Ray D. Madoff > Quotes

“The political scientists Kenneth Scheve and David Stasavage studied twenty countries, exploring the question of when, over the course of their histories, the countries imposed heavy taxes on the rich. They concluded that inequality was not sufficient on its own to cause countries to impose high taxes. Instead, they found that raising taxes on the rich happened only when the public believed that the state had unfairly privileged the wealthy, such that higher taxes on the rich were necessary to compensate for that unfair advantage. These perceptions of unfairness were more likely in times of war, when working classes faced conscription while capital owners benefited from increased demand for their products. Scheve and Stasavage argued that the reason progressive taxation saw its heyday in the United States in the twentieth century was because of these frequent conscriptions—first to fight two world wars, and then again to fight the Korean War and the Vietnam War. It is notable that the United States began cutting taxes on the rich only after the draft was eliminated in 1973.”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy

“One $7 million advertising campaign ran this advertisement: “When you die, the IRS can bury your family in crippling tax bills. It can cost them everything.” The ad was later criticized by FactCheck.org, an independent watchdog run by the Annenberg Public Policy Center for presenting a “misleading picture of who is actually affected by the estate tax since the vast amount of families are not affected by the estate tax.” The media campaign was particularly fierce and misleading when it came to family farms and businesses. According to one ad: “The death tax is killing American businesses.... To pay the death tax, many are forced to sell.”
It is striking that this campaign was so effective considering that it was based on such blatant distortions of the truth. Opponents of the estate tax repeal had written their own reports and op-eds explaining the limited application of the estate tax and the protections—real and potential—for family farms and businesses. These received little attention. To this, Luntz had a theory. As he explained in a New Yorker interview with Nicholas Lemann: “If you introduce a subject using language that will produce a strong opinion, no subsequent information will get people to change their minds. This is particularly the case when the competing claim is based on numbers — like in the estate tax where opponents of reform argued about lost revenue, high exemption amounts and the small percentage of the public likely to be subject to the tax. But discussing numbers is never a winning strategy.” Describing politicians who talk about numbers, Luntz added: “It’s like quicksand; the more you struggle the deeper you sink.”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy

“As the industrialists passed wealth to their heirs, they created a new class of idle American rich, many of whom embraced aristocratic ways.”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy

“Loan proceeds can be used to buy houses, yachts, and other things that support the asset owner’s lifestyle.”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy

“A frequent refrain of those defending the status quo is that the income tax system already heavily burdens the rich because the top 1 percent of earners pay 40 percent of all income taxes while 40 percent of Americans pay no income taxes at all. This is partially true: Individuals with the most taxable income do pay the most income tax. However, this statistic is about people who have high incomes, typically from work; it tells us nothing about the tax liability of those with the most wealth. Studies have shown that there is only about a 50 percent overlap between America’s wealthiest people and those who earn the most income. Moreover, as the leaked tax returns of several of the wealthiest Americans reveal, the ability of wealth owners to avoid taxable income means that they are just as likely to be among the 40 percent of nonpayers as they are the top 1 percent of earners.”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy

“Third, DAFs (donor-advised funds) allow private foundations to avoid the public scrutiny that Congress wanted them to have. If a private foundation makes a direct donation to a hate group or other questionable charity, that information is available to the public through public disclosure of tax returns. But if the private foundation wants to avoid this disclosure, it can simply make a distribution to a DAF, then make the donation to the hate group from the DAF, and no one is the wiser.45 While DAFs do publish their distributions, they list them over thousands of pages, and the information is disconnected from any particular donor.

45. Charitable gifts to hate groups can have devastating effects both within and outside the United States. Proposed legislation in Uganda imposing the death penalty for homosexuals was supported by significant charitable donations from United States taxpayers, many of which came from donor-advised funds. — Lydia Namubiro, “Charity Loophole Lets US Donors Give Far-Right Groups $272m in Secret,” Open Democracy (July 5, 2023).”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy

“The tax system benefits these wealthy heirs in another way as well: by hiding these tax benefits from the public. Gifts and inheritances are not only received free of income tax; but their receipt is also free of reporting requirements. This lack of reporting helps perpetuate the myth that the tax liability of the wealthy is more burdensome than it is.
To illustrate: a person with a $1 million salary (subject to about $325,000 in income taxes) also receives a $10 million inheritance. Under current reporting rules, only the $1 million salary is reported on the taxpayer’s return, giving the impression—to the taxpayer, the IRS, and the public—that the taxpayer is paying income taxes at a rate of 32.5 percent. On the other hand, if the taxpayer were required to report the $10 million inheritance (even if it weren’t subject to tax!), it would be easier to see that the actual tax burden is less than 4 percent of the income acquired in that year. If we add more zeros to the inheritance, the tax liability shrinks even more.”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy

“Investment in capital assets, deferral, and the Angel of Death loophole together are the core of “buy, borrow, die” as a tax-planning technique.”
― Ray D. Madoff, The Second Estate: How the Tax Code Made an American Aristocracy