Jesse Eisinger
Appearances
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Why is it so hard to tax billionaires? (Part 1)
This is not written in the Hammurabi Code. You know, this was not handed down on Mount Sinai. These are just policy decisions that generations relatively recently made with some expertise and other blind spots. One of the struggles was to understand how income tax got to be the way it is in this country. And it's still a process. We're still learning about it.
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Why is it so hard to tax billionaires? (Part 1)
I'm like, you know, among the seven people in the world who find it fascinating. and then tried to figure out why is this private? Why is it a secret? It turns out that's a policy decision and that originally in the Civil War, it wasn't secret, it was public. In the 1920s, it was public.
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Why is it so hard to tax billionaires? (Part 1)
So at each step of the way, we were realizing, oh, there are these decisions, it's all contingent, there's a lot of accidents, and we got to a system that actually is totally wrong for the current economy.
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Why is it so hard to tax billionaires? (Part 1)
So the first income tax was passed in the Civil War. And the way the government had raised money before that and then after that for a long time was through tariffs and levies, you know, fees on tobacco and alcohol largely. And that was a regressive system.
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Why is it so hard to tax billionaires? (Part 1)
Right. Right. So it's a higher percentage of your overall income or wealth if you're a working person than if you're really wealthy.
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Why is it so hard to tax billionaires? (Part 1)
That's the central argument. Okay. That is at the heart of it, that the wealthy are not paying their fair share, that they think they're exempt from taxes.
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Why is it so hard to tax billionaires? (Part 1)
There are blockades and trade is really curtailed. The economy slows down. So everything kind of comes to a halt and we need to fund it somehow. So we passed this income tax and the express purpose of it was so that the wealthy were going to contribute to the war effort. because this was a class war and you could buy your way out of your position in the army.
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Why is it so hard to tax billionaires? (Part 1)
You could buy your way out of the draft. And so there were accusations that only working men were dying. And so Lincoln said, we're going to have the wealthy contribute to this and it's going to be public so that people can see how much they're contributing to the effort. And of course, they hated it. They hated it then.
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Why is it so hard to tax billionaires? (Part 1)
I think they hated it for, yeah, very similar reasons. They hated paying anything, and they hated being exposed.
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Why is it so hard to tax billionaires? (Part 1)
So what happens is the country is being run in the aftermath of the Civil War by Republicans, you know, famously. This is like the party of Lincoln Republicans.
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Why is it so hard to tax billionaires? (Part 1)
Well, they're the party of Lincoln's Republicans, but they're morphing into the party of George H.W. Bush's Republicans. So over that course of the second half of the 19th century, it becomes a party dominated by Northeastern wealthy interests, wealthy Republicans. The whole country is being run by those interests.
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Why is it so hard to tax billionaires? (Part 1)
It's an incredible story. It's an incredible accomplishment. I think it's the single greatest victory of average Americans against the wealthy class in American history to get an income tax. And as I say, it's a complete accident.
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Why is it so hard to tax billionaires? (Part 1)
So what happens over the next decade after the Supreme Court has rejected the income tax is there are huge debates about how they could possibly bring this back and resuscitate it. And my hero of this story is this guy Cordell Hull, who's a young Tennessee congressman. And he's the kind of single-minded, obsessive about the income tax. He's a Democrat from the Hill Country in Tennessee.
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Why is it so hard to tax billionaires? (Part 1)
And he talks in his memoir about how members of the Democratic Party, his own colleagues, run away from him in Congress because they're so bored. of him, like, cornering them and talking about the income tax all the time. And so this is his obsession. And it was the Gilded Age where we're seeing fortunes that only have been matched by today's figures.
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Why is it so hard to tax billionaires? (Part 1)
And he's constantly giving speeches on the floor about how the wealthy, you know, how the Rockefellers at the time don't pay their fair share and feel like they're exempt from taxes.
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Why is it so hard to tax billionaires? (Part 1)
So they pass a corporate income tax for the first time. And there's essentially no debate about it. And they pass it to try to cut the knees off of the movement for the income tax. And so it's like he has to do something, but he wants to do as little as possible. Exactly. And he's trying. So what he they passed the corporate income tax, which is a huge victory for taxation in America.
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Why is it so hard to tax billionaires? (Part 1)
And then what happens is that doesn't succeed in cutting off the momentum for the income tax.
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Why is it so hard to tax billionaires? (Part 1)
And so they embrace it as a legislative gambit, and Hull, who has been the great champion of the income tax, is against it because he knows that it's going to be the death knell for the income tax and his dream and his obsession. They pass the income tax amendment, and they pass the tariff bill, and then the Republicans have wildly miscalculated it.
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Why is it so hard to tax billionaires? (Part 1)
Sure. Jesse Isinger, and I'm a senior editor and reporter at ProPublica.
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Why is it so hard to tax billionaires? (Part 1)
and it goes through the states and passes, and then we get the 16th Amendment.
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Why is it so hard to tax billionaires? (Part 1)
Because we are in a moment where our politics are totally calcified, where we have horrific wealth inequality, where our democracy is fragile, where people feel like they have no voice or ability to change anything. And so I have been obsessed with this period of time that looks very similar to our current period, but was a time of extraordinary reform.
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Why is it so hard to tax billionaires? (Part 1)
And I'm trying to understand why they were able to change things, and we can't.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, I'm in like the 99.5 percentile of people who think about rich people and taxes. Yes. Yeah. How did that happen to you? You know, just growing up angry. I wake up angry in the morning every day. I've always gravitated... It was all... It was a complete accident that I got into both journalism and then especially business and financial journalism. And then by happenstance, I gravitated to...
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Why is it so hard to tax billionaires? (Part 1)
con men and liars and charlatans. I went from, you know, incredibly complicated stuff like accounting fraud and day sales outstanding and accounts receivable to structured finance and collateralized debt obligations and all that stuff. But I was always very daunted about taxes because I thought that was actually the really complicated stuff that I could never understand. And?
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Why is it so hard to tax billionaires? (Part 1)
And then it fell into my lap through serendipity.
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Why is it so hard to tax billionaires? (Part 1)
I consider it the most boring investigative series ever written. And what made it so boring? It's about a bureaucracy that's not doing anything. And it's about the tax bureaucracy that's not doing anything. So you're layering taxes on nothing.
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Why is it so hard to tax billionaires? (Part 1)
Right. So what's happened is we've had the Great Depression, we've had World War II. Those were extraordinarily leveling events for the American economy. And in the 50s and 60s, the way a CEO is paid and wealthy people, by and large, are paid, they're paid salaries. So the giant corporations of the time are companies like GM, and executives aren't being paid.
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Why is it so hard to tax billionaires? (Part 1)
In stock, they're being paid salaries, and those salaries are taxed.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, exactly. But then there's a revolution that starts in the 70s that rewires American capitalism.
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Why is it so hard to tax billionaires? (Part 1)
And so you have this kind of explosive ability to make money because a stock option is worth nothing unless the stock goes way up. And then you get huge amounts. So you have this giant upside for these stocks. And we also have a technology revolution. So people are founding companies in their proverbial garages, and they own big chunks of it.
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Why is it so hard to tax billionaires? (Part 1)
And these are very profitable companies because they're doing things like software, so you don't have to spend a lot of money to make the incremental floppy disk. And so you see somebody like Larry Ellison at Oracle or Steve Ballmer and Bill Gates at Microsoft
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Why is it so hard to tax billionaires? (Part 1)
Exactly. Exactly. But I was very proud of it. We really got into the IRS and it was very important. We penetrated a wealthy person's tax audit to explain why it was so difficult to audit the wealthy.
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Why is it so hard to tax billionaires? (Part 1)
concentrated ownership of companies that have huge margins and their stocks explode and we get a new kind of wealth that turns out largely to be untaxed.
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Why is it so hard to tax billionaires? (Part 1)
We wrote about, in the end, pretty outrageous things like Paul figured out that you were more likely to be audited if you were a member of the working poor, if you were making $20,000 or $30,000 a year than if you were making $500,000 a year. And why was that the case?
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Why is it so hard to tax billionaires? (Part 1)
The shorthand way to think about it is that over a decade, Republicans, mainly with the kind of passive acceptance of Democrats, gutted the IRS to the point where the tax collection system of the United States was... almost completely incapacitated. So we had no ability to either oversee or audit or police the wealthy and corporations when they were trying to avoid or evade taxes.
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Why is it so hard to tax billionaires? (Part 1)
And we wrote that series of stories. It was read by a few important people in Washington and then one person who was really stirred to act, and they gave us all the taxes of the wealthy.
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Why is it so hard to tax billionaires? (Part 1)
A signal message pops up and asks if this is Jesse Isinger from ProPublica, and the person says they want to give me something. And, you know, I always answer those things.
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Why is it so hard to tax billionaires? (Part 1)
I get it a lot. And 90% of it is that when I walk down the street, I'm being monitored by the FBI. Oh, people who are just like not well. Yeah. Yeah. So most people are unwell. And then... Nine out of 10 who are not on Whale have something that is of some importance in a local or modest setting, but doesn't rise to the level of a ProPublica project or of national importance.
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Why is it so hard to tax billionaires? (Part 1)
But I'll get two, three tips like that a week. What was the first sign with this message that this was actually substantial? It took a while. So the person said that they wanted to send me something. And I said, sure, hoping it wasn't going to be anthrax. And then an envelope arrived, which is always kind of exciting. That doesn't happen very frequently. Again, it's never happened to me.
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Why is it so hard to tax billionaires? (Part 1)
I feel jealous. And I put the envelope aside and forgot about it. And then a couple of months later, a few months later, the Signal message pops up again, and there's a lot of cloak and dagger stuff about how the plan is going to be activated now.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, like, I'm going forward. I've decided to go forward. I'm now ready to move to phase two or something, you know, something like that. And are you kind of thinking, like... Oh, I'm thinking cranked.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, yeah, yeah. But, you know, I... In addition to being angry, I'm sort of hopelessly optimistic, you know? And so I'll always think, like, there's a possibility that, you know? But the first problem was that I had no idea where the goddamn envelope was. So I spent hours and hours going there.
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Why is it so hard to tax billionaires? (Part 1)
You know, I don't know if you've never been to my apartment, but that's not an enjoyable thing to try to sift through the mountains of paper desperately looking for this thing. I did find it, you know, deep within the bowels of our filing system, quote-unquote, and then got the password to this encrypted thumb drive, and I was looking at...
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Why is it so hard to tax billionaires? (Part 1)
Clearly something that smelled like something that come from the IRS. And what made it that way? Like, what did it... You know, it had jargon. It had fields and fields of numbers out to the single digits. Things that wouldn't be... You always think... The great fear is something that's fraudulent that you're going to be tricked into.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, you know, James O'Keefe is trying to trick you into publishing something that would be catastrophically embarrassing. Yeah. But this just had verisimilitude to it.
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Why is it so hard to tax billionaires? (Part 1)
Well, that took months and months and months. But at that point, I sort of, I called up Paul and I said, this is either the biggest hoax of your career or the best day of your career.
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Why is it so hard to tax billionaires? (Part 1)
We were looking at something that no one had ever seen before. Something that had been one of the most guarded secrets in all of the federal government. And we were privy to this extraordinary secret. And when you say that this is one of the most guarded secrets, like, how guarded was it? Well, you can go to prison for leaking any amount of private tax information.
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Why is it so hard to tax billionaires? (Part 1)
So it was clearly a violation of the law just to leak one person's tax information. This was thousands of people. So you were like seeing how much they make in a given year. You're seeing what kind of deductions they had. You could see their gambling winnings. You could see their stock sales. I mean, it was an entree into a completely different world.
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Why is it so hard to tax billionaires? (Part 1)
Yeah, yeah. Every person you can think of, the Waltons, was like, oh yeah, there are a lot of Waltons here. All the top hedge fund managers that you could think of. George Soros was in there. And you would be hard-pressed to name a billionaire who we don't have.
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Why is it so hard to tax billionaires? (Part 1)
Yeah. Well, good. I was worried for a moment that we were going to be too hard on them. I just don't want to get all those emails from Jeff Bezos. Yeah. I... Well, first of all, I have been one of the people who's been naked at ProPublica because I've been lucky enough, fortunate enough to be in the 990 where they disclose some of the top salaried people.
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Why is it so hard to tax billionaires? (Part 1)
And I'm sure that in my unproductive years, many people at ProPublica have felt that. resentful toward me. Maybe they feel resentful toward me in any year. But, you know, in fact, I go on. I'm able to work hard and work with colleagues. So you get over it and people aren't very conscious of it. Anyway, I think billionaires are special or let's say the ultra wealthy are special because they are
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Why is it so hard to tax billionaires? (Part 1)
are often quasi-public figures. I think it essentially makes you a public figure once you reach a certain threshold of wealth, especially because of the power and influence that the wealth accords you. They donate to major institutions and fund political campaigns. And I think in turn, they should sacrifice a little bit of their privacy.