Sorry to letter writer Ms. Callison. “Tax the Rich” sounds good on a protest sign. It appeals to fairness and the sense that billionaires are gaming the system while everyone else picks up the tab.
But here’s the uncomfortable truth: it doesn’t work. Not because fairness is wrong, but because the system is built to let the ultra-wealthy avoid the taxes such slogans target.
Most “rich people” don’t sit on piles of cash. Their wealth is tied up in assets, stocks, real estate, business holdings. Those assets grow in value, but the key word is unrealized.
Until they sell, that growth isn’t considered income. Billionaires with $100 billion aren’t earning it: they just own it on paper. Instead of selling stock and paying capital gains taxes, they borrow against their holdings.
A billionaire with $10 billion in Tesla stock can take out a $500 million loan at low interest, using the stock as collateral. The bank agrees that stock is worth far more than the loan. The billionaire uses that borrowed money to buy homes, yachts or fund investments. Because it’s a loan, it’s not taxable income.
The rich pay themselves modest salaries often just enough to cover reporting requirements. Elon Musk and Mark Zuckerberg famously take $1 annual salaries.
Warren Buffett takes about $100,000 in salary. That’s what shows up on their W-2s. Everything else, private jets, travel and “business expenses,” is written off through their companies. Their corporations foot the bill for a lifestyle that looks personal but is legally categorized as business-related.
When it’s time to repay those loans, they sell some stock, often at a lower tax rate because capital gains are taxed less than ordinary income. Some never sell at all. When they die, their heirs get a “step-up” in basis meaning unrealized gains are wiped clean for tax purposes or they create generational trust funds.
Decades of growth go untaxed entirely.
When politicians shout, “tax the rich,” they’re aiming at a phantom. You can’t tax income that doesn’t officially exist. Wealth taxes sound tempting, even in Olympia, but they run into practical and constitutional barriers.
How do you assess and collect tax on assets that fluctuate daily or exist in private holdings?
Even the IRS struggles to value privately owned businesses, real estate portfolios, or art collections. Art collections, now there’s a real money laundering operation.
Contrary to what many think, the Republicans are not giving tax breaks to the rich. They already exist. They live off borrowed money, repaying it with assets that have grown faster than the loan’s interest rate. It’s not cheating, it’s legal financial engineering. Remember the Danny DeVito movie, “Other People’s Money?” Sheltered money is protected money.
If we want real reform, it won’t come from slogans. It will come from rewriting a tax code designed for the 20th century but exploited with 21st-century sophistication. Until that happens, “tax the rich” remains a rallying cry without results: loud, righteous and ultimately ineffective.
Ray Anderson
Ethel
