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Professor Ray Madoff Explains How the Rich Avoid Taxes · We Can Do Better

• Fran Quigley: Welcome to We Can Do Better, a podcast about ending poverty in our time. My name's Fran Quigley, I'm a law professor, and I go with my students every week to eviction court. There we represent some of the millions of people in our country who are facing the loss of their homes. They also skip filling prescriptions, and some of them even go hungry, despite living in the richest nation in the world. We can do better. As you may remember from previous episodes, other countries already do far better. And in fact, the United States has often done better in the past at responding to the needs of our sisters and brothers across the communities. So our guest this week tells us that an important reason why the United States once did better was because that we had a fair taxation system, and we needed to get back to that system. Ray Madoff is a professor at Boston College Law School where she teaches tax law and estate planning. Ray has literally written the book on the ladder as the lead author of one of the top treatises on estate planning. But the book we're here to talk about today has reached a far broader audience. It is called The Second Estate, how the tax code made an American aristocracy. Here is my copy, my dog-eared copy. The Second Estate was named a Best Book of 2025 by the New Yorker. Ray has spoken about this important book in all kinds of venues, including the New York Times and NPR podcasts. She has written about the topic for the Atlantic. And to start off our conversation, I'd like to highlight two of the many passages of the book that that stood out for me. This is what Ray said about the tax code. Quote After the Constitution, the tax code is the single most important document affecting American lives. This is what Ray said about the tax system that we have right now. Taxes on the richest Americans have become largely elective. This country has become a land of two people rather than one. Overburdened workers at all income levels carrying the lion's share of running the cost of running the country. And a growing American aristocracy of wealth and power who are allowed to abdicate their responsibilities to the nation. Ray, thank you for joining us and welcome to the show. Ray Madoff: Thank you so much, Fran. It's really wonderful to be here and thank you for the work you do with the eviction clinic. It sounds amazing. Fran Quigley: Well, we we appreciate what you're doing to helpless someday maybe not have an eviction clinic, right? Some days that we won't have to have thousands of people being losing losing their homes every week. So I'd like to start off if we can, just let's start off with the title. Could you explain the historical meaning of the of the term the second estate and how that connects with our current tax system in the United States, our our wealth concentration here in the United States? Ray Madoff: Absolutely. So the second estate was the term for the aristocracy of pre-revolutionary France. People might remember that pre-revolutionary France was a time of massive inequality in France, the let them eat cake era. And the and as we know that didn't end too well for anybody. but the aristocracy in France at the time, they were everyone was a member of a distinct class. So the first estate was the clergy. The second estate was the aristocracy, and the third estate was pretty much everybody else, everybody from the bourgeoisie to the peasants. And basically the law of France was that the clergy didn't pay tax and the aristocracy didn't pay tax. They were explicitly excluded from the tax system, leaving the burden to fall on everybody else. Fran Quigley: Wow. And so how does that connect to twenty Ray Madoff: Yeah. Fran Quigley: twenty six United States of America? Ray Madoff: Yeah. So what's interesting is that we hear of a system like that and we think, okay, well, that's nothing like our system, right? Our tax system is one in which the greatest burdens are imposed on those with the greatest capacity to pay, right? We have a progressive income tax, we have an additional estate tax, and from its appearances, it looks like our tax system is really heavily burdening the richest Americans. But as I describe in the book. What has happened over the past thirty to forty years is the country is that the things have transformed to the place where in fact the richest Americans are able to opt out of taxes altogether. For they may some of them might pay a lot of taxes, right? But the cho the thing is is that for most of them they don't have to and it's a choice. And we might have seen that when we saw remember Elon Musk years ago, he was like, Should I pay eleven billion dollars in taxes? Right. You and I and most of your listeners can't really ask that, right? We're not we're not given the choice, but the wealthiest Americans are. Fran Quigley: Right. And I'd like to ask you a little more about about how that happens. I think you call it the tax avoidance playbook, but but before we do that, you write in the book that it hasn't always been this way, and we and we kind of tease that a little bit that we can do better. That that what has been the history and the philosophy in the United States behind taxing the rich either through income taxes or estate taxes or or what have you? Ray Madoff: 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 twentieth century, it's interesting because the country ran pretty much on tariffs, right? So we're kind of back to the future here today with Fran Quigley: Mm-hmm. Yeah. Ray Madoff: with Donald Trump's love of tariffs. Tariffs were pretty much the only game in town for raising revenue. And 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, they were the ones that bore the burden of taxes. And business people, people who were selling things, the wealthiest, they 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. So the thing 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 Mellon and Carnegie, and many of these super rich people were 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 were, you know, American born. But they were all kind of 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 the system, 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 100% tax on anybody who doesn't give their money to charity. So that people could commit their money like he did for libraries and Fran Quigley: Right. Ray Madoff: universities, other things. Other than that, their money should be taken away because inherited wealth was a big problem for the country. And and so In response to this, and then Teddy Roosevelt, he also advocated because he too was worried about the future of capitalism. McKinley, the the the big tariff president, the president who said, I'm a tariff man running on a tariff plan, right? He was killed by an anarchist. 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. And this happened in 1913, where we enacted our first modern income tax. We had had an earlier one that was found unconstitutional. We passed a constitutional amendment. And in nineteen thirteen, we had the first modern income tax. Originally, it only applied to the richest five percent of Americans. Nobody else paid any taxes at all. Fran Quigley: Mm. Ray Madoff: Three years later, we enacted a estate tax. an estate tax applied imposed a big tax on the transfer of wealth at death. And from that time, 1913 and 1916, through about the 1970s, these taxes grew, they became more elaborate, but they maintained a structure which was that there would be the heaviest taxes would be imposed. Based on those with the greatest ability to pay. So the income tax went from only applying to the richest Americans to applying to almost all Americans to fund World War II, right? We call that the transition from a class tax to a mass tax that took place. Fran Quigley: okay. Ray Madoff: But when it happened, we put in place a progressive rate structure so that somebody who earned a lot of money would pay a higher percentage return. on those later dollars than somebody who earned a little bit of money. We added on top of that an estate tax, we added a gift tax, and ultimately a generation skipping transfer tax. All of that was to fortify the taxation of inherited wealth. It was imposed at pretty high rates. At some points it was as high as 70%, but even today it's still imposed at 40%, which is still a pretty significant tax if it did what it was supposed to do. So we have the system, progressive income taxes, an additional estate tax, and it looks like we're all set, right? For much of the 20th century, this system was kind of doing its job. But what's happened is that since around the mid 1980s until today, there has been slow corroding of the system, undermining, in which we have created a system in which those with a lot of income Taxable income, people who work for their job for their money, right? Whether they're a whether they earn a very modest salary or whether they earn a big salary, they're paying plenty of taxes. But the people who aren't paying taxes are people who don't have to have a job and instead can rely on their investments and inheritances. And those are the systems where we have essentially optional taxes. Fran Quigley: Wow. And and you do a terrific job in your book about talking about again the the law as written appears to have progressive taxation and it did. And then just really clever people hired by really rich people have found the loopholes and found the exceptions, but but Congress and the the US political system hasn't responded appropriately to to to shut those down. but you mentioned that that people are paying Payroll taxes, and that definitely applies to the folks we see at eviction court. The people coming in wearing a McDonald's uniform or a home health care uniform, they're paying payroll taxes. But that doesn't line up with what I hear on CNBC when Jeff Bezos is interviewed, where he repeats a line that I think a lot of us have heard is that the top one percent of earners are paying forty percent of the taxes and that forty percent of Americans pay no taxes at all. So where's the disconnect between that kind of allegation and what's really happening? Ray Madoff: Glad you brought that up. I call that the the the statistic that saved the rich from taxes, right? We hear Fran Quigley: Hmm. Ray Madoff: this all the time. it is not just Jeff Bezos who's saying it there, but the Wall Street Journal frequently reports that on its on its pages and editorial pages in particular. The Washington Post in its editorial pages are now saying it, and the Economist Magazine, they too have joined in in stating this thing. So So what is wrong with this? This is one of these statements that is true but highly misleading. So let's first start about the 40% of Americans are non-payers. well, let's start with the with the the top 1%, right? The top 1% are paying 40% of the taxes. That's how we often hear that statement. But actually what they're talking about is that the top 1% of earners are paying the t are paying 40% of all income taxes. Okay. And people think, well, top earners, that must be Zuckerberg, Musk, Bezos, Buffett, right? All these all Fran Quigley: Right. Ray Madoff: these guys, Larry Ellison, right? Fran Quigley: Right. Ray Madoff: Because how else would they have become the richest people in the in the world, you know? But the answer is that when you actually look at their salaries, they are shockingly modest. Like the highest Fran Quigley: Yeah yeah. Ray Madoff: paid one is Warren Buffett. He makes $100,000, which isn't bad, right? But not what you'd expect for the greatest stock picker of all time, right? And that Fran Quigley: Mm-hmm. Ray Madoff: is his combined salary and bonus was never to be higher than $100,000. Fran Quigley: Wow. Ray Madoff: Jeff Bezos, $82,000, an amount that was so low that he was actually eligible for the child care tax credit, which he took. So he Fran Quigley: Huh. Ray Madoff: regularly will not take more than $82,000 in salary. And and ev as modest as that is, it's huge compared to all these other guys who are simply dollar a year guys, right? Zuckerberg Fran Quigley: Mm-hmm. Ray Madoff: and Ellison and Brynn and all of these people, they're dollar a year guys. They don't take a salary at all. Now, you might think, well, that's because you know they really care and they don't want to hurt their company. It's like no, it's because they know that, you know, as we say, salaries are for suckers. Salaries are subject to very heavy taxes. So somebody earning $60,000, right? Somebody who might end up in your in in the courts with the your students are helping them. Someone who earns sixty thousand dollars pays thirteen thousand dollars in taxes. If they're a self-employed person, let's say they're an Uber driver or a delivery person, right? They pay thirteen thousand dollars just in federal taxes. And most of those are payroll taxes. That $13,000 for someone who's trying to get by on sixty thousand dollars is really quite it's it's quite burdensome, right? It can easily make the difference between whether or not they can afford their rent or their food or their medicine, right? It's a it's a big hefty chunk of that money. And almost all of it is attributable to payroll taxes. So when we say that forty percent of Americans pay no taxes at all. That's simply not true. When you actually calculate, when you add in payroll taxes, the number is like seventeen percent, which is also the number of people over the age of seventy. So this idea Fran Quigley: wow. Okay. Ray Madoff: of non-payers, you often hear this, right? The Republicans like Mitt Romney, these are takers, not makers, right? That is not true. These and then the other canard for low income people is that somehow payroll taxes aren't really taxes, right? They they They're kind of hidden taxes because they show up. We often they look like they're called contributions on our on our pay stubs, right? Making it seem like something we can either choose to do or not do, or like it's future saving for our own retirement. But that's not what it is at all. Actually, money that is current people today paying payroll taxes are paying the social security of current retirees. This is a tax just like any other tax. And and there's no assurance that anybody who's paying these taxes today is ever gonna get any benefit from them. Right? I mean, hopefully our social security system will be there. Hopefully they'll live long enough to benefit from them. But there's been all sorts of cases of people who lost their benefits, either they for any number of reasons and they had no legal right to claim them. So they're not a personal saving. So Fran Quigley: Yeah. Ray Madoff: Now go to the other side and and so now we have the top one percent, right, that they are supposedly paying all the taxes, but they in fact are just as likely to be in the 40% of nonpayers, only true nonpayers, right? Rather than rather than in the greatest payers because they don't take salaries. So anyway, so that's how that statistic really confuses people. Fran Quigley: No, I appreciate that. And and you mentioned salaries are for suckers. You know, our our clients, again, who are working, who are on the risk of losing their homes. And FICA is very real to them, right? This is not a it's not a hidden tax for them. They understand that the you know the whole question is what am I supposed to be paid and what what's my take home pay? And that is oftentimes the difference between somebody being able to stay housed or not is is how much taxation is happening to them that that apparently Jeff Bezos and others are saying doesn't happen at all. So I appreciate you correcting the record. Ray Madoff: Yeah. And if you're self employed, you have to pay both halves of that. So it's it's fifteen point three percent. And then for people who are employed by others, economists generally think that the employees are still suffering that because they are they actually have lower wages than they would get if their employer weren't paying the payroll taxes. So it's falling on employees in every different way. Fran Quigley: Yeah. Well, when you mentioned a a little bit about how, okay, they're Jeff Bezos and and and Zuckerberg, et cetera, aren't making their money through salaries, yet they also aren't paying a lot of taxes. So you you talk about the the tax avoidance playbook, which I think I I saw one interview where somebody said, aren't you giving the game away and some of these rich people are gonna now know how to avoid taxes? I think your answer was they already very much know how to avoid Ray Madoff: Yeah. Fran Quigley: taxes. So So what are the ways that they avoid taxes? Ray Madoff: Okay, so the first way, as I mentioned, is they don't take salaries, right? They're not taking high salaries. And I'd say the only exception might be some of these private equity guys, right? But of course they have they have their own game where they are pretending that their salaries are capital returns and they're claiming them as capital gains. But that's a whole separate story. Okay, so generally speaking, our richest Americans don't take a salary, but what they do instead is they rely on the growing value of their stock. And this growth is enormous, right? Just from like 2023, just looking over the past three years, you know, many of them have had their wealth grow in the hundreds of billions of dollars. So this is really extraordinary, right? Massive amounts of wealth is growing. And the thing is, under our current rules, there is no assurance that anybody will ever pay tax on this growth in value of property. Because under our rules, you only pay taxes if you sell the property. And if you don't sell the property, you don't pay taxes on it. So if you give it away or you pass it at death, no taxes are paid. This is unlike the rule in Canada, where whenever property is transferred, right, not just by sale, but also by gift or at death, then the gains are tallied and people have to pay tax on those gains. But we don't have that rule here. And as a result, people don't have to pay taxes on their property. they d if they don't sell it. Now you might listeners might think, well, yeah, but if they don't sell it, how are they going to enjoy their lavish lifestyle? And and the answer is that if you are a very rich person, people are very happy to give you a loan, right? Your loans, Fran Quigley: Mm. Ray Madoff: you have a lot of security to offer for the loan. So nobody's worrying about being paid back. And so people are able to borrow money at tremendous terms and and that's what they live off of. And and so lots and lots of our richest Americans have just borrowed for everything. I mean I'd say yeah Yeah. Fran Quigley: Isn't I think you mentioned Larry Ellison in the book, is it just a remarkable amount of debt, but people are happy to loan to him? Ray Madoff: Absolutely. And what's amazing is that, you know, that was the book was written before he pledged even more shares to acquire Paramount, just as a little aside. Yeah, that was just when he was buying islands and all sorts of other things, you know? So so basically there's a lot of borrowing that goes on and that borrowing is entirely tax free. It's not a taxable event. Fran Quigley: And but you you say they're kicking the can down the road, they're kicking the can down the road, but I believe that the phrase is buy, borrow, die. So what about that third stage of of dying? How can they avoid Ray Madoff: Yeah. Fran Quigley: taxes by dying? Ray Madoff: Yeah. So there is an a little additional benefit, but I have to so the benefit is that when people pass on property at death, their heirs get the property as if they bought it for fair market value. Fran Quigley: Hm. Ray Madoff: Which is so this thing is called step or sometimes called the angel of death loophole. And and it's a great benefit and it wipes away a lot of gains. the thing is that that is this this angel of death loophole step up and basis it's something that you hear politicians talk about a lot, and it really is something that is should be should be closed, should be eliminated. But where all the action happens in in the estate where people are able to be avoiding taxes, what they're doing is they're doing gifting and there they Fran Quigley: Hello. Ray Madoff: don't get step up and basis. So you don't need step up and basis in order to avoid taxes. All you need is for your heirs to be able to borrow as well, which they can. Fran Quigley: And you I wanna ask you about where we are with the estate tax. And I think you've mentioned even calling it almost a voluntary tax because it's so so easily avoided. But but again, as we talked about, it it hasn't always been this way. And you spend some time in your book talking about the the kind of the PR campaign and the political campaign that that changed or or really defanged the the estate tax. Can you talk a little bit about what happened and and how that was sold? Ray Madoff: It's probably going to be surprising to a lot of your listeners, but prior to 1990, the estate tax was a very well-accepted, sort of, you know, innocuous tax. It was something that people understood and it applied to the richest one to two percent of Americans on their when they passed on property during life or at death. it was a pretty well-maintained tax. So for example, In nineteen seventy-six and then again in nineteen eighty-six, Congress enacted something called the generation skipping transfer tax to make sure people couldn't avoid the estate tax by creating multi-generational trusts. And then four years later in nineteen ninety, Congress enacted these rules because people were gaming valuation and they said, no, you can't game valuation. And they enacted these, they're called special valuation rules, and they were designed to avoid gaming. And both of these loophole, pretty significant loophole closing projects, they were both enacted under Republican presidents, right? Fran Quigley: Mm-hmm. Ray Madoff: These were this was just a a regular bipartisan revenue-raising fairness preserving tax that everyone accepted. However, beginning in the early 1990s, 18 of the country's richest families, the Mars family, the Koch, the Waltons, a lot of these famous families that we know, famous rich families, got together to advocate for repeal of the estate tax. But they knew it wouldn't look very good if they were the face of the estate tax, right? If they're just a bunch of rich people going like, We don't want to pay estate taxes, right? Nobody would Fran Quigley: Right, right. Ray Madoff: be that wouldn't be too effective. and so they did something very clever. First thing they did is they hired this guy, Frank Luntz, who was a tremendously powerful wordsmith. And he told them to stop calling it the estate tax because that sounds like something that applies to rich people. And instead call it the death tax because that's Fran Quigley: Yeah. Ray Madoff: something that sounds like it comes for everyone, like death, right? Sounds ominous, it's disturbing. it will work to turn people against it. And so, you know, I suspect you could pretty much stop anybody on the street today. And say, what is that tax? What do they call it? And they would say it's a death tax and it's an unfair double tax that hurts family, farms, and businesses, right? It was a phenomenally successful campaign. Because the other thing that they did is that rather than the rich people advocating for it themselves, they got a collection of business people, you know, family farmers. That was sort of the most appealing look. Because remember, the country, one of the reasons that People were so disturbed by the by the excesses of the Gilded Age, was because the country had always had a self image as being a place made up of farmers and small business people, right? And so those were the people they got to advocate to repeal the estate tax, to say, we're afraid of the estate tax. And the most effective spokesperson was this fellow by the name of Chester Thigpen, who was the grandson of slaves. And who had a Christmas tree farm. And he said, I'm afraid that I'm gonna lose my whole farm because of the death tax is gonna come and my family won't get it, and everything will be sold for timber. and of course he was afraid because their campaign was so effective that everybody saw advertisements and It was, you know, they so people became afraid. And this guy was afraid. He was they he was so effective. He testified in Congress many times about his fear, and he was so effective that Republicans wanted to call it the Chester Thigpen Relief Act to repeal the estate tax. Fran Quigley: my goodness. Ray Madoff: Okay, so Chester Thigpen actually did die. And when he died, it turns out that his estate wasn't subject to tax at all because it was way too small. It fit well within the exemption amount. So we actually have lots of provisions in our code to address the problem of family farms and businesses, but it was such an effective thing for the wealthy families to use that that's what they used to to to advocate for repeal of the estate tax. And this campaign was tremendously effective. Not just in terms of changing people's perceptions, but there was one year when there was no estate tax at all. Fran Quigley: Mm. Ray Madoff: and even when Obama was elected and and the estate tax was due to come back with full force, he made the exemption amounts even larger and the and the rates even smaller because Republicans and Democrats were afraid to advocate for reforms to the estate tax. The bigger problem was that. Congress as a whole stopped doing even basic upkeep with the tax. So the very last time there has been any changes to the tax, any closing of loopholes was 1990. So it's now has been 36 years. And no no loophole closing has occurred. But meanwhile, you know, my students and other estate planners Fran Quigley: Mm-hmm. Ray Madoff: Are all, you know, coming up with all sorts of workarounds around the estate tax. And then we just have this alphabet soup of different ways of avoiding the estate tax. And we know that the estate tax, the if you want proof that the estate tax does how little it does, I have I have two pieces of evidence for you and your listeners. Fran Quigley: Okay, great, great. Ray Madoff: The first one is that. At a time when the richest Americans, at the end of 2025, the richest Americans owned fifty trillion dollars. This is a massive amount. This is when the total total federal revenue, by the way, was only five trillion. Fran Quigley: Wow. Ray Madoff: But it was sh but we still had to borrow like two trillion because we didn't have enough to meet our seven trillion expenses, right? Meanwhile, the richest 1% had $50 trillion of wealth. Okay. The estate tax. A flat 40% tax that was designed to apply to all transfers during life and at death. At that time, at the end of 2025, it raised $28 billion. $28 billion. Now that is 0.06%, right? Less than less than one half of 1%. It was n it's nothing, is what it raised. And The second piece of evidence, which is even a stronger evidence, I believe, for the ineffectiveness of the estate tax, is that when we had our most recent tax bill, the one big beautiful act is sometimes called, Fran Quigley: Mm-hmm. Ray Madoff: that's an entirely Republican, that was an entirely Republican bill, right? We had a Republican president, a Republican Congress, and they could have anything at all that they wanted. Note what they didn't have. No repeal of the estate tax, right? And that's Fran Quigley: Cut. Ray Madoff: and that's because the existence of the estate tax makes it look like the rich people are paying taxes because it's right there on the books, a flat 40% Fran Quigley: Right. Ray Madoff: tax. So everybody thinks they're paying taxes, but in fact they're not. And furthermore, there's one other thing I wanted to say about it. the reason. That it's so valuable for the wealthy people to have it is because when we have an estate tax, the income tax provides a complete giveaway for money received by gifts, inheritance, or life insurance. Fran Quigley: Mm-hmm. Ray Madoff: Where our rule is no matter how much you receive, you don't even have to tell anybody. It is there is an unlimited exclusion from money received by gifts. inheritances or life insurance. So what that means is that if somebody has unemployment insurance because they've been hurt, they pay taxes on it. Fran Quigley: Right. Ray Madoff: Somebody gets disability benefits, they pay taxes. They pay taxes on Social Security. They pay taxes on on a a barter exchange, right? Everything is subject to tax, lottery winnings, prize winnings, gambling. But if you receive money by gifts, insurance or or inheritance, no tax at all, even if you get like a hundred billion dollars. So this all of this exclusion from the income tax is only justified because we believe we have an estate tax, but we don't have a functioning estate tax. So so that's how it happens. Fran Quigley: Yeah, and and that leads to your solution, which is counterintuitive when you first hear about it. It's like the estate tax has been gutted. The answer is not to bolster the estate tax. The answer is to get rid of the estate tax. So can you tell us how that how how that Ray Madoff: Yeah. Fran Quigley: would work? Ray Madoff: The estate tax is the the there's no way the estate tax is ever going to be fixed given the amount of of holes that have been poked in the tax over the years, right? So I teach my students all about how to do grats and gruts and klats and kluts and q perts and q dots and intentionally defective grant or trusts and all of these things, right? All of this alphabet soup of tax avoidance techniques. And to actually close those loopholes. would involve a massive effort. And the problem is that this campaign was so effective. If we haven't, if Congress has never even closed a single loophole, I don't know what makes us think we're going to start closing like 40 loopholes. It's just not going to happen. But I think there's another reason, which is that the estate tax had an Achilles heel to it that made it particularly vulnerable. And that is that the tax is imposed on the person who died. Right. And so now for some people, some people they'll never have paid taxes on it, right? Because they'll have Fran Quigley: Mm-hmm. Ray Madoff: acquired massive amounts of stock and the stock will have grown in value and they'll never have paid taxes on it. But other people can s think of like Paul McCartney, right? Or J.K. Rowling, right? They've acquired their wealth through taxable means. They have royalties, they have other forms of of income. And so They've paid a lot of taxes and now they die and we're saying, now you're subject to taxes again, right? Fran Quigley: Mm-hmm. Ray Madoff: That does feel like a double tax to people because they've paid taxes once and now you're dead, and now we're going to kick you when you're down, we're going to pay another tax. Because missing from the picture, most people aren't aware of all this giveaway in the income tax system. And so what I think we need to do is we need to get rid of the estate tax with its Achilles heel, and we need to actually impose the tax. where it belongs, which is the person who's being given this money. We should decide how much people should be able to inherit tax-free. Maybe it's a million dollars. You know, maybe we want to subsidize a million dollars of inheritance and say that much should be tax free. But after that, people should pay taxes on it, just as they do all their other forms of acquiring income. Fran Quigley: The live people, not not the dead people, the second generation. Yeah. Which you would think politically Ray Madoff: Exactly. But whoever sees Fran Quigley: would be we're we're we're not as sympathetic to somebody who didn't earn the money, who just earned the money by being born into the right family, right? Ray Madoff: Right. Exactly. Fran Quigley: Yeah. you you so that transparency you say could could have some value as well. It's just that the if we do right now, as you said, we don't know when they don't have to report it at all. So massive amounts of money is being a tran Transferred and we don't know anything about it. If we do tax it as to the recipient, then we'd know something. We'd we'd know what kind of wealth is out there that's being passed around, right? Ray Madoff: That's right. Fran Quigley: Yeah. you you do a a great job in the book, and you can tell that you're a teacher because you have this wonderful comparison between an Uber driver and how they're Ray Madoff: Yeah. Fran Quigley: paying payroll taxes, as you mentioned, and and paying on the salary, et cetera, and they're being taxed versus an Uber investor. And Uber drivers are our clients. We have lots of ride sharing clients and f fo drivers who unfortunately are are facing eviction. but we don't see a lot of investors. As you mentioned, the investors are going to be in that category of folks who don't, who can kick the can down the road and then potentially even pass it in in in an estate and never be taxed at all. Ray Madoff: That's right. Fran Quigley: what other what other fixes would you have besides the the actual just getting rid of the estate tax and and getting the And in and taxing the transfers that way. Ray Madoff: It right. So the two things that I would do is the so the if we recognize that the problem with our system is not is not earners, the problem our system is investments and inheritances, then I see the answers as investments and inheritances, right? So we Fran Quigley: Yeah. Ray Madoff: should ensure that when somebody has enjoyed gains of property, you know, again, over a certain exemption amount, we can decide, you know, people can have a house that's gone up, a million dollars, whatever it is we want to protect, but in excess of that. We should tally those gains when a person dies and impose taxes then or when or when they give the property away. Whenever the person transfers property, we should adopt that Canadian rule that says the transfer of property is the time where you pay taxes on those gains. And that way we make sure that these people that have been able to live off of this wealth will actually pay taxes on that wealth. Otherwise they won't. and then the other is to. for the people who inherit wealth that they should pay taxes on the wealth that they inherit in excess of an exemption amount. And the other thing by the way that I would do is if you have a system like this, then you can have your exemptions for things that we maybe want to have an exemption for. Like for example, if we care about family farms and businesses, we can have an exemption for family farms and businesses, Fran Quigley: Mm-hmm. Ray Madoff: but we have to Be honest about what it means for something to be a family business. But what we meant by a family business is somebody's livelihood. It's not the Mars family sitting around enjoying the growth of the value of their Mars stock. That is not a the type of family business that we need to be protecting. That's a dynasty. And dynasties have long been a source of tremendous concern for this country. Fran Quigley: Yeah. And you would think that would certainly that wouldn't resonate the way death tax. We're concerned about death tax or concerned about Mr. Thigpin or the somebody who owns the Main Street drugstore losing the the the store in the in the transfer between generations. So well I want to say that this book is terrific and this book actually there's there's topics we did not address, which means you should need to go out and buy this book. The second estate, we didn't talk about the charitable tax deduction, we didn't talk about Ray's views on the wealth tax proposals in California and other places. But but I want to re respectful of of your time, especially it's the f second week of classes, is that right? It is a sec it's Ray Madoff: Yeah. Fran Quigley: a it's a busy time. We law professors actually have to work this time of year. So Ray Madoff: Ha ha ha. Fran Quigley: so Ray, thank you so much for for being on the podcast and thank you so much for your work. Again, on behalf of the people who right now can't get access to social services and housing services, et cetera, because we you know, don't have the the funding because all of this tax avoidance is happening and the second estate is it's being written out of the tax code. So thank you for your writing and your research and your teaching, but also your advocacy. So very much appreciate you being on the podcast. Ray Madoff: Thank you so much, friend. This was fantastic. I look forward to listening to your other episodes. Fran Quigley: Thank you, thank you, and thank you all for listening to this. And remember, please, we can do better.