Professor Ray Madoff is a leading scholar in philanthropy policy, taxation, property, and estate planning at Boston College Law School, where she also directs the Forum on Philanthropy and the Public Good, a non-partisan think tank dedicated to examining whether charitable sector rules truly serve the public interest. The author of Immortality and the Law: The Rising Power of the American Dead and lead author of Practical Guide to Estate Planning, Madoff is a nationally recognized commentator on estate law, philanthropy, and wealth inequality, with contributions in major outlets such as the New York Times, Washington Post, and Wall Street Journal. Her work has earned her recognition among the NonProfit Times “Power & Influence Top 50” and Mass Lawyers Weekly’s “Top Women of the Law.”
Professor Madoff’s forthcoming book, The Second Estate: How the Tax Code Made an American Aristocracy, will be released later this month as the lead title of the University of Chicago Press Fall catalog. This Q&A explores the ideas and arguments behind her new book.
Q: The title of your book, The Second Estate, draws a historical parallel between today’s American wealthy elite and the aristocracy of pre-Revolutionary France. What drew you to that framing, and how does it help readers understand the stakes of today’s tax system?
Madoff: The existence of these two different systems—one for people who earn money, one for people who own wealth—bears remarkable resemblance to the tax system of prerevolutionary France, in which the aristocracy was written out of the tax system, leaving the burdens of the country’s expenses to everyone else. As the French economist Pierre-Samuel du Pont de Nemours (who later fled to America with his two sons, one of whom founded DuPont chemical company) said to the French National Assembly:
“In order to become noble, it is sufficient to become rich; and to cease to pay taxes, it is sufficient to become noble. So, there is only one way of escaping taxation, and that is to make a fortune.” (Charles Adams, For Good and Evil: The Impact of Taxes on the Course of Civilization, 2nd ed. (Madison Books, 1999), 222.
That description captures perfectly what is happening in the United States today. The country isn’t largely aware of it, because our system looks highly progressive and we keep hearing how progressive it is. But in truth, it very much resembles the system of prerevolutionary France: For those who have acquired wealth, taxes are no longer a concern.
Q: You’ve previously written extensively about philanthropy and tax policy. How does this book build on or depart from your earlier work?
Madoff: This book really builds upon my prior work in philanthropy in a number of ways. When we talk about the role of the wealthy in the tax system, philanthropy plays a big role because many of our wealthiest citizens donate to charity, especially after the Giving Pledge.
What people don’t realize, however, is how differently the tax code treats wealthy donors compared to working Americans. When ordinary Americans give, their deductions are capped. For example, someone earning $100,000 cannot eliminate their entire tax liability by giving all of it away. Their tax benefit is much smaller because we believe that while charitable giving is good, so is supporting the cost of government.
But when the wealthiest Americans give, they get far more tax benefits. Their giving often takes the form of appreciated assets, which means they can avoid capital gains, estate, and gift taxes entirely. These benefits can save them as much as 60 percent of the value of their transfers.
On top of that, most of their charitable giving doesn’t go directly to operating charities. Instead, it goes into private foundations or donor-advised funds—organizations they control. And under current law, these entities face little or no obligation to ever distribute that money for the public good. Technically, private foundations have a 5 percent payout rule, but they can satisfy that requirement simply by giving to donor-advised funds, which have no payout rule at all. So, in practice, there may be no obligation to spend the money.
Meanwhile, the vast majority of Americans receive no tax benefit at all for their charitable giving. That’s the striking contrast: Wealthy donors get unlimited deductions and enormous benefits, while ordinary Americans are capped or excluded altogether.
Q: You argue that the US tax system has evolved from countering inequality to driving it. Can you walk us through how that shift happened?
Madoff: The federal income tax was enacted in 1913, and the estate tax followed in 1916. Those two taxes—progressive income taxes and the estate tax—are the same ones we have today. And for the first 60 or 70 years, they worked reasonably well. Income taxes were imposed at progressive rates, and the estate tax served as a backstop to the income tax system.
What changed, beginning in the early 1980s, is that investments and inheritances were largely written out of the tax system. And that’s precisely the type of wealth the richest Americans hold.
Take investments. Prior to 1982, if someone owned a lot of stock, they paid a lot of taxes. That’s because the only way a company could share profits with shareholders was by distributing dividends, which were taxed at the same rates as wages. So, if you had a large stock portfolio, you had a large tax bill.
But in 1982, the SEC made a rule change that allowed companies, for the first time, to buy back their own stock. Until then, buybacks had been prohibited as a form of market manipulation. Once allowed, they transformed how companies distributed profits. Instead of paying dividends, companies could simply buy back their own shares, pushing up stock prices.
The effect was profound. Before 1982, the stock market looked like a sine curve: It went up and down, always returning to a middle point. But starting in 1982, the trajectory changed. Even though the market still rose and fell, it now moved sharply upward—like a hockey stick. From a tax perspective, this meant that instead of receiving taxable dividends, shareholders saw their wealth grow through untaxed capital gains. And because we don’t tax gains until assets are sold—and wealthy people rarely need to sell, since they can borrow against their holdings to fund their lifestyles—those gains effectively escape taxation.
As for inheritances: They’ve always been excluded from the income tax system, on the assumption they would be captured by the estate tax. But beginning in the 1990s, 18 of the wealthiest families in America funded a campaign to delegitimize the estate tax. They were so effective that since 1990, Congress—Democrats and Republicans alike—has done nothing to close the loopholes.
The result is that the estate tax now exists largely in form only. It raises almost no money. To give you a sense of the scale: By the end of 2024, the richest 1 percent owned $50 trillion. Yet the estate and gift tax raised only about $30 billion in that year. It makes no dent at all, even though the tax is supposed to apply to all transfers of wealth, whether during life or at death. These transfers are happening, but they are entirely evading the tax system.
Q: On a similar note, your book emphasizes how wealth can effectively remove itself from the tax system altogether. How does that impact ordinary taxpayers, both in terms of fairness and government revenue?
Madoff: It affects things in two important ways. First, people often say there’s no point in taxing the rich because it wouldn’t make a difference—we have to raise money from the middle class. The claim is that the wealthy simply don’t have enough money to matter. But if you look at the numbers, you can see how peculiar that is.
In 2024, the United States spent a total of $6.8 trillion. From all sources—corporate taxes, individual income taxes, payroll taxes, excise taxes—the government raised about $5 trillion. That left a deficit of $1.8 trillion.
Now compare that to the wealth of the top 1 percent. At the end of 2024, they held $50 trillion. Clearly, it matters whether this group pays taxes. Our system assumes they do, but because it’s so easy to avoid taxes on investments and inheritances, there’s no reason to think they actually are. We have no evidence they are paying. And when ProPublica released its analysis of leaked tax returns of the wealthiest Americans, what we saw confirmed this: Many of the richest Americans had essentially no tax liability.
So, the first impact is on government revenue—if the richest don’t pay, we run deficits. The second impact is on fairness. Ordinary taxpayers, especially working Americans, are carrying a heavy burden. A gig worker earning $60,000 a year will pay over $13,000 in income and payroll taxes. That can be the difference between fixing a car, paying rent, or putting food on the table. These are life-altering amounts of money for people at that income level. Meanwhile, those with vast wealth can legally avoid taxes altogether.
Q: One of the striking points in the book is that the system does not necessarily rely on secret offshore havens. Instead, the US tax code itself provides pathways for the wealthy to avoid taxation. What are some of the more hidden and in-plain-sight mechanisms you found most surprising or troubling?
Madoff: Probably the most important point is that at the same time we’re giving a free pass to the richest Americans, we’re imposing really significant burdens on working Americans.
Take payroll taxes. As mentioned earlier, a gig worker earning $60,000 a year will pay more than $13,000 in income and payroll taxes. For someone living on $60,000, that $13,000 can be the difference between repairing a car, paying rent, or feeding a family. These are very heavy burdens for people earning modest incomes.
And yet, the public often doesn’t realize it. We hear statistics like “the top 1 percent pay 40 percent of income taxes” or “40 percent of Americans pay no income tax.” These numbers are used to create the impression that the rich are paying everything, while a large portion of Americans are freeloading. But those statistics are highly misleading.
When people cite the 40 percent figure, they’re talking about the top 1 percent of income earners. But many of the top 1 percent of wealth holders, those who live off investments and inheritances, pay no income tax at all. Meanwhile, low-income Americans who “pay no income tax” still pay significant payroll taxes. For the self-employed, those payroll taxes can be as high as 15.3 percent—essentially a flat tax starting at dollar one.
Payroll taxes are also hidden from public view. We call them “contributions,” as though they aren’t taxes. But they are the second-largest source of federal revenue, raising more than 30 percent of all funds. They pay for the country’s biggest expense, yet they’re treated as something other than taxes. At the same time, the wealthiest Americans, whose gains, as I’ve said, come from investments and inheritances, are able to avoid taxation altogether.
That double standard—burdens on workers, freedom for wealth—is one of the most troubling aspects of our system.
Q: Your book has been praised for making the US tax code a page-turner. How did you approach writing about such a complex, technical system in a way that’s accessible to general readers?
Madoff: First of all, I had a fantastic editor who insisted that I work to win the reader on every page. So, I really tried to do that.
The main way I approached it was through stories. Stories are the easiest way for people to understand complex issues, and thankfully there are so many fascinating stories about how our tax system has transformed over time. The book is as much about history as it is about tax.
I write about things like Coxey’s Army and its role in Social Security, and the origins of the Giving Pledge and how it came about. The book is full of stories, and even some jokes, that bring the material to life. My goal was to make the subject not only understandable, but engaging.
Q: Beyond diagnosing the problem, your book outlines how we got here and what can be done. What reforms do you think are most achievable in today’s political climate?
Madoff: The first thing—which may be surprising coming from someone who teaches this subject—is that I think we should repeal the estate tax. The estate tax has been so thoroughly delegitimized and so completely abandoned by Congress that it no longer raises meaningful revenue. It brings in less than one-half of one percent of total federal revenue.
Instead of being a burden on the wealthy, it now functions as a cover, allowing the rich to pretend they are paying higher taxes than they really are. Retaining it serves little purpose.
What we should do instead is reform the income tax system to bring investment gains and inheritances back into it—the system that all of us work under and that Congress actually maintains. Everyone should be part of the same system. Gains should be taxed at death, and inheritances should be taxed to the person who receives them.
That would make the tax system fairer, more effective, and much harder for wealth to escape.
Q: And if you could design one immediate change to rebalance the system and reduce inequality, what would it be?
Madoff: It would probably be to repeal the estate tax and replace it with an inheritance tax. Inheritances should be taxed in the hands of the person who receives them, just as we treat other forms of income.
Q: At BC Law, you teach courses like Trusts and Estates and “Taxing the Rich.” How has your teaching intersected with the themes of this book?
Madoff: Over my 32 years at BC, I’ve taught courses in trusts and estates, estate and gift tax, estate planning, and now “Taxing the Rich.” One of the interesting ironies is that I spend a lot of time teaching students how the wealthy avoid taxes—and how to do it. At the same time, we also spend a lot of time discussing questions of justice and fairness.
That’s what makes teaching tax so compelling for me. Taxes are unbelievably important in society. They shape how people live, because they can impose very heavy burdens, and they create the glide path that allows wealth to concentrate at the very top. In many ways, tax is as important an issue as any in terms of structuring our society.
But people are naturally intimidated by the subject. The code is long and dense, the pages are thin like onion skin, and the sentences are hard to parse. It can seem overwhelming. What I love about teaching tax is showing students that if you take a little time—and have a guide—you can understand it. You can see what is happening with your own eyes. That moment of clarity is very exciting, and it’s why I feel so grateful to have built my career teaching this subject.
Q: You also co-founded the Boston College Law School Initiative on Philanthropy and the Public Good. How has that work influenced, or even inspired, this book?
Madoff: A big part of this book is about the role of philanthropy and how our current rules are not really working for the public good as they should. The charitable sector is tremendously important in American society, it does so much vital work, but it needs to be supported by tax rules that actually get money to operating charities.
Right now, the rules on the books can too easily be avoided through mechanisms like private foundations and donor-advised funds. My work with the Initiative on Philanthropy and the Public Good really shaped the way I think about these issues and deeply informed the arguments in the book.
Q: How does being part of the BC Law community help ground and support your scholarship?
Madoff: BC is an extraordinary institution. I won’t say it’s the greatest in the world, because I don’t know them all, but it has been an amazing place to build a career. It’s a community where both faculty and students are encouraged to find their best selves, and I think that comes very much from the Jesuit tradition.
As a faculty member, I’ve always felt supported in pursuing the directions my scholarship has taken me. And the students here are remarkable—so smart, thoughtful, and engaged. Whenever I talk with them about these ideas, they become energized, sometimes enraged, but always deeply engaged. That dynamic builds on itself and keeps my work vital.
Even beyond the classroom, the culture at BC Law is unique. Everyone contributes: the faculty, the staff, even the people in the cafeteria. They are kind, supportive, and encouraging. I actually thank one of them in my book because their generosity of spirit is part of what makes this community so special. BC really is a place that cultivates people to develop in ways that allow them to go out and serve the world, and I feel so grateful to be a part of it.
Q: In closing, what do you hope your audience—whether lawyers, policymakers, or concerned citizens—takes away from your book?
Madoff: The most important thing I want people to take away is that taxes are not too hard for them. This is not a subject they should leave to others to figure out. People have strong views about issues like gun rights and abortion rights, and those are very important. But taxes are just as fundamentally important.
I want readers to see that taxes are understandable. You just need to take a little time and not listen to those who say, “Don’t bother.” And I also want them to see that the system is not beyond fixing. We don’t need to design entirely new taxes or invent wealth taxes. A few reforms to the income tax system could create a much fairer, more functional structure. These are completely doable changes.
Photograph by Caitlin Cunningham