Professor Ray Madoff Explains How the Rich Avoid Taxes

Yeah.

So I think it's really useful to take a quick look at the history of our modern tax system.

So if we go back to the early part of the 20th century, it's interesting because the country ran pretty much on tariffs, right? So we're kind of back to the future here today-

Mm-hmm.

Yeah

... with, uh, with, uh, Donald Trump's love of tariffs.

Tariffs were pretty much the only game in town for raising revenue, and, um, the problem with them was that they imposed their greatest burdens on farmers and consumers and anybody who needed to buy things that they were living on.

Uh, they were the ones that bore the burden of taxes, and business people, people who were selling things, uh, the wealthiest, they, uh, they benefited from the system of tariffs because they were able to raise their prices without worrying about foreign competition coming in and underselling them.

So people were getting it high prices from both ends, both from foreign imports and from domestic providers who were all imposing higher prices.

Um- So, uh, the thing that, that was also happening at the time was this was the time that we think of as the robber baron era or the Gilded Age, right? It's the time where we had massive growth of extreme wealth on one end and extreme poverty on the other end.

So this was a time where many of these richest Americans whose names are known to us today, right, like, uh, uh, Mellon and Carnegie and many of these super rich people were, uh, you know, controlling the country.

And they had massive wealth, and then when they died, their heirs got the property tax-free.

And the country-- meanwhile, we had this massive group of very poor people.

A lot of them were immigrants and others were, uh, were, you know, American-born, but they were all kinda suffering under this system of tremendous inequality.

And there was a lot of concern about the future of capitalism, whether it could survive a system where there was such massive inequality.

And into this system, uh, Andrew Carnegie, one of the, you know, richest people in the world, wrote something called The Gospel of Wealth that said basically that if we're gonna join the interests of the wealthy and the common man, we need to have a system that does that.

And his system that he proposed was that we should have essentially a one hundred percent tax on anybody who doesn't give their money to charity so that people could commit their money like he did for libraries-

Right

... universities, other things.

Other than that, their money should be taken away because inherited wealth was a big problem for the country.

And, um, and so in response to this, and then Teddy Roosevelt, he also advocated it because he too was worried about the future of capitalism.

Uh, McKinley, the, the, the, uh, big tariff president, the president who said, "I'm a tariff man running on a tariff plan," right? He was killed by an anarchist.

Um, and you know, socialism was really running rampant throughout the world.

We had the Russian Revolution that went on, and, and capitalism had not yet established a foothold.

So a lot of people became concerned that we needed to have a new system that would impose heavier tax burdens on the wealthiest Americans.