The Taxed and the Untouchable: Anatomy of a Democratic Kleptocracy

The Great Inversion

In modern economic mythology, the government is a leviathan fed by the wealthy. In practice, however, the fiscal lifeblood of most nations comes not from the hoarded fortunes of billionaires or the vaults of multinational corporations, but from wage workers, salaried professionals, and small business owners — those who earn income through labor, not capital. This inversion — where the productive middle and lower classes shoulder the tax burden, while capital owners, asset speculators, and corporate giants find legal exits — defines the moral and economic absurdity of our time.

In the United States, the great majority of federal tax revenue is generated by two primary sources: individual income taxes and payroll taxes. Together, these account for approximately 84% of the federal government’s revenue, while corporate income taxes contribute less than 7%¹. This reveals a stark imbalance: it is not the ultra-wealthy or multinational firms that sustain the state, but ordinary citizens who have no access to offshore shelters, tax-deferred equity vehicles, or shell company disguises.

The irony is sharpest in liberal democracies where wealth is theoretically the reward of participation in open markets. Those who ascend beyond mere wealth into the stratosphere of capital dynasties are able to decouple themselves from the rules imposed on everyone else. They do not merely avoid taxation — they operate in a shadow financial world where wealth circulates through jurisdictions with secrecy, impunity, and strategic opacity. As economist Michael Hudson has argued, modern financial elites have not become post-industrial so much as post-tax, enabled by a regulatory architecture that no longer governs wealth but serves it².

This essay will trace the contours of this inversion. It will examine how individuals and families — from low-income workers to high-salaried professionals — fund the state apparatus through direct taxation, while corporations and billionaires exploit legal mechanisms to avoid contributing proportionally. We will explore the offshore machinery of financial opacity, the political economy of tax code capture, and the myths used to justify regressive systems under the guise of economic freedom. This is not just about wealth inequality — it is about fiscal injustice embedded in the very structure of modern governance.

Notes

¹ Congressional Budget Office. The Budget and Economic Outlook: 2023 to 2033. U.S. Government Publishing Office, February 2023, p. 9. https://www.cbo.gov/publication/58848

² Hudson, Michael. Killing the Host: How Financial Parasites and Debt Destroy the Global Economy. CounterPunch Books, 2015, pp. 232–235.

Who Really Pays: Wage Earners, Not Wealth Holders

The image of the ultra-wealthy as overburdened taxpayers is a persistent myth—and one that serves the interests of those most adept at avoiding the obligations of citizenship. In the United States and other developed nations, the primary source of public revenue is not capital, but labor. The burden of sustaining government operations falls overwhelmingly on individuals who earn wages and salaries, not on those who accumulate passive income from assets, rents, or dividends.

As of the most recent Congressional Budget Office data, individual income taxes and payroll taxes accounted for nearly 84 percent of federal revenue, with corporate income taxes contributing a mere 7 percent¹. This trend is not unique to the United States. Across the OECD, taxes on labor consistently account for the majority of total revenue, while taxes on wealth and capital have either stagnated or declined². In effect, working people are underwriting not only their own social services but also the legal and financial systems that allow capital to escape obligation.

More revealing still is the distribution of the effective tax burden by income group. While low-income households pay a significant portion of their earnings in regressive taxes—such as sales taxes, excise taxes, and payroll taxes—high-earning professionals and small business owners often face the highest marginal rates on declared income. In contrast, ultra-wealthy individuals, particularly those in the top 0.1 percent, frequently report little to no taxable income at all, thanks to mechanisms that convert income into unrealized capital gains or defer it through trusts and shell companies³.

For example, a salaried professional earning $500,000 a year may face a combined federal, state, and payroll tax burden approaching 50 percent⁴. This individual, though statistically “wealthy,” lacks the financial architecture to shift assets offshore, disguise income through corporate wrappers, or borrow against equity to extract wealth tax-free. The true middle and upper-middle class—those without tax teams or family offices—are increasingly the backbone of national taxation, even as they are excluded from the privileges afforded to dynastic capital.

The stark reality is that income from labor is easy to track, tax, and punish. It is reported by employers, subject to withholding, and enforced through automated systems. Meanwhile, income from capital—the source of wealth for most billionaires—is fluid, opaque, and discretionary. It flows across borders, hides in legal fictions, and only becomes “real” when the holder chooses to make it so⁵. Thus, the modern tax state is not so much regressive in law as it is in practice: the poor and the non-rich pay because they cannot afford not to.

Notes

¹ Congressional Budget Office. The Budget and Economic Outlook: 2023 to 2033. U.S. Government Publishing Office, February 2023, p. 9. https://www.cbo.gov/publication/58848

² Organisation for Economic Co-operation and Development. Revenue Statistics 2023. OECD Publishing, 2023. https://www.oecd.org/tax/revenue-statistics.htm

³ Saez, Emmanuel, and Gabriel Zucman. The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. W. W. Norton, 2019, pp. 82–85.

⁴ Tax Foundation. "Summary of the Latest Federal Income Tax Data, 2023 Update." November 2023. https://taxfoundation.org

⁵ Piketty, Thomas. Capital in the Twenty-First Century. Harvard University Press, 2014, pp. 466–475.

How the Ultra-Rich Escape the Net

Taxation in theory is a civic obligation shared by all. In practice, it is an engineering problem—one that the ultra-rich have solved. Their solution is not simple evasion, which implies illegality, but systematic avoidance through legal complexity. The wealthiest individuals in the world do not hide their fortunes under mattresses or in briefcases—they house them in shell corporations, dynasty trusts, and offshore entities designed explicitly to circumvent tax liability while preserving ownership and control.

The mechanisms are well documented. A billionaire with equity in a publicly traded company can defer taxation indefinitely simply by not selling shares. Instead, they can borrow against the value of those assets at extremely low interest rates, enjoying liquidity without triggering a taxable event¹. Known as “buy, borrow, die,” this strategy allows dynastic wealth to grow untaxed across generations, with step-up provisions eliminating capital gains at death². At no point is there a legal requirement to convert paper wealth into taxable income.

Offshore banking further strengthens this evasion architecture. Trusts based in the British Virgin Islands or the Cayman Islands—jurisdictions with minimal disclosure requirements—allow beneficiaries to effectively control assets without appearing to own them. These trusts are then layered through additional shells in places like Luxembourg or Singapore, producing a chain of legal entities that regulators struggle to trace. This opacity is intentional. In the leaked Panama Papers and later in the Pandora Papers, even seasoned investigators were often unable to establish the real owners behind complex offshore structures³.

This is not fringe behavior. It is routine among the global financial elite. According to economist Gabriel Zucman’s estimates, as much as 8 percent of the world’s financial wealth—amounting to more than $7 trillion—is held offshore, much of it undeclared for tax purposes⁴. In the United States, an Internal Revenue Service whistleblower estimated that as much as $1 trillion in taxes goes unpaid each year, largely due to sophisticated evasion techniques that favor high-asset individuals and large corporations⁵.

The key insight here is that the ultra-rich do not simply pay less tax than others—they exist in a parallel system where taxation is optional, enforced only when compliance is strategically beneficial. Most citizens are taxed automatically and visibly. The elite, by contrast, operate with a high degree of invisibility, shielded by legal entities, financial instruments, and jurisdictions designed not to prosecute wealth, but to protect it.

Notes

¹ ProPublica. “The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax.” June 8, 2021. https://www.propublica.org/article/the-secret-irs-files

² Brown, Richard. “Buy, Borrow, Die: How Billionaires Exploit the Tax Code.” Tax Notes Federal, vol. 171, no. 1, 2021, pp. 41–53.

³ International Consortium of Investigative Journalists. Pandora Papers. ICIJ, 2021. https://www.icij.org/investigations/pandora-papers/

⁴ Zucman, Gabriel. The Hidden Wealth of Nations: The Scourge of Tax Havens. University of Chicago Press, 2015, pp. 1–7.

⁵ Internal Revenue Service. “The Tax Gap: New Estimates for 2014–2016.” Department of the Treasury, 2022. https://www.irs.gov/newsroom/the-tax-gap

How the Ultra-Rich Escape the Net

Taxation in theory is a civic obligation shared by all. In practice, it is an engineering problem—one that the ultra-rich have solved. Their solution is not simple evasion, which implies illegality, but systematic avoidance through legal complexity. The wealthiest individuals in the world do not hide their fortunes under mattresses or in briefcases—they house them in shell corporations, dynasty trusts, and offshore entities designed explicitly to circumvent tax liability while preserving ownership and control.

The mechanisms are well documented. A billionaire with equity in a publicly traded company can defer taxation indefinitely simply by not selling shares. Instead, they can borrow against the value of those assets at extremely low interest rates, enjoying liquidity without triggering a taxable event¹. Known as “buy, borrow, die,” this strategy allows dynastic wealth to grow untaxed across generations, with step-up provisions eliminating capital gains at death². At no point is there a legal requirement to convert paper wealth into taxable income.

Offshore banking further strengthens this evasion architecture. Trusts based in the British Virgin Islands or the Cayman Islands—jurisdictions with minimal disclosure requirements—allow beneficiaries to effectively control assets without appearing to own them. These trusts are then layered through additional shells in places like Luxembourg or Singapore, producing a chain of legal entities that regulators struggle to trace. This opacity is intentional. In the leaked Panama Papers and later in the Pandora Papers, even seasoned investigators were often unable to establish the real owners behind complex offshore structures³.

This is not fringe behavior. It is routine among the global financial elite. According to economist Gabriel Zucman’s estimates, as much as 8 percent of the world’s financial wealth—amounting to more than $7 trillion—is held offshore, much of it undeclared for tax purposes⁴. In the United States, an Internal Revenue Service whistleblower estimated that as much as $1 trillion in taxes goes unpaid each year, largely due to sophisticated evasion techniques that favor high-asset individuals and large corporations⁵.

The key insight here is that the ultra-rich do not simply pay less tax than others—they exist in a parallel system where taxation is optional, enforced only when compliance is strategically beneficial. Most citizens are taxed automatically and visibly. The elite, by contrast, operate with a high degree of invisibility, shielded by legal entities, financial instruments, and jurisdictions designed not to prosecute wealth, but to protect it.

Notes

¹ ProPublica. “The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax.” June 8, 2021. https://www.propublica.org/article/the-secret-irs-files

² Brown, Richard. “Buy, Borrow, Die: How Billionaires Exploit the Tax Code.” Tax Notes Federal, vol. 171, no. 1, 2021, pp. 41–53.

³ International Consortium of Investigative Journalists. Pandora Papers. ICIJ, 2021. https://www.icij.org/investigations/pandora-papers/

⁴ Zucman, Gabriel. The Hidden Wealth of Nations: The Scourge of Tax Havens. University of Chicago Press, 2015, pp. 1–7.

⁵ Internal Revenue Service. “The Tax Gap: New Estimates for 2014–2016.” Department of the Treasury, 2022. https://www.irs.gov/newsroom/the-tax-gap

The False Promise of “Job Creators”

Few ideas have enjoyed more bipartisan repetition or ideological resilience than the notion that tax cuts for the wealthy spur economic growth. Phrased as an appeal to entrepreneurship and wrapped in the rhetoric of “supporting small business,” the claim is simple: lower taxes on the rich and corporations will result in more investment, more jobs, and broader prosperity. This narrative, however, rests not on empirical economic evidence but on an ideological commitment to protecting capital.

The modern form of this myth was codified in the Reagan era under the banner of supply-side economics. The premise was that lowering marginal tax rates on the highest earners and reducing capital gains taxes would incentivize investment and expand the productive capacity of the economy¹. In reality, the evidence has consistently shown that the bulk of the gains from such tax cuts are captured by the top 1 percent, with no measurable increase in long-term job creation or wage growth². In 2017, the Trump administration passed sweeping corporate tax cuts under the same rationale. Despite claims that this would unleash a wave of hiring and capital expenditure, corporations used the majority of the windfall—over $800 billion—to fund stock buybacks rather than invest in workers or infrastructure³.

This bait-and-switch is only possible because the figure of the “job creator” is deliberately vague. It conflates local business owners with multinational conglomerates, and family-run firms with hedge funds. The tax code, however, distinguishes little between them. In recent decades, corporate lobbying has ensured that pass-through income from large firms is taxed like that of small partnerships, allowing wealthy entities to masquerade as mom-and-pop operations⁴. This rhetorical sleight of hand allows tax cuts for billionaires to be framed as lifelines for “Main Street.”

Meanwhile, actual small business owners rarely benefit from such policies. They lack the scale to exploit the same loopholes and are often burdened by rising costs in healthcare, rent, and compliance. While Amazon receives tax breaks to build a fulfillment center, the neighborhood bookstore pays full freight—and competes on margins it cannot sustain. The state thus subsidizes scale and extraction, not community-level economic resilience.

What makes the “job creator” myth particularly insidious is its function as a moral shield. It reframes tax avoidance not as antisocial behavior but as economic stewardship. It renders the richest citizens and largest firms untouchable by virtue of their supposed indispensability. Yet as multiple economic studies have shown, public investment—in education, infrastructure, and healthcare—has a far greater multiplier effect on job growth than cutting taxes for the wealthy⁵. What creates jobs is not wealth hoarded in offshore accounts or repurchased stock, but aggregate demand and broad-based public provisioning.

Notes

¹ Bartlett, Bruce. “Supply-Side Economics: The Theory That Trickle-Down Policies Work.” The Atlantic, December 2012. https://www.theatlantic.com/business/archive/2012/12/supply-side-economics-the-theory-that-trickle-down-policies-work/265252/

² Tax Policy Center. “Effects of Income Tax Changes on Economic Growth.” Urban Institute & Brookings Institution, September 2014. https://www.taxpolicycenter.org/publications/effects-income-tax-changes-economic-growth/full

³ Yglesias, Matthew. “Companies Are Spending the Tax Cut Windfall on Stock Buybacks.” Vox, February 2018. https://www.vox.com/policy-and-politics/2018/2/20/17031544/tax-cuts-stock-buybacks

⁴ Cooper, Michael et al. “Business in the United States: Who Owns It, and How Much Tax Do They Pay?” National Bureau of Economic Research Working Paper No. 21651, October 2015. https://www.nber.org/papers/w21651

⁵ Bivens, Josh. “Public Investment: The Next ‘New Thing’ for Powering Economic Growth.” Economic Policy Institute, April 2012. https://www.epi.org/publication/bp338-public-investments/

Shadow Finance and the Black Market for the Elite

When the term "black market" is used in public discourse, it typically evokes images of smuggled goods, street-level narcotics, or unlicensed trade at the economic margins. Rarely is the phrase applied to the financial behavior of the world’s richest actors. Yet the most significant and least scrutinized black and gray markets operate not in cash-only alleyways, but in the upper echelons of international finance, facilitated by elite law firms, compliant jurisdictions, and a deregulatory regime decades in the making.

These markets are not hidden—they are simply unexamined. The shadow financial system encompasses a vast constellation of non-bank financial institutions, offshore asset vehicles, complex trusts, private equity arrangements, and cryptocurrency exchanges, many of which exist beyond the reach of meaningful regulatory oversight. The scale of this architecture is staggering: according to the Financial Stability Board, the global shadow banking sector now exceeds $200 trillion in assets¹.

Much of this shadow finance exists in legally ambiguous or lightly regulated jurisdictions—so-called “secrecy havens.” These are not limited to distant islands, but include Delaware, Nevada, Luxembourg, and Singapore. They provide favorable conditions for obscuring beneficial ownership, reducing tax obligations, and evading public disclosure requirements. For the ultra-wealthy, these havens offer more than tax relief—they offer strategic invisibility.

One of the most common mechanisms is trade-based money laundering (TBML), a process in which goods are over- or under-invoiced to disguise illicit transfers of value. While this tactic is often associated with organized crime, it is also exploited by multinational corporations engaged in transfer pricing abuses—shifting profits to low-tax jurisdictions under the guise of internal transactions². The result is a legal gray zone in which tax avoidance, capital flight, and money laundering blur together with near impunity.

The rise of cryptocurrency has added another dimension to elite shadow finance. While blockchain ledgers are public, the use of privacy coins (like Monero), mixers, and decentralized exchanges (DEXs) has enabled untraceable capital movement across borders. Contrary to media caricatures, most large-scale illicit crypto flows are not conducted by ransomware syndicates or darknet users, but by offshore investment funds, whale traders, and politically exposed persons seeking to move capital discreetly³.

Luxury assets—art, yachts, real estate—are also integral to elite financial opacity. High-value goods can store wealth, appreciate, and be moved or liquidated with minimal traceability. Freeports, such as those in Geneva and Singapore, function as tax-free, customs-exempt storage vaults for art and precious goods, legally shielded from scrutiny⁴. This practice not only facilitates tax evasion but serves as a hedge against political risk, economic collapse, or even sanctions.

These black and gray markets are not peripheral to global capitalism—they are deeply embedded within it. Their legality is often not a matter of ethical transparency, but of having the lawyers and legislators to make them so. As Michael Hudson observed, modern finance has turned the logic of taxation on its head: what once funded the state has become a parasitic mechanism to extract wealth from it⁵.

Notes

¹ Financial Stability Board. Global Monitoring Report on Non-Bank Financial Intermediation 2023. January 2024. https://www.fsb.org

² Reuter, Peter. “Challenging Conventional Thinking on the Link Between Trade and Money Laundering.” World Bank Policy Research Working Paper 3615, 2005.

³ Chainalysis. Crypto Crime Report 2023. Chainalysis, Inc., February 2023. https://www.chainalysis.com

⁴ Balcells, Joan. “Freeports: The Billionaire’s Warehouse.” Le Monde Diplomatique, English Edition, March 2021.

⁵ Hudson, Michael. The Bubble and Beyond: Fictitious Capital, Debt Deflation and Global Crisis. ISLET-Verlag, 2012, pp. 299–305.

Audits for the Powerless

While the ultra-wealthy manipulate complex legal structures to conceal their wealth, it is the working poor and lower-middle class who most frequently experience the heavy hand of tax enforcement. In recent years, the Internal Revenue Service has shifted its enforcement strategy toward those least able to contest it—targeting recipients of the Earned Income Tax Credit (EITC), low-wage workers, and small-scale sole proprietors. The paradox is profound: those with the least income are subjected to the greatest scrutiny, while those with the most wealth often escape audit altogether.

According to a 2022 analysis by Syracuse University’s Transactional Records Access Clearinghouse (TRAC), the IRS audit rate for EITC recipients was roughly five times higher than for individuals earning $1 million or more per year¹. The rationale offered by the agency is logistical: high-income tax returns are more complex and require more staff hours to audit, while low-income audits can be automated. But this logic masks a systemic inequality: enforcement is driven not by risk or equity, but by cost-efficiency and bureaucratic inertia.

The discrepancy is exacerbated by years of budget cuts and political interference. Since 2010, IRS staffing has declined by over 20 percent, with enforcement divisions disproportionately affected². At the same time, Congress has imposed restrictions that prevent the IRS from using its allocated funds to develop sophisticated auditing techniques for large corporations and wealthy individuals. The result is a tax enforcement regime that punishes visibility, not abuse. W-2 earners are easy to audit. Hidden partnerships, offshore trusts, and shell companies are not.

Moreover, the cost of audit defense introduces a chilling effect. For low- and middle-income taxpayers, even a minor audit can entail weeks of stress, lost time, and out-of-pocket costs. These taxpayers lack access to specialized attorneys or accountants, and are often unfamiliar with the appeals process. By contrast, wealthy individuals can delay, obfuscate, and negotiate with impunity. In practice, the IRS operates as a regressive enforcement mechanism, auditing the poor not because they are dishonest, but because they are exposed and compliant.

This pattern is mirrored in other realms of enforcement. Welfare recipients undergo frequent identity checks, residency verifications, and eligibility audits. Small-time benefit fraud is prosecuted, while large-scale corporate subsidy abuse goes ignored. This asymmetry is not merely a function of scale—it reflects a political economy in which fraud committed by the powerful is often reframed as strategy, while infractions by the poor are moralized and punished.

The logic of modern tax enforcement, then, is inverted. Surveillance, suspicion, and sanction fall hardest on those least capable of fraud, and least able to defend themselves. Tax avoidance, when sufficiently sophisticated, is no longer viewed as criminal—it becomes the mark of fiscal intelligence. Meanwhile, compliance is rewarded with audits.

Notes

¹ Transactional Records Access Clearinghouse (TRAC). “IRS Audits Poorest Families More Than Others.” Syracuse University, March 2022. https://trac.syr.edu

² Congressional Budget Office. “Trends in the Internal Revenue Service’s Funding and Enforcement.” U.S. Congress, July 2020. https://www.cbo.gov/publication/56467

Socialized Services, Privatized Profits

While ordinary citizens pay taxes into public systems with the expectation of mutual benefit, the wealthiest actors often extract immense private value from those very systems—without proportionally contributing to their maintenance. The modern capitalist economy depends heavily on socialized infrastructure, public research, and state-guaranteed financial stability, yet allows private entities to capture the profits while externalizing costs. This is not an aberration of capitalism—it is now one of its defining features.

Public infrastructure is the most visible layer of this arrangement. Roads, bridges, ports, airports, electrical grids, water systems, and broadband networks are funded by taxpayers, but disproportionately utilized for the logistical operations of major corporations. A shipping giant like Amazon, for instance, benefits immensely from a publicly maintained transportation network while using intricate tax avoidance strategies to pay little or nothing in federal taxes¹. The business model is one of dependency on public goods with evasion of public obligation.

This dependency is even more pronounced in sectors like pharmaceuticals and technology, where publicly funded research provides the foundational innovations for private industry. The National Institutes of Health (NIH), for example, funds over $40 billion in biomedical research annually. Many of the most profitable drugs on the market were developed from NIH-backed research, only to be patented and commercialized by private firms². The public bears the risk; the private sector reaps the return. In the case of COVID-19 vaccine development, companies like Moderna and Pfizer received billions in public subsidies and pre-purchase agreements, while asserting proprietary rights over the resulting technologies and pricing them at commercial rates³.

The same pattern holds in finance. The global financial system is undergirded by public institutions that absorb private failure. Central banks intervene to stabilize markets during crises, provide liquidity to over-leveraged banks, and guarantee deposits in the event of collapse. During the 2008 financial crisis, trillions in public funds were mobilized to bail out private institutions deemed "too big to fail." The profits earned during the boom years were privately held, while the losses were socialized⁴. And yet, a decade later, corporate tax contributions remained historically low, and the regulatory reforms that followed were watered down or reversed.

This is the crux of the privatization paradox: the most profitable actors in the economy are those most reliant on public risk absorption, state-backed innovation, and government infrastructure. Rather than contributing commensurately to the systems that sustain them, they lobby for deregulation, privatization, and tax cuts—all while continuing to benefit from the commons they disavow.

The result is a moral economy in which profit is treated as individual genius, and cost as collective inevitability. The taxpayers who fund the highways, subsidize the research, and bail out the banks are told they cannot afford healthcare, tuition-free education, or guaranteed housing. Meanwhile, the beneficiaries of their contributions build fortified estates, offshore their wealth, and shape public discourse to protect their privilege.

Notes

¹ Institute on Taxation and Economic Policy (ITEP). “Amazon Avoided $5.2 Billion in Corporate Income Taxes on $11.2 Billion in Profits in 2018.” February 2019. https://itep.org/amazon-in-its-own-words-no-taxes/

² Cleary, E. G., et al. “Contribution of NIH Funding to New Drug Approvals 2010–2016.” Proceedings of the National Academy of Sciences, vol. 115, no. 10, 2018, pp. 2329–2334.

³ Brown, Brendan. “How the U.S. Government Funded the COVID-19 Vaccine Race.” Brookings Institution, February 2021. https://www.brookings.edu

⁴ U.S. Congressional Oversight Panel. Final Report of the Congressional Oversight Panel, March 16, 2011. https://www.govinfo.gov

The Political Economy of Tax Injustice

Tax codes are often presented as complex but neutral instruments—technical documents engineered to raise revenue and stimulate growth. In reality, they are deeply political artifacts, shaped by lobbying, campaign contributions, and the revolving door between government and industry. The asymmetries in tax burdens are not accidental outcomes of economic forces but the result of deliberate political engineering. In short, the tax system is not broken; it has been captured and reprogrammed to serve wealth.

The mechanism of this capture is well known: corporate lobbying, in concert with high-dollar campaign financing, ensures that tax legislation reflects the interests of those most able to influence it. In 2022 alone, the financial services and insurance sector spent over $600 million on lobbying efforts in the United States—more than any other industry¹. These expenditures are not random acts of advocacy; they are strategic investments with high returns. Studies have shown that for every dollar spent on lobbying, corporations can reap hundreds in tax savings and favorable regulations².

Meanwhile, the public interest is underrepresented. The average taxpayer, no matter how well-informed, lacks the legal and institutional access to shape legislation. Even lawmakers themselves are often dependent on industry experts and lobbyists to draft tax provisions. The 2017 Tax Cuts and Jobs Act (TCJA), for example, was pushed through with minimal debate and contained dozens of carve-outs and loopholes that favored multinational corporations and high-income households³. The public justification was “job creation,” but the design reflected deep alignment with elite interests.

Behind these policies lies a subtler form of control: the revolving door. High-level staffers at the Treasury Department, IRS, and congressional tax committees frequently leave public service for lucrative careers in private accounting firms, lobbying outfits, and tax consultancy. These firms, in turn, hire former officials specifically for their knowledge of loopholes, enforcement thresholds, and legislative processes. The result is a class of fiscal technicians who migrate between enforcement and evasion—not to enforce the tax code, but to circumvent it⁴.

Internationally, efforts to reform this dynamic have produced mixed results. The OECD’s attempt to implement a global minimum corporate tax rate of 15 percent has been heralded as a milestone but contains numerous exemptions and enforcement challenges⁵. As with domestic reform, the rules are often structured to appear progressive while preserving strategic flexibility for those with sophisticated legal counsel. The result is a system of performative justice—tax fairness in rhetoric, inequality in fact.

At the heart of this economy lies not just wealth, but power: the power to shape rules, to delay reforms, and to shift burdens downward. Those who can afford to influence policy do so not only to reduce their own taxes but to ensure that the public remains distracted by austerity narratives, culture wars, and the myth of personal responsibility.

Notes

¹ OpenSecrets.org. “Top Industries: Lobbying, 2022.” Center for Responsive Politics. https://www.opensecrets.org/federal-lobbying/industries

² Drutman, Lee. “The Business of America is Lobbying.” Oxford University Press, 2015, pp. 113–120.

³ Tax Policy Center. “Distributional Analysis of the Tax Cuts and Jobs Act.” Urban Institute & Brookings Institution, December 2017. https://www.taxpolicycenter.org

⁴ Gensler, Gary. “Testimony Before the House Committee on Financial Services.” U.S. House of Representatives, June 5, 2022. https://financialservices.house.gov

⁵ OECD. International Agreement on Base Erosion and Profit Shifting (BEPS) – Pillar Two Model Rules. OECD Publishing, 2022. https://www.oecd.org/tax/beps/

Class Collapse and the New Financial Feudalism

The cumulative effect of regressive taxation, elite capture of financial systems, and the privatization of public goods is not merely growing inequality—it is the erosion of the middle class and the consolidation of a new financial aristocracy. The promise of upward mobility, once central to the postwar liberal order, is now largely mythical for the majority of wage earners. In its place has emerged a stratified system that increasingly resembles a form of digital-age feudalism, in which wealth is inherited, mobility is stifled, and power is extracted rather than earned.

At the structural level, this collapse is measurable. In the United States, the share of total national wealth held by the middle 60 percent of households has declined from 36 percent in 1989 to just 27 percent in 2022¹. Meanwhile, the top 1 percent has increased its share from 23 percent to over 32 percent. This divergence is not a cyclical fluctuation—it is a trendline of class stratification that parallels the dismantling of progressive taxation, the decline in union power, and the financialization of everything from housing to education.

This class collapse is especially visible in generational data. Millennials and Gen Z are, on average, wealthier than previous generations in nominal terms, but their real purchasing power, asset ownership, and economic security are substantially lower. Housing, higher education, and healthcare—once gateways to middle-class stability—are now debt traps². The professions that once guaranteed stable incomes and upward mobility—teaching, nursing, public service, the trades—no longer offer such guarantees. For millions, the only way to "get ahead" is to gamble in financial markets, start speculative businesses, or marry into wealth.

In contrast, the ultra-wealthy now function as a hereditary overclass. Dynastic fortunes are not only preserved through trusts and tax arbitrage—they are amplified through exclusive access to high-yield private markets, early-stage venture capital, and institutional-grade real estate. These opportunities are inaccessible to ordinary investors, no matter their intelligence or work ethic. The IRS reports that nearly half of all estates over $10 million include “family limited partnerships,” a favored structure for intergenerational wealth preservation and tax minimization³.

What emerges from this architecture is not classical capitalism, but something more extractive and inert: a neo-feudal order in which wealth functions like land in the medieval economy—locked in estates, generating passive income, and immune from redistribution. As economist Yanis Varoufakis has observed, capitalism’s transformation into technofeudalism is marked by control over platforms rather than production, and the commodification of behavioral data rather than labor⁴. In this environment, traditional class struggle gives way to access struggle—who can enter the financial caste, and who is permanently excluded.

The moral and political consequences of this shift are profound. As the middle class dissolves, so too does the legitimacy of democratic institutions built upon it. The citizen becomes a debtor, the worker a contractor, the home a speculative asset, and the future a liability. In such a world, taxation ceases to be an instrument of social contract and becomes, instead, a mechanism for managing the dispossessed.

Notes

¹ Federal Reserve Board. Distributional Financial Accounts, Q4 2022. https://www.federalreserve.gov

² Pew Research Center. “Millennials Overlooked? How the Youngest Generations are Struggling with Wealth.” March 2023. https://www.pewresearch.org

³ Internal Revenue Service. “Estate Tax Statistics, Filing Year 2021.” Department of the Treasury. https://www.irs.gov/statistics/soi-tax-stats-estate-tax-statistics-filing-year-data

⁴ Varoufakis, Yanis. Technofeudalism: What Killed Capitalism. The Bodley Head, 2023, pp. 45–61.

A System That Consumes Its Backbone and Mortgages Its Future

A tax system reflects a society’s priorities. In the postwar decades, that system was designed—however imperfectly—to support an expanding middle class, fund infrastructure and education, and stabilize the economy through progressive redistribution. Today, that system has been inverted. The working majority funds a government whose principal function is not public welfare, but the preservation of capital. The tax burden falls heaviest not on the speculative elite, but on those whose incomes are visible, whose compliance is enforced, and whose mobility is structurally curtailed.

The consequences of this inversion are not abstract. As inequality has surged and tax obligations have become increasingly regressive in practice, the federal debt has ballooned to over $34 trillion. That figure is not merely symbolic. It comes with a staggering cost: the United States now spends more than $870 billion per year in interest alone, a figure expected to exceed defense spending by 2025¹. Interest payments on the debt are projected to consume more than $10 trillion over the next decade, without reducing the principal by a cent².

For the average American household, this means an annual contribution of $3,000 or more just to service the interest on this debt—a debt they did not authorize, from which they reaped little benefit, and whose greatest beneficiaries have since offshored their wealth or shielded it through legal architecture. The largest contributors to the debt—corporate bailouts, tax cuts for the wealthy, foreign wars, and financial deregulation—were enacted without public oversight, often without public consent. These policies enriched the few while imposing fiscal obligations on the many.

This is the final absurdity: wealth does not fund the state; labor does. Capital is not taxed to maintain public goods; labor is taxed to sustain capital. Even the deficits incurred to shield the wealthy from taxation become future claims on the working class.

The system is thus consuming its own foundation—its middle class, its productive base, and its public trust—while securing ever more favorable terms for unproductive capital. It is not merely unjust; it is unsustainable. A society cannot endure when its obligations are socialized and its privileges privatized, when its rewards flow upward while its risks and costs are pushed downward.

In such a structure, taxation ceases to be a tool of social contract and becomes a mechanism of discipline—a demand made not in exchange for representation, but in service of wealth that neither needs nor recognizes the citizenry that sustains it. And when that structure becomes permanent, we are no longer living in a democracy of economic equals, but in a managed decline overseen by a rentier aristocracy.

The poor pay. The middle class pays. Even the affluent, if they lack access to elite vehicles of protection, pay. But those who command the financial system itself—the architects of opacity, the custodians of dynastic capital—they are no longer participants in the tax system. They are its beneficiaries.

Notes

¹ Congressional Budget Office. The Budget and Economic Outlook: 2024 to 2034. U.S. Government Publishing Office, February 2024, pp. 24–27. https://www.cbo.gov/publication/59945

² Committee for a Responsible Federal Budget. “Interest Costs on the National Debt Are Skyrocketing.” October 2023. https://www.crfb.org

om tat sat