stock sales. IT was an untrained into a completely different world.

And so as your decoding the information you have is that the billionaires that i've heard of is IT like jeff basis warned about, we just looking .

at their tax information. Every person you can think of the world oh ah there a lot of women here, all the top peaching managers that you could think of, George sorrow was in there and you would be hard pressed to name a billionaire who we don't have is .

an extraordinary amount .

of private information for anyone to Jessie says the team at republica had to think carefully about how to proceed. There were ethical questions to consider, like which parts of the data dump were actually news, where they but the story told by the tax returns was the story of a lot of behaviour that seemed pretty astonishing. Everyone's had the experience where a wealthy person explains to how actually they are not really that wealthy.

But seeing these documents, IT was like watching the wealthiest people in amErica do that to the U. S. Government's tax collectives. For example, jeff basis, in a year where his network s was eighteen billion dollars, was paying so little in federal taxes that he looked to the other exercise like a poor person.

Somehow he both qualified for and take advantage a government tax credit for child care er that's actually designed to lower child poverty in this country. Our government sent jeff bazas a check for four thousand bucks to take care of his kids. Republican reached out to basis of representatives who declined to receive detailed questions about the reporting.

Another example warn buffett. In the data, they can see that one year buffett to wealth had grown by over twenty four billion dollars, and they paid about twenty three million in taxes. That was is out to one tenth of one percent, the equivalent of a person whose network increased by hundred thousand dollars in a year, paying one hundred box in taxes.

Buffet, to his credit, one of the few billion's who responded to in an extended letter, he pointed out that his tax returns have long available publicly and said that he believes his money is more useful if he go to charity, rather than, quote, to slightly reduce and ever increasing U. S. Debt, which honestly is probably the way a lot of people feel, not just billionaire being a billionaire, imagine hasn't subsides, but he has its downsides.

So one is that when you said has downsides, everybody starts lighting at you. The other is that many people do not like you and do not think you should exist. Only fifteen percent of americans pulled by pew.

So IT was a good thing for the country that some people have more than a billion dollars. I improvers intend to feel little bit of curiosity for anyone everyone kind of hates. I want to ask, just say, about this decision he'd made to pretty severely violate the privacy of the ultra thy, even if IT may have been for the greater good. I also did Billy her side. I understand what.

obviously.

and particularly for me, I understand the idea that in a world, weather isn't full transparency. No one wants to like, go first. Like, I understand the feeling of lake, let's all be naked or let's nobody be naked. But I don't want to be one of the only naked people I get in that way I will defend the billionth.

Yeah, i'm well, good. I was worried for now that we're going .

to be too hard on I just want to get all the evils ject.

Um I well, first of all I have been one of the people who's been naked at republica because i've been lucky enough, fortunate enough to be in the nine ninety what they disclose some of the top salary people and i'm sure that in my unproductive years many people at replica have felt resented toward me.

Maybe they feel resented, told me in any year, but you know in fact, I go on i'm able to work hard and work with colleagues so you get over IT, and people are very concious of IT. Anyway, I think billionaires are special, or let's say, the ultra wealthy are special, because they are often qazi public figures. I think that essentially makes you a public figure wants to reach a certain threshold of wealth, especially because of the power and influence that the wealth accords you. They donate to major institutions and fund political campaigns. And I think in turn, they should sacrifice a little bit of their privacy.

In finland, norway and sweden, citizens tax return to our main public in amErica with continent can actually file public records, request and learn the state tax bill of any other citizen Jessie's interest in this is not certainly about humiliating the ultra rich. It's more this.

Jesse's suspicion is that if billionaire taxes were transparent, we discovered that a lot of their tax strategies that may be illegal still don't pass the ethical smell test. And if we saw the loopholes they were using, we might be motivated to close those loopholes, of course. But IT seems hard to imagine any of this actually happening.

Jesse will tell you that as an enthusiastic student of the american tax code, the story of how we got this code is really the story of history and accident. IT has changed a lot. IT could change again.

This is not written in the ham arabi code. You know, this was not handed down a mount si. These are just policy decisions that generations relatively recently made with some expertise in other blind spots.

One of the struggles was to understand how income tax got to be the way IT is in this country. And it's still process we're still learning about IT. I'm like among the seven people in the world is kind of fascinating and then um tried to figure out why is this private?

You know why is there a secret and IT turns out that's a and that originally in the civil war IT wasn't secret. IT was public. In the one thousand nine hundred twenty years there was public. So at each come step of the way we are realizing, oh, there are these decisions at all contingent. There's a lot of accidents, and we got to a system that actually is totally wrong for the current economy.

After the break, we will make you the eighth the person in the world to find income taxes fascinating, the most spellbinding story you never knew you wanted to hear. I swear, god, how amErica even decided to have an income tax.

This show is sponsored by Better help. This month is all about gratitude. And along with the person I just shut IT out, there's another person we don't get to thank enough ourselves is sometimes hard to remind ourselves that we are trying our best to make sense of everything.

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Chapter three class war. Every country needs to raise money from its citizens somehow. But there's a lot ways that this could happen.

You could have A L tax. You could tax the land with a property tax in ancient egypt, the farrow tax the citizens wheat harvests these days. The tax we usually talk about is the income tax.

But if your country has an income tax, you have to decide, do you tax people? Do you tax companies? Do you tax both? AmErica in the beginning chose to not tax the income of either people or companies when we first started experimenting with the radical leftwing idea of income taxes, Jesse says he was just a temporary reaction to an ongoing national crisis.

So the first income tax was passed in the civil war. And the way the government had raised money before that and then after that for a long time, with through turfs and levies fees on tobacco and alcohol largely, and that was a regressive system. So IT, that means that .

basically like because everyone pays the same amount for a bottle whisky, whether you're wealth or poor, if the government raises all its money through whisky tax, everyone is paying the same amount of .

taxes is no matter how much money they have. So it's a higher percentage of your overall in wealth.

if very and that I mean, when people were making argument against that, was that why they decided to shift?

They have a OK that is at the heart of IT that the wealthy are not paying their fair share, that they think they're exempt from taxes.

These arguments came to ahead in the civil war because the government badly needed money and terror revenue. Money from taxes on alcohol, tobacco had dried up in more time.

Their blockades and trade is really curtailed. The economy slows down. So everything kind of comes to halt, and we need to funded somehow. So we pass this income tax. And the express purpose of IT was so that the wealthy, we're going to contribute to the war effort, because this was a class war, and you could buy your way out of your position in the army, you could buy your way out of the draft. And so there were accusations that only working men were dying. And so linkedin said, we're gona have the wealthy contribute to this and it's going to be public so that people can see how much they're contributing to the effort. And course, they hated IT.

They hated IT.

then they hated IT pay. I think they hated IT for yeah very similar reasons. They hated paying anything. Yeah and they hated being exposed.

Jesse says the arguments wealthy people were making back then sounded a lot like the arguments here today. The government wasn't Better at allocating capital than rich people were taxing. The rich could discern them from working more. Back then, the wealthy won these arguments that federal income tax passed during the civil war was rescinded a few years after the war ended eight and seven two, which began a forty years fight to restore IT.

I've been surprised know that there was a long period of time when we didn't have an income tax, but I was even more surprised to learn that the modern income tax IT exists because of the political party most dedicated to loving IT, the republicans. Republicans in amErica are responsible for our federal income tax. And the story of how that happened is really the story of one of histories, funniest own goals. Chapter for an extremely expensive mistake.

So what happens is the country is being run in the aftermath of civil war by republicans. You famous ly .

like the party of linking publications to the .

party of lincoln republicans, but they're morphing ing to the party of George H. W. Bushes republic OK. So over the course of the second half, the nineteen century IT becomes a party dominated by north eastern wealthy interests, wealthy republicans. And the whole country is being run by those interests.

I mean, I will say if someone is a radical position that income taxes you should exist. I can also imagine how heart IT must have been when you grow up with the idea that you pay taxes, you pay taxes but being like, hey, i've got a crazy idea next year we're taking a percent of your money away from you. They'd be a very easy political project to defeat.

It's an incredible story. It's an incredible accomplishment. I think it's the single greatest Victory of average americans against the wealthy class in american history to get in income. text. And as I say, it's a complete accident.

an accident that would occur amid a heated political fight. There is an insurgency of populists berny sandpipers, who are devoted to working class, mostly rural americans. One of those populist politicians actually does get an income tax will past in eight hundred ninety four.

But just a year later, the supreme court rules that it's unconstitional tional. These insane insurgents have overreached. Their plan stopped in its tracks.

So what happens over the next decade after the supreme court has rejected the income tax is their huge debates about how they can possibly bring this back and resistant. And my hero of this stories is got cortex hall, who's a Young tennessee congressman. And he is the kind of single mind did obsessive about the income tax.

He's a democrat from the hill country in tennessee. And he talks in his memory about how members of the democratic party, his own colleagues, run away from him in congress because they're so bored, I like Carrying them. And to talking about the income tax all the time.

And h, so this is his obsession. And IT was the gillin age where we're seeing fortunes that only have been matched by today's figures. And he's constantly giving speeches on the floor about how the wealthy, how the rockefellers at the time don't pay their fair share and I feel like their exempt from taxes.

And considered this our present moment, where we have these ultra alty people whose power occasionally seems to exceed the power of the nations where they live. Our moment have felt me like something new, something outside of history. But we were pretty much here before, once the gilded age.

Back then, instead of people becoming unable magine wealthy by building and owning the infrastructure of the internet, people become an imaginably wealthy by building and owning the infrastructure of physical things, railroads, steel, oil. The fact that we have an income tax at all is a reaction to the problems of this earlier area. Here's what happened.

The progressives and the populists who wanted in income tax had to face down a big opponent, a powerful republican politician named Nelson orridge. Nelson aldrich, very opposed to the idea of an income tax he had preferred to. The concept at one point is communistic, which may be a little bit, but objects could tell americans were boiling, had about inequality.

And he knew he had to give this unwashed, angry mob something, some throne bone. And he thought he saw a way out, a compromise, because around the same time, they're been a different proposal. Instead of taxing the incomes of individuals, how about we tax the incomes of companies? A corporate income tax that measure to aldridge in his republicans seemed like a less radical solution.

So they pass the corporate income tax for the first time OK. And there's essentially no debate about IT. And they pass IT to try to cut the knees off of the movement for the income tax.

And so like he has to do something, but he wants to do as a little as possible.

exactly. He's trying. So what he they pass the corporate context, which is a huge Victory for taxation in america. And then what happens is that doesn't succeed in cutting off the momentum, the income tax. So there's .

still some public appetite for income tax. And the republicans LED by now, son aldridge actually put forward a constitutional moment supporting one. There thing is the woman is gonna SE.

It's badly. This time the states will voted down, and this will just end the conversation about the federal income tax. The rebel beginning are feeling pretty good about this penny swell manea.

And so they embraced IT as a legislative gambit. And hall, who has been the great champion of the income tax, is against IT because he knows that it's gonna the death nell for the income tax and his dream and his obsession. They pass the income tax amendment and they pass the tariff bill. And then the republicans are widely miscalculated and IT goes through the states and passes. And then we get the sixteen amendment.

the passage of the sixth amendment, the moment where we americans made the federal income tax constitutional, the amendment reads, quote, congress shows the power to lay and collect to taxes on incomes from whatever source arrived without apportionment among the several states and without regard tenny census or enumeration. Jessie iser is the only person I ever met who finds this amendment exciting.

The way you talk about the passing in the sixteen amenity, it's like a movie you just walked out of like, why is this so like living to do? I feel like i'm listened to that star. Exclude but like .

a tax or form along.

I think what is this, how come this is this moment speaks to use so deeply.

because we are in a moment where our politics are totally classified, where we have horrific wealth inequality, where our democracy is fragile, where people feel like they have no voice or ability to change anything. And so I ve been obsessed with this period of time that looks very similar to our current period. That was a time of extraordinary reform. And i'm trying to understand why they were able to change things and we can't.

I thought we were telling the story about taxes, and we still are. But at the heart of this, for jc is one of the most vexing, important questions about american life right now. Why does IT feel like nothing can change? And what would IT take to break that feeling? Avers are a break. Yes, there is a ticket of intractable problems in amErica right now, but will continue to tell the story of this particular one, how things got so stuck, how you might get unstuck as after these acts.

Welcome back to the shop reporter Jessie ising er just saw the story of the invention of the federal income tax and that story ended on a feeling that I think most people don't actually have, although hopefully you are too swept up in the magic of storytelling. And notice we were celebrating the federal income tax as a kind of miracle, a miracle can we acknowledge? Most people do not feel that way.

Our hatred of our tax code is one of of the few things most americans actually agree on. We would like taxes like, we like getting a paper cut on a sun burned, stopped toe. But the income tax background was, first born, was a very different animal in the beginning, was relatives simple? And he described a very modest tax on income applied to only to the wealth est americans, even for them tax rates between one and seven percent.

But then one thousand nine hundred and seventeen, we enter world over one. The government needs out more money. And to those rates are meanly jacked on the ultra weight, up as high as seventy seven percent.

Which brings us to chapter five. Chapter five, the rich try to get their money back. So I guess like why does attack her be getting more complicated? Like in my head in one thousand nine thirty, the tax code is like a couple piece of paper in a folder. And then at some point, IT is a phone book and i'm trying to watch IT get thicker.

I yes, yeah. So it's pretty simple initially. And as those tax rates go up, the incentive to make IT more complicated also goes up. And that begins happening in the nineteen .

and twice mali mital more. She's a professor of history at washington and lee university. SHE is a person you go to if you want to talk for some reason about the history of the income tax. He told me the story have had a rich began to fight back.

We see a sort of conservative move in the one hundred and twenty eight, three republicans in a row, three different republicans in a row are elected in one thousand, twenty and twenty and twenty four and one, one thousand and twenty eight. They all have the same. Treasury secretary, Andrew melon.

Andrew mellon pisser g. Banker, with eyebrows as a glorious as his moustache, his fortune rumored at over half a billion dollars, considered quite a bit of money in those days. This half billion air was given the job of treasury secretary, a wealthy person in charge of deciding how much he and his wealthy friends should pay the federal government.

Just as a reminder, in the last chapter we learned about this. But basically there's two types of tax systems progressive, where everyone here is the same dollar about Richard poor. The sales tax on a boat whisky progressive.

And then there's progressive where people pay a percentage based on their wealth in those systems, rich people pay more. Our new income tax was progressive. The person charged with Andrew mellon did not like that.

Andrew mellon is pretty interested in reducing the progressivity of the tax code, but he understood that like taxing the rich has always been popular, right? If you look through american history, the sort of cry of taxing the rich is always one of the popular things. And so melon knows that he can't get rid of the progressive tax code. But what he can do is make IT less progressive, sort of sneaky, right, by introducing all of these kind of right off. So what we might think of as tax shelters and allow people with that kind of income, income from investment, income from business as to shield some of that income from the taxco.

So just a basic understand. Andrew mellon, yes, was working for the government. And one way you could understand what he was doing was intentionally making the detect code more complicated as a way of giving the wealthy people, who presumably he knew in head dinner parties with and was in fact one of them some like, it's like you don't like school. Here's a big stack of excuses yeah .

right say you preserve the appearance of a process sive tax code, but you're actually making IT less progressive by giving people a lot ways to hide some of their income.

All of these generators were having behind closed doors, and the avery american would not have been thinking about any of this because, remember, for the Normal, non railroad owning american, there is no income tax. But all of this is .

about to change where your profits are going to be cut down to a reasonable low level by tax. Your income will be subject to higher tax.

Franklin delano rossel takes power very much the opposite of Andrew melon, no mash, Normal sized brows in after hours. Cabinet cordial hall, the original hero of the income tax F D R, wanted to heavily tax the ridge, but also text everybody else.

Indeed, in these days, when every available dollar should go to the war of, I do not think that any american citizen should have a new income in excess of twenty five thousand dollars per year after the payment of taxes.

Catch six, everyone has to pay taxes. Now the revenue .

act of one thousand nine hundred and forty two makes U. S. Income tax into a mass tax rather than class tax, by lowering the thresh hold at which income first starts to be text to the number of taxpayers, right? Income taxpayers goes from about, I want to say, three point five million americans in one hundred and thirty nine are two, about forty two million americans.

nineteen forty five. And how do people feel about that at the time? Because there are the naughty are there?

Yeah right. So they feel pretty good, which is the sort of extradition park. And one of the things that's really sort fascinating is look at, well, I mean, how do you sell this income tax that yeah you know people don't like paying taxes necessarily, right?

No.

but our tax system still relies on voluntarism. You know, maybe you'll get audited, maybe arrests so come after you, but you're basically what of paying your taxes more or less voluntarily.

And that kind of extreme is the first time that most americans are sitting down and writing a huge check to the government.

Yeah, bright and I wouldn't have been necessarily a huge check, but IT won't been the first time that they did IT. So they had to be talked to do IT. And one of the things the treasury department that does is IT works with, I mean, influencers is the wrong word to use for the one thousand and four days, but it's basically that they work with pop cultural figures. The commission, a song called, I paid my income tax today.

I. Said was glad to see me, which was then distributed .

to you know almost two thousand radio stations across the country. IT was recorded by genetrix， but IT is right. The lyrics or something like, I paid my .

income tax today. I D up with the USA. You see those bombers in the sky rock of ella helped build. So did I. I paid my income text today.

And it's very much sort of gear towards what the song calls mr. Small fry, this idea that everybody has an obligation to pay their taxes, the slogan that the treasury department decided to use to sell their income tax with taxes to be the access right, very much linked to at this effort to win the war. They even go, so far, submission. Two films from what disney wow. Star Donald duck.

are you A P. Rios american eager to do your part? And there's something important you can do there.

These two problems. So the government is all, one, people don't know how to pay their taxes. And two, you've got to convince them that they should pay their taxes. Because IT is sort of part of being an american citizen, is part of being a good american citizen.

You won't get a medal for you will be a ital help to country. Needs .

is like, i'd wanted to know how the U. S. Government had convinced americans to get on board with this idea that we'd all send in a check every year.

And hearing how IT actually worked, only made with him crazier during my grandfather's lifetime, americans were instructed, partly via our pop culture, that we'd be doing something new now. We'd all now contribute to the federal governments. Go find me, donal duck.

That we have to in order to stop the notes. And we're going to do IT, not just this year, but forever that we agree to. This .

really is a civic miracle. Can tell you what IT is that? What that your income taxes? Yes, your income tax.

And so in that moment, people are happy to do IT because there's this x central threat, because some of people's anger and anxiety about elite in this country has temporarily been becoming by historical events after the war. What happens after the war?

So after the war, the tax system itself, more less stays in place, are there are reductions in the rates right throughout, both at the top and at the bottom. But the basic shape remains the same. It's sent qualified in one nine hundred and fifty four. Uh, and that world war two tax system is basically the basis of the tax system that we're still using today.

That tax system really fuels the modern federal government is IT pays for everything, schools, roads, wars, astronauts, everything the government does that you like. Everything the government does that you don't like. That tax code also balloons and becomes, weirdly, a place.

We have arguments without quite having arguments. Rich people's arguments about holding on their money get inscribed into bizarre little subsections, but also government subsidies, which might be too controversial as straight cash payments. He describes instead in tax credits, mortgage interest credits, childcare credits.

It's like the tax code. Is this very hard to understand, intentionally boring codex in which we conduct to some very loudest disagreements. But while we're having these disputes, something really fundamental is about to change something most of us won't actually notice.

The billionaires are right to build themselves in escape pod. Capture seven, the rewiring of american capitalism. So in the middle last century, in mad times, I was surprised to learn that rrh people once had enormous tax bells. Ls, I asked Jesse, ising her about this era so thousand nine hundred and fifties, which is A A moment where we still have an income tax that seems to function more the way you would think it's supposed to you like what is taxi in the life of an american CEO of a successful company in two thousand nine hundred and fifties?

right? So what's happened is we've had a great depression. We've had more n or two. Those were um extraordinary leveling events for the american economy.

And in the fifties and sixties, the way a CEO is paid and wealthy people buying larger paid their paid salaries. So the giant corporations of the time are companies like G. M.

And executives aren't paid stock. There are being paid sales. The is are tax.

But so they would have, like, if I were the head of gm in one thousand nine hundred and fifties, I actually would have gotten an enormous paycheck every two days. exactly. And in the government, unlike today, like the tax rate very much higher. And so not all of my money, but the part of my income that was much higher than the worker's income would be taxed a much higher rate 呀。

exactly. But then there's a revolution that starts in the seventies that rewires american capitalism.

In one thousand nine and seventies as search engine ing listeners and only search engine ing listeners. Now there is a massive inflation crisis that comes with both a recession and a real loss of trust by americans in their government because of been because of lots of other things. That inflationary crisis ends in the ninety eighties with wrong regan, who presides over a series of massive tax cuts, eighty one.

And that is correlated with crowing up the cause of the kind of financialization of the U. S. Economy that begins in the one thousand nine hundred and eighty and then accelerate through the nineties and into the twenty first century. And a tax code that a mine to tax regular income is not as well equipped to tax these new forms of. Well.

and when you say financial something.

basically people are and the wealthy are making money, not by making things, but by making sort of paper investments, right? So most of the money right is not in building new factories, is not in coming up necessarily even with new technologies, but in the financial markets, in buying and selling bits and pieces of other companies.

So in the one thousand nine eighties, rich americans are making more of their money now through their salaries, but through stock options, which has a weird side effects on taxation. Normal salaries, like paychecks we know, are taxed ed as income. But if you want to stock and IT goes up in value, that is not taxed unless .

you sell IT. And so you have this kind of explosive ability to make money because the stock option is worth nothing unless the stack goes way up and then you get huge amount. So this giant upside for these ceos, and we also have a technology revolution.

So people are founding companies in their proverbial garage and their own big chunks of IT. And these are very profitable companies because they're doing things like software. So you don't have to spend a lot of money to make the incremental floppy disk. And so you see somebody like Larry else in an oracle or Steve bomber and bill gates at microsoft with concentrated ownership of companies that have huge margins and their stocks explode and we get a new kind of wealth that turns out largely to be on text.

The feeling many of us have these days that inequality is high, that the wealthy have become unfathomably ridge. IT begins here. Our new guilded era were, once again, we have beards who has just live beyond or above the state, these billionaire position, a kind of wealth our tax system often just doesn't know what to do with.

Sometimes it's like their money is invisible to us now, because a crime is being committed, but because by design or accident, their money is money. The government really does not know how to see billionaires, powerful engh to reshape society, but who, every April, magically resemble poppers in the ice. Var government, in our next episode, we will tell you tty bult proof method for legally hiding your money from the federal government.

If you're a billionaire, this next episode engine might help you finally afford a second vacation home for your personal trainer. If you're not a billion years, you can listen the story of how they figured out an enormously profitable looper and hear about what IT would mean to close up. That story is in our next episode, which is out right now.