Slate Money: Money Talks – How Our Tax Code Makes the Rich Richer

Date: October 28, 2025
Host: Felix Salmon (Bloomberg), Co-host Emily Peck (Axios)
Guest: Ray Madoff, author and law professor at Boston College
Episode Theme: Explaining how the U.S. tax code has been reshaped over the last century to advantage the ultra-wealthy, rendering systems like the estate tax ineffective and preserving dynastic wealth.

Episode Overview

This episode explores the central thesis of Ray Madoff’s book, "The Second Estate: How the Tax Code Made an American Aristocracy." The discussion unpacks how both income and estate taxes were once effective tools for curbing inherited wealth and ensuring the rich paid their fair share—but now, loopholes and policy drift have left the tax burden squarely on middle-class and working Americans. Felix Salmon and Emily Peck probe Ray Madoff’s insights about the historical trajectory of U.S. taxation, why today’s rich can lawfully avoid taxes, and what structural reforms might restore equity.

Key Discussion Points and Insights

1. The Disappearing Tax Burden on the Rich

• Historical effectiveness: From the 1910s through the 1970s, the U.S. tax code (income and estate tax combined) meaningfully taxed the very wealthy to fund government and limit dynastic wealth.
  • Ray Madoff: “Together, the estate and the income tax did a pretty good job from when they were enacted in 1913 and 1916... pretty much right up through the ‘70s.” (05:00)
• Gradual erosion: After 1990, Congress ceased to update the tax code to close new loopholes. The rich, aided by estate planners and supportive politicians, found ever more ways to shelter and pass down wealth tax-free.
  • “Since 1990, Congress... engaged in quiet quitting on keeping up the estate tax. And the effect... was that on its own, the estate tax crumbled as estate planners did their jobs, finding more and more loopholes.” – Ray Madoff (17:26)
• Current impact: The estate tax now raises only a fraction of a percent of federal revenue.

2. The Rebranding and Political Attack on the Estate Tax

• Frank Luntz’s messaging: In the 1990s, top wealthy families worked with strategist Frank Luntz to rebrand the "estate tax" as the "death tax," swinging public perception and political will against it.
  • “If you call it the estate tax, everyone thinks it’s fair... But instead... let’s call it the death tax. And by calling it the death tax, we are going to make everybody think that they are subject to it. That just as death comes for everyone, so too does the tax man.” – Ray Madoff (13:03)
• Policy consequences: The change in rhetoric led to sweeping reductions in the estate tax; exemptions rose, rates fell, and by 2010 the tax was temporarily repealed.
• Bipartisan drift: Both Democrats and Republicans lost the will to maintain or defend the estate tax, succumbing to the myth of "double taxation" and popular resistance.
  • “There is no such concept of double tax, right?... But I think the reason this double tax argument was so effective was because in the estate tax realm... the tax is nominally imposed on the decedent.” – Ray Madoff (20:32)

3. Loopholes and Legal Tax Avoidance: The Playbook of the Ultra-Rich

• How the rich structure their finances:
  • Take little or no salary—thus avoiding high income and payroll taxes (03:12, 33:13).
  • Build wealth as unrealized capital gains, taxed at a lower rate (and often, not at all).
    • “Capital gains are taxed at a maximum rate of 20%... Andrew Mellon... thought that it should be the other way around.” – Ray Madoff (32:50)
  • Borrow against their stock holdings rather than sell to fund their lifestyles, thus paying no tax on those gains (34:35–35:41).
    • “If you had $100 billion, they'd keep giving you money to... They do. They just give you money... They literally don’t pay it ever.” – Emily Peck (35:17)
• Step-up in basis: When the wealthy die, heirs inherit assets at current market value, erasing all capital gains for tax purposes.
  • “All the gains get washed away and we never pay tax on them. We call that the angel of death loophole.” – Ray Madoff (37:25)
• Charity as loophole: Unlimited deductions for gifts to family foundations enable dynastic power to persist tax-free.

4. Political and Social Shifts: Why the System Remains Unchanged

• Loss of collective will: The fading threat of socialism/communism reduced pressure to use taxation for redistribution; society began admiring, not distrusting, the ultra-rich (21:49).
• No modern Carnegies: Few wealthy voices advocate for taxing their class; while Buffett and Gates voice support, their actions reveal otherwise.
  • “If I had my way, I’d be paying a lot more in taxes. And I’m thinking, okay, well, what are you proposing?... But he doesn’t actually wanna put forth anything.” – Ray Madoff (22:42)
• Overcomplexity: Multiple tax systems (estate, gift, income, capital gains) lead to confusion, reinforcing the wealthy’s ability to skirt costs.

5. Reform Proposals and Ray Madoff’s Prescriptions

• Failings of a wealth tax: Direct wealth taxes drive money into hard-to-value private assets and are impractical for enforcement (46:02).
• A workable solution:
  • Eliminate the estate tax.
  • Tax unrealized capital gains at transfer, whether through sale, gift, or inheritance, with reasonable exemptions to shield ordinary families.
    • “We should bring it all into the income tax system because this division of taxes over these multiple systems... makes people confused. A lot of people think the estate tax is a double tax because they don’t know that inherited wealth is not subject to tax.” – Ray Madoff (47:54)
• Subject inheritances over a certain threshold to income tax, using the existing tax system for fairness and simplicity.

Notable Quotes & Memorable Moments

• The tax system’s moral failure:
  “To say that somebody like Mark Zuckerberg should be able to acquire so much wealth tax free, never pay taxes on it in his life, his kids might never pay taxes on it on their lives and forever and ever, no one ever pays taxes on it... That feels deeply inappropriate to me in a country that has such a large debt that we are paying more in interest than we are for our national defense.” – Ray Madoff (44:52)

• Frank Luntz’s pivotal branding:
  “Let’s call it the death tax. And by calling it the death tax, we are going to make everybody think that they are subject to it—just as death comes for everyone, so too does the tax man.” – Ray Madoff (13:03)

• Macabre estate planning humor in 2010:
  “Estate planners... often refer to it as the ‘throw mama from the train’ year. Or, you know, there were jokes like things to serve your parents in this year—warm chicken salad, get them flying lessons.” – Ray Madoff (16:39)

• Emily’s visceral reaction:
  “This Book made me so angry. I was sort of like simmering with rage just reading it.” – Emily Peck (03:12)

• On how the ultra-wealthy avoid ever paying tax:
  “If you have enough wealth to borrow money against it... nobody has to ever pay tax... There is this issue of step up in basis at death... that is a real frosting on the cake...” – Ray Madoff (36:05)

• On public attitudes toward tax and inheritance:
  “Once you have it, you don’t want to give it back.” — Felix Salmon (41:52)

Important Timestamps

• 03:12 – Emily’s emotional reaction to the book’s revelations
• 05:00 – Historical efficacy of income and estate tax
• 13:03 – Frank Luntz, rebranding, and the political attack on estate tax
• 17:26 – “Quiet quitting” by Congress on enforcing the estate tax
• 20:32 – The myth and rhetoric of “double taxation”
• 33:13 – Capital gains vs. salary: why the rich avoid income tax
• 34:35–36:05 – The borrow-against-stock trick for a lifetime of (untaxed) spending
• 37:25 – “Angel of death loophole” explained
• 41:52 – Why people hate paying taxes on inherited wealth
• 44:52 – Moral argument: tax fairness and the national debt
• 46:02 – Why wealth taxes may be unworkable in practice
• 47:54 – Ray’s core reform: tax inheritances and gains as ordinary income

Conclusion

Ray Madoff’s appearance on Slate Money vividly dissects the history, political dynamics, and contemporary strategies that have gutted America’s progressive tax tradition. Through sharp discussion and memorable examples, the episode makes clear that today’s tax code is built not on accident, but on policy drift and engineering by the rich and their allies. The proposed fix: eliminate the estate tax in favor of taxing inherited gains as ordinary income, a simple, fair, and enforceable route toward remedying the system’s deepest inequities.

For more on this issue: Read Ray Madoff’s book, "The Second Estate: How the Tax Code Made an American Aristocracy."