 If you're just joining, you're listening to The Billionaire Playbook. My name is Conor Goodwin and I am an events associate with ProPublica. For those new to us, ProPublica is a nonprofit newsroom dedicated to investigative journalism. At this event, we will discuss the tax-codes relationship to wealth inequality, how exactly the federal tax system is broken, and various reform ideas like Biden's recent billionaire tax proposal. Our panelists will also answer your questions. To ask a question at any point, click the Q&A icon at the bottom of your screen and type it there. Also, if you would like to enable subtitles, click on the closed captioning icon at the bottom of your Zoom screen. And now, allow me to introduce our speakers. Daniel Hemmel is a professor of law at the University of Chicago Law School and a visiting professor at the New York University School of Law. Binyamin Appelbaum is the lead writer on business and economics for the editorial board of the New York Times. Paul Keele is a reporter for ProPublica, where he covers business and consumer finance. And our moderator today is ProPublica senior editor and reporter, Jesse Isinger. I'll let Jesse take it from here. Thanks so much, Conor. Really appreciate it. And thank you, Daniel and Binya, for joining us. Paul, you had no choice in the matter, of course, so you had to be here. And I also want to thank McKinsey for sponsoring investigative journalism and also providing so much fodder for investigative journalism by enabling so much corporate malfeasance around the world. So thank you very much for that. So, let's get started. Paul, you've been my partner for many years, perhaps too many years from your point of view on tax matters and tax enforcement matters and covering the IRS I think it's safe to say you've become one of the premier tax reporters in the country. And we have been delving into this trove of IRS data for a long time now. We're aligning exactly how much but why don't you explain to what we have and what we've been doing over the last year or so, and give the highlights before we can dive into what it means and some of the reform ideas floating around. Sure. Yeah, so I mean, it was it's a tremendous amount of information, I guess is the first thing so we had thousands of people in it thousands the wealthiest Americans, and going back more than a decade of information. And it was a lot of information, and it was a lot of information data to wrangle in a way that we could, we could work with it. And we had a team of like 10 reporters on this to to, you know, first was making sense the data and then was finding things to say about it. And so it was clear and coherent way that people want to read about and they were important and so I was thinking about how to divide up the stories we came away with. And I think probably the easiest way to think about it is there are aspects of our tax code where there are openings that have been given to the wealthy, that basically say here, pay less tax. And the clearest example of that I think was this aspect of the Trump tax cuts that provided as a tax cut to, you know, people who owned private businesses, pass through businesses, and so we're able to do a story like you know, look at the data and see exactly like who, you know, benefited the most, be able to match that up with people who lobbied on the bill. You know, have like a data point like 82 families saved a billion dollars in taxes in one year from this one, you know provision that was put in the tax code. And then there's aspects of our tax code that weren't really given to the wealthy but more were, I don't have taken it's too strong of a word but, you know, in tax world they talk about aggressive tax positions, sometimes, meaning that you know there are three lines that can be crossed. And then it's up to the IRS to, you know, counter whatever position you're taking on your taxes so we Peter teal was able to amass a $5 billion Roth IRA Roth arrays are supposed to be relatively modest sized retirement accounts. You know, a provision the tax code that's supposed to help them help middle class people build wealth for retirement. It's supposed to result in a $5 billion Roth. We have billionaires saving money by running their horses at the Kentucky Derby. Again, we have our tax code says if it's a hobby you're not supposed to be able to deduct it for wealthy business owners they're able to find gray lines where it's you know a little harder for average people to find those gray lines and take those deductions which are the taxes that they were taking, and then we're able to look at the estate tax you know you're supposed to add death these estates massive estates are supposed to be taxed but they're very long standing ways around this and so, you know, our colleagues were able to look at, you know, people turning 21 years old and now they got $20 million in a year from a trust that dates back to, you know, 80 years ago, when, you know, their great grandfather their grandfather opened their first trust for their, for their descendants and people are still benefiting from this way around the estate tax. And then, it's kind of another category which is like, we have an income tax. And for people who are like wage earners to do to like what your income is, is not really much of a mystery. You're actually given a piece of paper every year that tells you what your income is. But if you own a business, or if you are, you want a business and you own a lot of stock in your business. It's like what is income. And so there's ways to to erase income that you are receiving through means by generating losses through businesses. You know we highlighted real estate mogul Steve Ross who owns the Miami Dolphins like Time Warner Center, very successful real estate developer who didn't pay income tax for a decade because his tax return says my income this year was negative was $37 million, which is not a measure from other indications of what he's how he's doing financially just able to do that because our tax code allows, you know the wealthy to take those sorts of deductions and manipulate what is what is income and then on the other side of the ledger you have people have large holdings of stock. So it does not tax income if it's not realized in other words turned into cash that you once you sell your stock doesn't turn in coming to tax return. And so our first story just looked at you know the basis is in the musks and Buffett, and you know found looked at the top 25 wealthiest measured how much wealthier they got in a five year period and compared how much taxes, they actually paid, and we came up with what we thought were true tax rate of 3.6% I think. So that's, that's the best I could do a review. Yeah, that was good. And of course that is the last thing that you just mentioned our first story was built around this idea that the ultra wealthy in this country. And you know to summarize really what we've been writing on is that the ultra wealthy live in a completely different tax universe than average Americans and the main way that they do this is not through an exotic complicated hidden fashion, but completely it's not through people and plain vanilla, which is that they allow their wealth to accumulate and they avoid actual income and the technique is called coined by USC professor by borrow die you buy, or build your asset you borrow against your wealth. And when you die, lots of ways to avoid taxes and this is the main idea behind the billionaires income tax. And I think Daniel that Biden has proposed that economists at the White House have kind of embraced that Senator Ron Wyden has been championing for several years can you summarize this for lay listeners and viewers and then. And then let's let's dive into that proposal. So Senator Wyden's proposal and President Biden's proposal slightly different I'll start with Senator Wyden's and then explain President Biden's the tax code only taxes you upon realization so if you buy Amazon stock for $1 as Jeff Bezos did back in the 1990s, and now it's worth $200 billion. Economists would say you've had $200 billion of economic income over that period, but until Jeff Bezos sells the stock, he doesn't pay any tax. Ron Wyden's idea was, and it's not original to run wide and economists have talked about this for years is at the end of every year, we would tax you as if you had sold your assets. You have to start to market your gains. So, Jeff Bezos would have been paying income tax as he went from having a net worth of zero up to having a net worth of $200 billion today. That was Wyden's idea. President Biden's idea is to create a new concept in the code of full income that would be your taxable income, plus all of your unrealized gains. That's the value of your holdings from the previous year. And then, if you're already paying a tax of 20% on that, then you're fine and you don't have to worry about the new Biden minimum tax. If you're paying a tax of less than 20% on that, then you have to pay up to 20% and you get to credit any taxes that you pay on unrealized gains against your capital gains taxes when you ultimately sell those assets. So if we take an idea similar to the true income concept used in the first pro-publica piece, the idea would be to make sure that everyone with a net worth of $100 million or more is paying a tax of 20% on their true income. So what we found in that first story is that people like Jeff Bezos and Elon Musk and Michael Bloomberg and George Soros and Carl Icahn had literally paid zero in federal income tax in recent years and under both of these proposals, they would not be able to ever pay zero in federal income taxes. Is that right? They would define their income as assuming that their wealth was growing, they would be paying income tax. Exactly. Now, Mark Zuckerberg would either have zero dollars of income tax this year or potentially have a huge refund because his net worth has gone down by tens of billions of dollars this year because of plummeting values of Facebook stock. But he would have paid a lot of tax on the way up. Right, let's put a pin in that because that is sort of one of the objections to this tax that people will raise. But I want to go to Binia to ask, and I assume that this can be made into more than a one word answer, but does this have any chance of passing Binia? Well, I mean, the one one answer is no, we're not right now. But you know, I think big picture, you know, this series to me is really valuable because it's sort of offered kind of a taxonomy of the way that the rich get around the tax code and it boils down to sort of three big things. You know, the first is the one that gets all the sort of popular attention, which is the idea that the rich are in there creating bespoke loopholes and that happens for sure, but it's not the primary issue. And the second is the idea that they're constantly stressed testing the limits of the tax code and that undoubtedly happens as well and I think on a greater scale. And you guys wrote about some clear examples of that as well. But the big issue and the one that this legislation is seeking to address is just that, you know, our tax code is not designed to tax wealth. And so the vast majority of the way that people who are wealthy accumulate assets accumulate wealth and then live off that wealth so that it's functioning in the way that income functions for, you know, that wage income functions for most people. You know, that's just not something that we have a system that is able to deal with that. And so the question is, you know, can you deal with it legislatively can you rewrite the rules in a way that would confront this. There clearly are ways to do that technically you asked about the politics of it and, and at least right now, there is not a majority in the United States Senate that that wants to confront this problem. Why be near because this strikes me as one of the more popular ideas, among average Americans that taxing the wealthy is consistently strong in the polls with not just Democrats but independence and Republicans even lay Republicans that is. And a majority of Democrats want to tax the rich, although maybe not to main senators but what, what is causing this political problem it seems like slam dunk or a kind of populist Democratic Party to embrace. Well, I mean, the short answer is that we don't have a populist Democratic Party, but to sort of break it into two pieces on the Republican side of the aisle you undoubtedly have large numbers of Republicans, I mean, Republican voters who, you know, favor this conceptually but their representatives in Congress basically operate on to the assumption that this is not the salient or at least determined to issue for them when it comes time to go to the polls and so they're not going to try to act on it even if you know in isolation you might be able to get a majority of voters to favor this as a practical matter their representatives can ignore their, their views on this issue. And then on the Democratic side of the aisle where in theory you have enough votes to do something like this. The reality is that you don't have 50 senators regard themselves as populists or who subscribed to that set of priorities you have a group of senators who do you have senators who are, you know, to some extent, you know, ideologically concerned about the implications of this kind of taxation, and or beholden to people who don't want to see these changes made. And it just I mean it takes one, and you've more than one so you know there's there's just not enough support for it. So, if, if you were tax czar of the world or of the United States rather would this kind of billionaire unrealized gains proposal be your first choice or are there other things that you think would be more effective at taxing the wealthy and fixing the system. If you were tax aren't had control of the Supreme Court I would do something like what Senator Wyden proposed and impose tax on gains at the end of each year. And I think vineas right that that is them, the non taxation of unrealized gains is the main loophole that high net worth people don't even need to think about in order to exploit it's easy it's just there in the code. There are some concerns given the current Supreme Court. One is that they'd say this isn't really a tax on income. And if it's not a tax on income then it's not explicitly authorized by the 16th amendment. And it would potentially be a direct tax that then needs to be a portion among the states based on population, which would be a total disaster because Connecticut has way more than 1% of the high end wealth but if it only has 1% of the population. If it only raised 1% of the revenue from Connecticut, there really be no reason no way to do this consistent with an apportionment requirement. The second concern is that the Supreme Court would say well it's a tax on income but it's also tax on wealth, because it's triggered by having a net worth over in the Biden proposal over $100 million in the wide proposal I believe it was over a billion and a tax on wealth might also be a direct tax that then needs to be a portion among the states. But I think even given our current Supreme Court, if we got rid of the stepped up basis loophole at death. And we imposed deferral charge on long held assets so that you didn't get a benefit from avoiding realization year to year, we'd be pretty close to our ideal system, not all the way there, but close. I just laid on some complicated concepts and I was just about to ask that so Paul, can you fill this in what what Daniel just talked about the, what is the stepped up basis and why is that important and and what have we found. Right. Yeah, so the step that basis is, it's a funny thing it's a very jargony phrase but then we try to find another way to say the phrase. There's really no better way that I come up with say it and concisely which is why we're so stepped up basis but the idea is, you know, normally during your life if you, if you buy low and sell high, you pay the difference like the gain and you pay tax on that. The question is, what is the intact Jordan about the basis like what did you buy it at. And if once someone dies, the basis is goes to whatever the value is at that, at that time. If you bought it at a dollar, and now it's trading at $100 and you die, your descendants your heirs get to treat it as if it you bought it at they bought it at $100 and so that gain is never taxed. And it's a massive benefit, particularly for people who own like a large, you know, portions of stock, and essentially makes it so that if you can just push out far enough horizon. This is this is part of buy borough die right the reason buy borough die works, say borrow borrow borrow die. The reason it works is because you can you push it off and then the taxes never paid because because of this provision of the tax code you can borrow against it. You know if your wealth is going up that can pay for whatever you're borrowing your loan. And so there's tomorrow never comes essentially. And we really found billionaires really do borrow right I mean we found Alison we found mosque. Yeah they disclose it and sec filings and say, and sometimes the credit line it's like owning, you know, like it's a home mortgage like line of credit except the line of credit is worth like $100 billion. And I think you can live on that and I else and managed to buy a Hawaiian island so I think that's pretty, pretty good. So, Daniel, you talked about some of the objections and, and been I want to kind of bring you in on some of the other objections to a billionaire income tax. Daniel talked about the problems at the Supreme Court. I kind of want to revisit that because there are aspects of the code that already account for unrealized gains, but, but there are other objections to a billionaire income tax that you've surely heard. And one of them is that assets are very hard to value. Another that Daniel alluded to is that what are we going to do right billion dollar checks to Mark Zuckerberg when stocks go down. And then I, and then a third is that there were kind of singling people out. And I want to pick up on that one first before we get into the valuation issues. What about singling the wealthy out why is it important to tax the wealthy and are is Biden being mean to billionaires and who will who will speak up for the billionaires. If so, you know I think there's a there's a couple of ways to answer that question the first you know is the answer that Willie Sutton gave when they asked him why he robbed banks said that's where the money is. So if you're, you know, running a tax collection agency, you got to go to the people who've got the monies that's number one. Number two is billionaires are the people who benefited most from living in America and it makes sense to ask them to pay their share toward the operations and maintenance of this country. So yeah they're being picked on they're being picked on because they are the people who have the most and to have benefited the most and and the idea is that you can ask them to contribute the most as well and that's a reasonable thing to do and that. You know, most Americans it seems intuitively unfair that Warren Buffett Secretary should pay a higher share of her income to the federal government every year than does her boss. That's not a situation that comports with our sense of fairness or justice or equality so that's sort of the underlying case for doing this. The objections that get raised to it though are not without some merit the technical ones, you know they all have solutions but those solutions are imperfect and one needs to accept that that a system that, you know, has to value assets that aren't liquid is going to, you know, arrive at some conclusions that are, you know, at least, you know, not purely defensible and that, you know, there's going to be some problems with you know year to year fluctuations and the value of assets. Well, the most interesting one is how we ended up with stepped up basis in the first place which is that we have this very ambivalent relationship politically with inherited wealth. You know, the idea that the government might put someone in a position where they might have to liquidate their family business their family farm, the legacy of their parents is something that to a lot of Americans, including a fair number who are not themselves in that position seems unfair and and to be avoided. And so the tax code has in various ways been constructed to prevent that eventuality to lean over so far in the direction of preventing that eventuality that we've effect we you know we've, we've sort of taken any tax system, but that you know the morality of that or the desirability of that is sort of a central preoccupation of a lot of people who get upset about this kind of taxation. Yeah, it's been an extraordinary political campaign over the last several decades to virtually eliminate the estate tax. And as my colleagues, Justin Elliott and James Bandler and Trish Callahan found they have the lobbyists against the estate tax have not only branded the debt tax but also trotted out African American farmers on kind of regular basis to to display them as the potential victims of, you know, estate tax or a stepped up basis elimination. But it should be said that's not all astroturf right like you've got a bunch of members of the Congressional Black Caucus who are themselves first generation African American millionaires or who was, you know, constituents and primary donors are first generation African American millionaires. And they are some of the most vocal opponents of this they are they are some of the most outspokenly, you know, sort of forthright in saying basically like this is ours we don't want to take it away. There's a real political valence to that issue in a particular portion of the African American community. It's quite quite interesting. So, Daniel, what about asset valuations this is hard to a problem to solve as, as the opponents suggest for some billionaires no it's not a problem at all. With Jeff Bezos and Elon Musk we can figure out their net worth within a one or 2% margin of error really quickly by looking at SEC filings and New York Stock Exchange and Nasdaq prices. It's a little bit harder for the Mike Bloomberg's of the world, whose assets are in privately traded partnerships, but I think it's not an insuperable obstacle. Particularly, if you wait until death to value and then impose something like a deferral charge to take back the essentially the benefit of the time value of money. Then it's just a one time valuation. And we already have to do that for estate tax purposes we can do that for income tax purposes to. Mm hmm. So, obviously the agency that would have to do this is one that you're intimately familiar with Paul. The IRS is the can you tell, tell people what we found about the IRS and our previous reporting and, and then kind of weigh in on how much confidence you have that the IRS could implement this kind of tax. Yeah, we started believe in 2018, basically on the premise that the IRS had lost tens of thousands of employees and we figured well that can't be good. But we wanted to see what the effects of that and what what it caused that and tell the story of that essentially what it caused it is, you know, a 10 year campaign by Republicans to cut funding and but not always on the basis that we want to make it the IRS to enforce the law. It was, it was often like other stuff so there was a scandal around politicization and how they were auditing a nonprofit, well political groups. But it was never like we want to make sure they can't you know audit rich people that's not what was said at least out loud. So you, it leads to tens of thousands of, you know, revenue agents and other enforcement, people leaving the agency just retiring essentially never being replaced. And so we, we talked to scores of these people who have retired and often like, you know them saying like I was just like waiting for like the new blood to come into the door so I could teach them what I learned over my decades and like, and never came right. The effect of this has been, you know, the IRS still has computers, even though they are running like, you know, 50 year old code sometimes. And I think one thing people don't really realize is that, you know, lower, lower the mid income people generally if they are audited or looked at by the IRS they're audited more or less by a computer. So if you have your w twos and your other tax forms, if you put in the wrong number, their computers going to catch it and it's either just going to correct it for you and send you a message, or it's going to result in an audit. And the audits often are just called correspondence audits which is essentially just like a letter spit out by a computer that says, you know, you said your income was acts prove it, like that's the audit, and then you have to send back documentation. And the person will actually look at it. So we found is, you know, audits of low income people had fallen much less precipitously than audits of the rich because to audit a wealthy person to audit a business. It takes a skilled practitioner, you know, a revenue agent to ask the right questions to go through the books, and things get super complicated, particularly for like larger businesses or closely held businesses. They simply don't happen. And so, you know, the rates that have fallen since 2011 it's like like 90% ish drop off and audits of the upper income. You know, typically like owners of businesses and that sort of thing. So that's where we are. And so people question whether the IRS would be able to enforce something like this and the answer is they do not currently enforce the law, because they can't. So no, but that doesn't mean it's not possible. If they, you know, were adequately funded by and biologically funded like what they had, you know, relative, you know, 10 years ago or something like that, even back then though people were saying they, you know, agents told us that it's not like, you know, they had conferences and they traveled like that was like the big travel thing it was but, you know, it's not much to ask, I think. Yeah, the other idea and other idea that's been floated in Congress is to adequately fund the IRS that got some had some conversation about it last year periodically arises, but seems to be going nowhere. If the billionaire income tax is going nowhere what about other reforms of income tax and funding the IRS is this. Is this a dead letter in DC right now even though the Democrats are ostensibly in the majority. Did. Well, did been you. So I think, you know, okay. Sorry, I, I wasn't you. You know, I wasn't hearing. So you know I think in the first place you know the potential for increased enforcement to make a big difference is huge. To my mind one of the most astonishing statistics about this is you know the IRS says that it thinks that you know more than half of income that isn't verified by some source so you know when you go to the IRS you probably also send them a w2 they can very easily check to see that you're, you know, reporting the right amount of income, less than half of unverified income they think actually gets properly reported and taxed that's an astonishing figure I mean this is just tax is right you've got just businesses all over this country running around and not, not, you know, not actually fully reporting the income they're earning or paying taxes on it. The increased enforcement would make a huge difference. And it would to some extent enable increased crackdown on some of the things that the wealthy individuals are doing and I think that that's potentially enormously consequential. But we should be clear as we were saying earlier, the tax system is not structured to collect a significant amount of money from people like Jeff Bezos and you know you can hire as many IRS agents as you want to. So the rules of the tax system, Jeff Bezos is still going to be paying a minimal share of his income in federal income taxes. And so that you know that's just the reality of the limits of this approach but does it have a chance so you know that the Democrats did kick some extra funding in the direction of the IRS in there. This is the most recent government spending bill. The IRS is currently hiring more agents. It's been holding job fairs there was one in Salt Lake City, Utah that the Wall Street Journal wrote up recently. And so, you know, they're doing more than they were doing two three years ago. It's impossible that the Democrats will be able to again incrementally increase funding if they get another government spending bill through before they lose control of the house next year. But you know that's not going to transform the IRS, it's not going to give it what its advocates say that it needs. It would fall short of that but it's movement in the right direction. Daniel how serious is the IRS's disability right now how how crippled is it in your view and and how serious problem is this for you the the tax collection system overall I what I was looking for from who sort of alluded to it but didn't quite come out and say that you know what this in the way that I was hoping which was that this is a threat to the legitimacy of our government and a legit legitimacy of our democracy. And I wonder if you concur and how serious a threat do you think this we're in right now we're facing right now. I think it's a huge threat. I think compliance remains surprisingly high across the board given that the IRS is so horribly underfunded we think that people pay somewhere like 85% or so of the tax that they owe. I think there are some estimates that are even higher than that into the 90s so in general people remain paying their taxes. And I think most high income people are not engaged in blatant tax evasion, but part of the threat comes from the fact that for ordinary individuals are interactions with the IRS are really frustrating. And that, because the IRS is doesn't have enough people to answer the phones. And I think that contributes to a widespread anti tax sentiment that then makes it harder to enact proposals like a billionaire's tax. And even with the IRS is current staff, they could implement the billionaire's tax as applied to Elon Musk and Jeff Bezos and raise a ton of money, but we need to change the law in order to do that. And the IRS is the fact that the IRS is so hamstrung makes it harder to change the law. So speaking about, I just set up so I just I just want to go on the record and the threat to democracy campaign. Excellent. Thank you. I'm glad that I could feed you that that softball there but one of the things that I was interested in and let's circle back on the constitutional question because one of the things I've been struck with is when you really delve into the code. It turns out that unrealized gains are taxed with some frequency, Daniel hedge fund managers are able to choose voluntarily to have their assets marked to market to, to have the current value of their assets. And that's not for taxes, even if they haven't sold something. If you are the kind of person who opts to give up your American citizenship, for whatever reason, on that day is a big tax day for you and all of your assets are valued. Right then and there of course, as you said the state is valued at death. They add up things so this concept seems to be well established in the law. How could such a well established concept be unconstitutional. In the Supreme Court I would vote to say that both a tax and unrealized gains and a wealth tax are constitutional. Well, we'll try to record that the fact that the fact that a provision is in the code doesn't mean that the Supreme Court would say it's constitutional it just hasn't the expatriation tax hasn't been challenged on constitutional grounds in a case that generated precedent from the Supreme Court. The court has long made a distinction between taxes and excises and an excise is a levy on a particular transaction. So some things that we describe as taxes are constitutionally excises the corporate income tax the Supreme Court has said is an excise on the use of the corporate form. I think one could coherently say that the expatriation tax is an excise on giving up your citizenship that the market to market tax on commodities dealers is an excise tax on the privilege of using commodities and futures exchanges, and I can still say that a tax that depends upon the total value of your state and not at death would be subject to the direct tax provisions in the Constitution the Supreme Court has said that a tax at death is an excise on the transfer of assets to your heirs, so it's But if nothing's changed and you're just sitting there, we don't have solid precedent to point to to say that it's constitutional I think we have good arguments. So did Cordell Hull and et al mess up by not taking the words direct tax out of the, the Constitution when they were writing the 16th amendment. The drafters of the 16th amendment made a mistake, and they should have just gotten rid of the direct tax clauses, entirely and there was a little bit of discussion on the Senate floor at the time, unfortunately Norris Brown from Nebraska who was one of the drafters of the 16th amendment, explicitly said during the debates that he didn't want to get rid of the pre existing direct tax direct tax provisions in the Constitution. You were talking, you raise a really interesting point about African African American legislature legislators, I was thinking that there was another kind of aspect of progressive left discourse that has somewhat undermined the push for higher taxes. The kind of monetary, modern monetary theory, MMT curious and folks among the left. And in short, this is a theory that essentially and I'm going to drastically oversimplify, but that we can. We have to worry about deficits, and we can spend what we want to provide the government services we desire. And in fact, it will I'm curious, your view whether that has actually kind of undermine the case or undermine the push for taxing the wealthy that people have said we know what, why should we spend political capital here when we can just spend the money on them the programs we desire. Yeah, I mean, I politically I think that I'm empty really functions as a permission structure for liberal Democrats, it plays much the same role that supplies that economics played for Republicans in the 1970s it allows them to get around a political debate that they're doing, and to pursue their further goals, without having to engage in that original fight in the 70s it was a fight around deficits and whether or not they were dangerous. And now it's a fight around, you know, taxes and whether or not they're necessary. And I do think that there are liberal Democrats for whom MMT offers a theory of why you might be able to pursue your agenda without actually needing to go ahead and extract that money from the wealth of the wealthy. I don't think it's been the proximate cause of the failure of this legislation. The reality is that, you know, those liberal Democrats for the most part would still vote for a wealth tax even if they're not as fervent in their support for it. You know the reason this isn't moving forward is because of the other end of the political spectrum at least the other end of the Democratic Party. But I do think that it has shifted thinking about the priorities, and has allowed at least for some liberal Democrats a greater emphasis on new forms of social spending as as being able to move ahead without necessarily resolving the inequities of the And are there any cracks on the right, you know you've seen these populist Republicans flirting with antitrust for instance you know got one of the provinces of the left in recent years. And, you know, so are there, is there any sign that there are any Republicans are going to break with this sort of 40 year lower tax Grover Norquist orthodoxy. This is a fascinating question, because, you know, you have exactly as you just said you have you know this this Grover Norquist sort of uniform policy to which all Republicans are required to subscribe that any tax increases in And that is holding in place, but underneath it you can see signs of intellectual inconsistency grappling with these questions about you know. Okay, if we've got wealthy people in this country who have amassed power to the point that it's making us uncomfortable, and there are definitely Republicans who feel that way in particular about the tech billionaires. Do we break apart their companies is that consistent with capitalism do we think about ways of, you know, attacking their wealth directly. Is that consistent with our views on taxation so I think, you know, it has not risen to the level yet where you have Republicans standing up and saying we're in favor of this but I think that there are interesting intellectual intellectual debates happening in some parts of the Republican Party about how you grapple with a political reality. There are concerns about inequality on both ends of the political spectrum. And, and the question of whether changes to the tax code become one vehicle through which Republicans are willing to pursue that I think is really interesting. The form in which I think it is most likely to arrive at least initially would be in closing loopholes or restructuring things in a revenue neutral way that's the most sort of theologically palatable way to move forward. And speaking of closing loopholes Paul so if we were, you know, if the country couldn't get a billionaires income tax passed which it doesn't look like it can. What have you thought of as the, the most obvious or, you know, easiest to implement or not necessarily easiest to implement but the change in the code that demanded the most attention I mean when you talk about Stephen Ross reporting to the IRS that he's losing 400 odd million dollars a year, even as his assets are going up and his properties are making money, he's got these loss making vehicles. You know, I think the average person would say that's just not right how how would you fix that is that easy is it difficult is it. What are the most obvious fixes in your view. Yeah, I mean there's fixes that I think of that are part of the legislation last year so like the Peter teal Roth IRA situation there, there was legislation that developed on Capitol Hill. After that story that we understood from experts would actually fix that problem and somewhat return Roth IRA to a structure that you know it was actually going to people it's supposed to go to. And what would you remember what that fix would do. It would essentially like make them divest from the, if I'm saying this correctly, you know, kind of roll back the these giant like that this tax protected account and make it so that, you know, it wasn't, they would never pay gains taxes and the gains from those accounts. I think you couldn't couldn't put exotic instruments into a Roth IRA you'd have to put their publicly traded instruments, you know, because he was putting his founder stock in there and there would be some limits on that I think right. And so like you know the estate tax thing. There are fixes that that were talked about on Capitol Hill that are Biden's budget that I understand from experts and you know Daniel can comment on this that that would fix this issue of creating trust to get around the estate tax so easily. And this issue of like Steven Ross or billionaires having like negative income, you know tax. Sorry, negative incomes for purpose of their tax returns to the point that you know we're able to document that like stimulus checks were sent out to like a bunch of billionaires and super rich people who had negative agis. So if you have negative incomes on other tax returns. That is something that actually was in the Trump tax bill that the curb that. And there was something like, you know, Democrats have basically talked about expanding that and basically what it would make it so that you can't just wipe out all your income 10 times over. There would be a limit to that. So these are fixable problems. So the past legislation to fix them. So I think we'll start to take some audience questions now and a lot of questions are interesting because they're our listeners and viewers I guess are focused on a lot of the technicality so here's one I think Daniel maybe you would take this from Zachary Hamel. Can you discuss ways in which the wealthy could manipulate losses to reduce owing in a given year if they were being taxed on their unrealized gains as you know how a real estate guru might default on several multimillion dollar mortgages, but also purchase a multimillion dollar property in the same year. So, could they are there ways to manipulate wealth growth. There are, though, I don't think they're any greater than the manipulation opportunities that exist under the current code and fair market value plays a disciplining role. The way for Elon Musk to manipulate his tax under a market to market system would be to manipulate the value of Tesla stock. He'd have to diminish the value of Tesla stock which I don't think he'd want to do because he'd only be saving 20 cents on the dollar, and he'd be losing the other, the other 80 cents, maybe he tried. But the, I think, biggest way to avoid a mark to market tax would be to take currently public companies private so that we can't see the change in value year to year. It's not possible for some smaller enterprises. It's just not possible for Tesla and for Amazon there's just not enough private equity capital to take those private, and even for the people who do go private. Ultimately they're either going to die or sell their assets. And we could at that moment do a serious valuation that takes back some of the benefits that they might have gotten from understating the value earlier on. And Paul, a lot of people wrote in to say, ask whether the middle class can use the tactics that we wrote about that billionaires use. What are you, can they, what do we find. You know, it's funny because I mean when we were doing our story about all these benefits and the tax code for real who own real estate, and you know oil and gas and that kind of stuff a lot of those goes back a long way. But there was like a real boom and sort of like middle income but upper middle income people using, you know, generating losses, tax losses so you know. And to the point where it was a big deal in the 1970s and 80s and it was something that was addressed in legislation in the 1980s and they closed a lot of the ways that people were generating losses and getting rid of their wages. But it really struck us the way that those reforms were really good at making sure that like, you know, your dentist or your lawyer or somebody like that could, you know, closing their, their, their way of getting out of taxes but if you own a business a lot of that those same opportunities are, it's much more easy to generate losses on real estate that you own if you're a real estate developer and that sort of thing. And so it really that that was pretty striking to us the way they close the door to average, you know, people but other income scale, these sorts of things are still possible. And, Binyah, we've got a another question and I don't know if this is going to put you on the spot but did the Scandinavian countries tax billionaires fairly and if, if not, if you don't know the specifics there in general across the world is there anybody who's doing this well as I'm not familiar with an unrealized gains tax system anywhere else in the world, for instance. So I'm not either and Daniel may be better positioned into that question I don't know. I think Scandinavia has huge problems in taxation of the rich, some problems that we've actually solved that Sweden has a whole lot of hundred millionaires who are putting money into offshore accounts. And we're actually, I think pretty good at catching the American hundred millionaires and billionaires who are doing that. We're struck, Daniel, Paul and I and the team were struck when you see these giant leaks, the Pandora papers Panama papers you see relatively few Americans, and very few named Americans and, and the conclusion we drew from that is one we've essentially been talking about this whole time that it's so easy legally to avoid taxes in the United States why bother breaking the law or engaging in, you know, complex secrecy, when you don't have to you do agree with that is that why we haven't been seeing Americans in these weeks. I think that the US is doing pretty well compared to other OECD countries in terms of preventing our high net worth taxpayers from using these offshore vehicles not perfect. There's certainly some of it happening. But part of it is because our code is so for us. Part of it is also because we've basically told the rest of the world, you've got to give us information on the Americans who have tax accounts in your countries, but there's no reciprocity we're not telling them about the foreigners who have their money in the United States. So this is a question we've gotten in several forms, which is, you know, billionaires give a lot to philanthropy. And what's the problem with that. For instance, occasionally they even give it to Pro Publica, which we are, we are grateful for so we want to carve out if we eliminate those those benefits but so is there a problem with billionaire philanthropy and is it better to tax them than to have philanthropy and should we get rid of the charitable deduction or limited in some fashion. So right so the question is compared to what right like if a bill if you're asking should the billionaire spend it on another swimming pool or should they give it to the local food bank it's obviously got some social benefits if they give it to the local food bank. If you instead turn that money over to the government would it do more good I think there's a very good case that it would. You know, public resources can be put to use in ways that private individuals cannot philanthropy has a hugely important role to play in society, the extent to which the tax code incentivizes it is frankly unclear. The extent to which it would continue if you eliminated the charitable deduction tomorrow, I think is entirely unclear. Many of these efforts are motivated by considerations other than or in addition to the tax benefits. And so you know whatever you think about philanthropy I think is quite a different question than what you think the tax code should do to encourage it. But at a very basic level, I do personally believe that we would be better off as a society if instead of allowing Bill Gates to allocate his fortune, a larger share of that fortune was transferred to the federal government and the people of the United States could decide how to allocate it Yeah, I mean Buffett said in a response to our first story. I think I can allocate it better than the US government turns out that I have better ideas than even Warren Buffett on how to allocate tax dollars but but maybe other people wouldn't agree with my ideas and and we allocate them in a democratic fashion or seek to. Interesting question, Daniel from Paul Beckett from Oxford Brooks University. And I think you said we've sort of talked a little bit about this but what he says is to the what extent of the beneficial ownership avoidance products of the domestic US tax havens such as South Dakota, complicit in the tax avoidance and the planning of the ultra wealthy in the US and I think we talked a little bit about how Americans might not be using this as much as foreign kleptocrats, although certainly Americans use trusts in enormous ways so I wonder one, how much do we use our tax avoidance actually let's back up. Can you summarize that we are really the biggest tax haven in the world aren't we. And does that pose a problem how much Americans using this. And, and does this undermine our credibility around the world when we talk about tax enforcement. I think Americans are using South Dakota trusts, but not for the same tax evasion reasons that foreigners might be using South Dakota trusts. And I think we are the world's ultimate tax haven. When we came in islands. Antigua, those countries are replaceable in the tax evasion game. What you really need is ultimately a country that will take your money and invest it in real things, and not look too hard. And the United States does that we allow foreigners to pour money into the New York stock exchange and other US exchanges, and we allow them to earn gains and we don't tax them on their gains. And that is the engine of international tax evasion. We also compete with the Cayman Islands in Singapore and other sort of intermediary offshore tax centers by providing secrecy. And we do that primarily for non Americans. I think Americans are putting money into South Dakota trusts in order to get out of a state tax. And once you get the money into a South Dakota trust it can basically grow forever is state tax free. But that's not hiding it from the IRS that's legal under our current law. And so is there any effort to close those kind of loopholes that you're familiar with. I mean, these are, it's not just South Dakota Wyoming, Alaska, Delaware, you know, there are a variety of states that have become, you know, Reno, Nevada become tax havens. Is there any ability in our political system currently to even address that. So the place where you see people upset about it is in other countries I mean it is certainly the case the tax authorities and other countries are aware that some of their wealthy citizens are using the United States as a tax haven and it is an issue that comes up regularly in discussions of you know, the of changes in international law or in the, you know, when the United States is asking for countries to be more transparent in the way that they handle these records, you know, foreign countries sometimes return that toss and say basically we want the same thing from you. Do I think it's going to change. I don't see any evidence that it will. The United States has tremendous leverage in these negotiations and has for the most part been unsympathetic to find concerns about these issues, in part because the American perspective is basically, we are accepting investments in legitimate things and you know, it's not our job to police where that money is coming from you know, we're selling an apartment we're selling shares of stock. You know, we're selling trust in South Dakota. The short answer is I don't see a lot of evidence that the United States is interested in cracking down on any of that. So we're winding up. I really appreciate the time but let me just pose one quick question for you, Vinya and Daniel to close some closing thoughts. It was, we had the first income tax in the Civil War, and it took roughly 50 years for the 16th Amendment to be passed. The income tax, there was an income tax in 1894 that was passed and struck down by the Supreme Court and so it took another 15 years or so before that income tax was passed Supreme Court muster. So we've had a kind of groundbreaking proposal from the Biden administration about taxing the wealthy. Is this the beginning of a kind of cycle that would get us to some big political change in the next decade or two decades or is this going to just dissipate because of the calcification of our political system? Vinya and then Daniel and then we'll say au revoir. I think it's the right question. I think we don't know that yet. I think it is true that, you know, rising levels of inequality are provoking a political reaction as they did 150 years ago. And I think the optimistic scenario is that over time, you know, the antipathy to this level of inequality and these accumulations of wealth coalesces into politically viable and popular forms that can move through the House and Senate and pass through the House and spend. Whether that's going to happen I think is a very open question for the reasons that you mentioned. A political system is broken in some pretty fundamental ways and it's easy to get discouraged about the prospects for change but better to end on a hopeful note and say maybe we will move in that direction. I certainly hope so. You endorse that Daniel. I think the failure of the Biden billionaires taxes are highly contingent. If it hadn't been for the Delta and Omicron variants, this might have happened because we'd have a slightly more popular president who would have been able to push it through with his political capital. And one optimistic note is that for tax changes, it only takes 50 votes in the Senate rather than 60 votes. So, could the Democrats have a majority that doesn't depend upon mansion and cinema in the next six or eight years I think definitely possible. Interesting. Well, thank you guys so much. And Connor over to you I really appreciate that and Paul thank you. Thank you so much. That's our time for today. I just want to thank all our speakers, Paul, Daniel, Binya and Jesse for an informative and timely conversation. And thank you to our audience for joining us and for all your thoughtful questions.