Abolish Estate Tax to Create Fairer Income-Based System for Taxing Billionaires
Source: Ray D. Madoff. "How to Tax Billionaires - The Atlantic." April 13, 2026. www.theatlantic.com
The Gist
The author argues we should scrap the estate tax (which barely raises money anyway) and instead tax all wealth transfers - inheritances, gifts, and investment gains - as regular income. This would be simpler and actually make billionaires pay taxes instead of letting them use complex loopholes to avoid them.
Conclusion
To effectively tax billionaires, we should abolish the estate tax and bring all wealth transfers (inheritances, gifts, investment gains) into the income tax system
Premises
- The current estate tax raises minimal revenue (less than 0.5% of federal revenue) while creating the illusion that the rich pay more taxes than they actually do
- Billionaires use a three-step playbook to avoid taxes: taking minimal salaries, deferring capital gains taxes indefinitely, and receiving wealth through inheritance which isn't subject to income tax
- The 1982 SEC rule change allowing stock buybacks made taxes on corporate profits optional by enabling tax-free stock appreciation instead of taxable dividends
- The estate tax has been functionally eliminated through loopholes and lobbying, despite remaining on the books
- A Canadian-style system that taxes property transfers (including gifts and inheritance) as income has proven workable
- Bringing inheritances and gifts into the income tax system would be simpler to administer and harder to avoid than wealth taxes or trying to restore the estate tax
Assumptions
- The primary goal should be ensuring billionaires pay taxes proportional to their wealth acquisition
- Income tax systems are more effective and harder to circumvent than estate or wealth taxes
- Public opposition to the estate tax ('death tax') is insurmountable
- Taxing recipients of wealth transfers is more practical than taxing the transferor's estate
- The current system's complexity enables avoidance that a simpler system would prevent