How the ownership class built a tax system that runs on your money, and why it was never an accident.

"A cynic is a man who knows the price of everything and the value of nothing."

~ Oscar Wilde

There is a trick that wealthy collectors occasionally play at auction, and understanding it requires only arithmetic. Suppose you already own five copies of a significant asset — a key comic book, a blue-chip painting, a case of wine that the market has decided to treat as a financial instrument. A sixth copy comes up for sale. You bid it aggressively, past its estimated value, past the point where you intend to win it. Every dollar the hammer price rises on that sixth copy adds a dollar of implied value to each of the five you already hold. The auction result becomes the new comparable sale, the new price floor, the new reference point for insurance valuations, collateral assessments, and the next auction. You may spend two hundred thousand dollars on aggressive bidding for a lot you ultimately lose and walk away having added two million dollars in paper value to your existing holdings. That is not a loss. That is an exceptionally efficient deployment of capital.

The more sophisticated version doesn't require you to lose. You win the lot at the record price. The acquisition cost is absorbed. The comparable sale you've just established still does the valuation work across your broader holdings. The record price is simultaneously a purchase and an advertisement, and you paid for it with money that, as we will get to shortly, was almost certainly borrowed against other assets and will not, in any meaningful sense, ever be taxed.

In a regulated financial market, this kind of coordinated price manipulation would attract immediate regulatory scrutiny. In the art market, the rare comic book market, the fine wine market, it is entirely legal, essentially unacknowledged, and practiced by people who describe themselves, without apparent embarrassment, as passionate collectors.

This is a minor footnote. What follows is the main text.

The asset appreciation that this bidding strategy manufactures is, under American tax law, not income. Appreciation — the increase in value of something you own — is taxed only when you choose to sell it. This is not a secret. It is the first principle of a system whose consequences, once you follow them to their logical conclusion, are considerably more radical than the polite vocabulary of fiscal policy debate typically permits.

The billionaire does not sell. This is the foundational insight of what practitioners call the "buy, borrow, die" strategy, a phrase whose casual brutality is precisely calibrated to the reality it describes. The asset is purchased. It appreciates. No taxable event occurs. The owner borrows against it at rates that, until the recent inflationary period, were effectively zero, and lives on the loan proceeds. Loan proceeds are not income. The interest on the loan may be deductible. The asset continues to appreciate, now functioning simultaneously as a store of value, a source of untaxed liquidity, and a deduction generator. If it is a physical asset — a painting, a first edition, a comic book sealed in a laboratory-grade acrylic slab — it may be transferred to a freeport facility in Geneva or Singapore, where it sits in a legal nowhere beyond the effective jurisdiction of any taxing authority, as permanent or as temporary as the owner requires.

The owner dies. The asset passes, through a dynasty trust structured in South Dakota — a state that abolished the rule against perpetuities in 1983 and has since become the preferred domestic jurisdiction for mechanisms specifically engineered to hold appreciating assets across multiple generations without triggering transfer taxes — to the trust's next generation of beneficiaries. The cost basis steps up to current market value at the date of death. The entire appreciation, potentially decades of compounding gains on an asset that represents, in any honest accounting, publicly subsidized private wealth, is extinguished as a tax liability at the precise moment it would otherwise have been realized. The next generation inherits not merely the asset but the complete mechanism for extracting value from it, and the cycle begins again with the stepped-up basis as its new floor.

Jerry Siegel and Joe Shuster paid taxes. They paid taxes on the page rates Detective Comics paid them in 1938, and on whatever they earned in the decades that followed — which was not much, because they had signed away their creation for one hundred and thirty dollars and a contract that the courts spent the better part of a century trying to unravel. The entity that now controls the intellectual property they created will pay taxes calibrated by an army of accountants and lobbyists whose professional function is to minimize the distance between the statutory rate and the effective rate. The collector who paid $3.25 million at auction for a graded copy of Action Comics #1 — if the structure is competently executed, and it almost certainly is — will pay no capital gains tax on its appreciation, ever, for as long as the dynasty trust persists. Their grandchildren will inherit the asset, the mechanism, and the accumulated advantage, and the process will continue until either the law changes or the family runs out of competent attorneys, whichever comes last.

The law will not change in any meaningful way. The lobbying infrastructure that protects the stepped-up basis, the dynasty trust, the freeport system, and the carried interest deduction is funded by the same pool of capital that benefits from their preservation, and it operates with a consistency and a patience that the periodic political coalitions assembled to challenge it have never been able to match. The last serious attempt to address the stepped-up basis loophole died in the Senate in 2021. The freeport transparency requirements proposed by the European Parliament following the Panama Papers revelations produced a set of reporting obligations so riddled with carve-outs and enforcement gaps that practitioners in the field describe compliance as an administrative formality rather than a substantive constraint.

Now consider the military budget.

The United States currently spends approximately $900 billion annually on defense — a figure that has increased, in real terms, through administrations of both parties, through periods of fiscal austerity that produced cuts to housing assistance, food programs, Medicaid, and public education, and through every rhetorical cycle about debt and responsibility that the political class has reliably produced over the past four decades. That money is raised overwhelmingly through income taxes, payroll taxes, and consumption taxes paid by people who work for wages. It is spent, in substantial proportion, on contracts awarded to defense manufacturers whose major shareholders are institutional investors and high-net-worth individuals who have structured their ownership positions in the ways described above — through entities, trusts, and jurisdictions that minimize the tax liability on the returns those contracts generate.

The geometry is not merely closed. It is elegant. The working population finances, through taxes on their wages, a military-industrial apparatus whose profits flow to an ownership class that has structured its affairs to ensure that those profits are not, in any meaningful sense, taxed in return. The people who bear the fiscal burden of the military are not, in the main, the people whose capital appreciates when Raytheon wins a contract. This is not an incidental distributional outcome. It is the system functioning precisely as the people who designed and maintained it intended.

The person sitting at the cabinet table who controls the defense budget, or the regulatory apparatus, or the tax enforcement priorities of the Internal Revenue Service, and who arrived at that table through a combination of personal wealth, donor relationships, and ideological alignment with the people who funded the political operation that placed them there, understands this geometry. Their public statements are specifically engineered to obscure it. They do not say: we have structured the fiscal system so that the people least able to bear the burden of public expenditure bear the largest share of it, while the people most able to bear it have access to mechanisms that reduce their contribution toward zero. They say: we must be responsible stewards of taxpayer money. They say: we cannot afford to expand the social safety net. They say: economic growth benefits everyone.

These are not accidental choices of framing. They are a professional vocabulary, developed over decades and underwritten by think tanks, foundations, and academic appointments funded by the same capital that benefits from the arrangements the vocabulary is designed to protect.

The Internal Revenue Service is perhaps the most clarifying example of how this works at the institutional level.

The agency's enforcement budget has been systematically reduced over the past three decades. The result is an enforcement capacity that the agency's own published analyses confirm is concentrated on wage earners whose income is reported automatically through W-2 withholding — people whose tax liability is essentially pre-calculated and uncontestable — while audit rates for high-income individuals with complex returns involving pass-through entities, offshore structures, and alternative assets have fallen to levels that practitioners describe, with professional understatement, as non-deterrent.

The reason is not mysterious. Auditing a complex high-net-worth return requires experienced revenue agents working for months or years against teams of attorneys and accountants who are better compensated than the agents and have every incentive to make the process as expensive and inconclusive as possible. The IRS, operating under a constrained budget, makes rational resource allocation decisions that result in the systematic under-enforcement of tax obligations at exactly the income levels where the obligations are largest and the avoidance structures most sophisticated. This outcome was not designed in a single legislative act. It was produced by the cumulative effect of budget decisions made over thirty years by legislators whose campaigns were funded, in part, by the people most advantaged by the outcome.

The Inflation Reduction Act of 2022 allocated approximately $80 billion to IRS enforcement over ten years, specifically targeting high-income non-compliance. The response from the affected community was immediate, organized, and well-funded: a lobbying campaign that successfully clawed back a substantial portion of that funding in subsequent budget negotiations, before a meaningful number of additional audits had been completed. The mechanism demonstrated its own resilience in real time, in public, with a transparency that was possible precisely because no individual actor needed to say anything embarrassing. The money moved through the political system along its established channels, and the enforcement capacity did not materialize. There is no smoking gun. There is only the consistent operation of a system whose outcomes are, across decades and administrations, remarkably stable in their distribution of burden and benefit.

The political durability of this arrangement depends on a fact about human psychology that its architects understand better than most behavioral economists: loss aversion is more powerful than the prospect of gain. The person who has achieved a mortgaged house, a 401(k) that tracks the same market the billionaire's trust is pillaging, two cars, and a healthcare plan contingent on continued employment has a direct and felt stake in the stability of the system that produced those things — not because the system is serving them well in any absolute sense, but because the perceived distance between what they have and what they might lose is more psychologically immediate than the perceived distance between what they have and what they might gain.

The employment culture that insists a job is the ultimate privilege is not entirely dishonest, which is what makes it so durable. Employment does provide income, structure, identity, social connection, and the specific psychological security of knowing that tomorrow looks like today. These are not trivial goods. The propagandist's skill — and it is a skill, refined over decades and worth every dollar of the consulting fees paid to develop it — is in taking something genuinely valuable to the person who has it and inflating it into a complete account of what is possible and what is deserved. The worker generating returns for a shareholder he will never meet, in a system he did not design and cannot meaningfully exit, is thereby induced to experience his structural condition as a personal achievement and defend it accordingly.

The working and middle-class voters who delivered electoral majorities to administrations that then cut capital gains taxes, weakened union organizing rights, deregulated financial markets, defunded enforcement mechanisms, and expanded the carried interest deduction were not voting against their interests in some abstract ideological sense. They were responding to a political communication operation of extraordinary sophistication that had successfully convinced them that their interests and the interests of the ownership class were aligned — that what was good for the shareholder was good for the employee, that a rising tide lifts all boats, and that the people proposing the alternative were either naive, malicious, or both.

The boats that have risen and the boats that have not are now a matter of public record. The data on wealth concentration, wage stagnation, healthcare costs, housing affordability, retirement security, and social mobility in the United States over the past four decades constitute one of the most thoroughly documented indictments of a policy regime in the history of economic statistics. The indictment has not produced the expected political response, which tells you that the system's capacity for self-maintenance operates at a level deeper than policy preference — at the level of identity, narrative, and the specific human need to believe that the world one inhabits is, in its broad outlines, fair.

Superman was created by two sons of Jewish immigrants who understood dispossession from the inside, as a fantasy of power deployed in the service of the powerless. The character's entire moral architecture is built on the premise that extraordinary capability carries an obligation to protect the vulnerable from the powerful — a premise that a Depression-era child reading a ten-cent comic would have understood as simply true.

That premise has been converted, through ninety years of corporate management, into a $15 billion entertainment franchise whose primary cultural function is to provide the exhausted worker with a two-hour experience of vicarious empowerment that costs fifteen dollars and sends them back to work on Monday morning feeling, at some dim and unexamined level, that justice is possible and the powerful can be held to account. It is, as a mechanism for managing the political imagination of a population, worth considerably more than the comic that inspired it.

And it costs the ownership class essentially nothing, because they own that too.

The correct response to all of this is not despair, though despair is understandable. It is not cynicism, though cynicism is available in unlimited quantities and requires no effort to acquire. It is something closer to clarity — the cold, functional clarity of understanding a mechanism well enough to stop being surprised by its outputs and start asking the only question that matters: what would it take to change it?

The answer is not a charismatic politician. The system has demonstrated, repeatedly, that it can absorb charismatic politicians and redirect their energy through the established channels of donor relationships, career incentives, and the permanent professional class that administers policy regardless of who wins elections. The answer is not a single piece of legislation. The system has demonstrated that it can dilute, delay, defund, and ultimately reverse legislation through the same infrastructure that produced the legislation's opponents in the first place.

What the system has not demonstrated is any capacity to survive a population that understands it with sufficient clarity to stop providing it with the one input it actually requires: the ongoing consent of the people it is built to exploit.

That consent is what the comfortable job, the superhero franchise, the political campaign promise, the think-tank white paper, and the cable news argument are all, in their different registers, designed to maintain. Withdrawing it is not simple, and it is not fast, and it will not happen through any single act of individual heroism. It will happen, if it happens, through the slow and unglamorous accumulation of people who have looked at the mechanism clearly enough to stop finding it either natural or inevitable.

Jerry Siegel and Joe Shuster created a character who could see through walls.

The rest of us are going to have to settle for seeing through the argument.

Jonathan Brown writes about cybersecurity infrastructure, privacy systems, the politics of AI development, religion, magic, philosophy, literature and many other topics at bordercybergroup.com and aetheriumarcana.org. Border Cyber Group maintains a cybersecurity resource portal at borderelliptic.com

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