Project 2025, the Heritage Foundation’s blueprint for a second Donald Trump presidency—you know, that document he knows nothing about even though 140 people from his first administration, including six former Cabinet members, helped create it—is full of delightful little Easter eggs. One provision that has attracted almost no public notice, perhaps because it seems so reasonable, is the authors’ call for the government to create “universal savings accounts” (USAs).

Heck, it even has a patriotic name!

All taxpayers should be allowed to contribute up to $15,000 (adjusted for inflation) of post-tax earnings into Universal Savings Accounts (USAs). The tax treatment of these accounts would be comparable to Roth IRAs. USAs should be highly flexible to allow Americans to save and invest as they see fit, including, for example, investments in a closely held business. Gains from investments in USAs would be non-taxable and could be withdrawn at any
time for any purpose. This would allow the vast majority of American families to save and invest without facing a punitive double layer of taxation.

But let’s think about this. Over the past few decades, Congress passed a series of bills to help Americans save for old age privately via government-subsidized pensions, 401(k)-type plans, and individual retirement accounts—of which Roth IRAs are one type. These tax breaks and program expansions have all been bipartisan, and all have passed with flying colors, because they sound pretty good—much like these universal savings accounts—until you examine them more closely.

And then you have to ask: Good for whom?

Taken collectively, the various retirement subsidies are mind-bogglingly expensive. They are, in fact, the federal government’s single largest tax expenditure, projected to deprive the Treasury of almost $2.5 trillion over five years (2023–2027), according to the bipartisan Joint Committee on Taxation (JCT)—mostly, as I’ve written, to the wildly disproportionate benefit of our most affluent.

In the most extreme case reported thus far (by ProPublica), the Silicon Valley entrepreneur and political puppet-master Peter Thiel used a $1,700 contribution to his Roth IRA—Roths are intended for middle-class savers—decades ago to purchase 1.7 million “founder’s shares” of PayPal at one-tenth of a cent each. Because of that, by 2002, the year eBay purchased PayPal, ProPublica reported, the balance in Thiel’s Roth was up to $28.5 million, with all of those gains nontaxable. He then repeated this cycle with other fledgling companies, culminating in a Roth IRA containing north of $5 billion in assets.

Thiel was an outlier, but ProPublica identified others with IRAs worth tens or hundreds of millions of dollars. Indeed, in 2021, at the request of Senate Finance Committee chair Ron Wyden (D-Ore.), the JCT counted more than 28,000 taxpayers with traditional or Roth IRAs with balances exceeding $5 million—497 of the accounts contained $25 million or more.

What does this have to do with Project 2025? Well, USAs would be Roths on steroids. The $15,000 annual contribution limit is more than twice what people under 50 are allowed to contribute to a Roth. And even the highest earners could contribute to a USA—with Roths, you can only make the full contribution if your income is $146,000 or less. The fact that one needn’t wait until retirement to withdraw funds make USAs all the more compelling.

Heck, if you can afford to put $15,000 a year into an investment fund and let it take a tax-free ride—which the majority of Americans cannot—there would be no reason not to. “High bracket taxpayers would get the biggest tax benefits and could find the disposable savings to participate most easily,” says Steven Rosenthal, a senior fellow at the Tax Policy Center who has written about the retirement system’s income and race disparities.

Roth IRAs cost taxpayers relatively little, mainly because most people play by the rules. USAs would obliterate the rules, and cost the government a pretty penny.

But the real poison pill is this line: USAs should be highly flexible to allow Americans to save and invest as they see fit, including, for example, investments in a closely held business.

That sounds an awful lot like what Thiel did. Or, for example, a private equity fund manager could put his “carried interest” in a USA at the outset of a project. A CEO could contribute tens of thousands of shares of cheaply acquired stock options before the company goes public. A garage inventor—like Bill Gates once was—could value his company initially at $15,000 and put all of the stock into his USA. It’s not worth much now, but wait 10 years—Jackpot!

“Their tax avoidance potential would be infinitely greater. They would have the potential to exempt multibillion-dollar gains, even trillion-dollar gains, from taxation,” tax attorney Bob Lord and Morris Pearl, chair of Patriotic Millionaires, wrote in a Fortune commentary.

“Allowing taxpayers to invest ‘as they see fit,’ could fuel stuffing…when an individual uses a tax-free account to acquire non-publicly traded assets at prices below fair market value,” Rosenthal told me in an email. (He and New York University law professor Daniel Hemel have written to the Senate Finance Committee, urging lawmakers to crack down on the practice.)

Whether Thiel’s Roth magic trick violates current IRS rules on “prohibited transactions” is a private matter for him and agency lawyers to hash out—but legal minds who have thought it through see some potential red flags. What’s more, the IRS has issued guidance that deems similar-sounding strategies “abusive” and says it views them as “tax avoidance transactions.”

Democratic presidential nominee Kamala Harris regularly asks Americans to imagine Donald Trump without guardrails. Well, imagine Roths without guardrails—larger contributions, no income cap, and no rules about how the funds can be invested. Roth IRAs in particular cost US taxpayers relatively little—about $14 billion a year—mainly because most people play by the rules. USAs would obliterate the rules, and in doing so, cost the government a pretty penny.

But this isn’t just about tax revenues. The bigger problem is how wildly inequitable America’s wealth and income distributions have become over the past four decades, a shift that started with the wealth-friendly tax cuts of the Reagan era. Just this week, the Congressional Budget Office reported that the average 2021 household income for the top-earning 1 percent of taxpayers was more than $3.1 million—42 times the average for the bottom 90 percent, according to an analysis of the data by Americans for Tax Fairness. That’s the most skewed income distribution since CBO began reporting on the data in 1979. Back then, the income disparity was 12 to 1.

America has ceased to be recognizable as a land of opportunity—or rather, one must now ask, a land of opportunity for whom?

USAs would be worth considering if Congress limited them to people with few assets who earn less than $100,000, for example, and imposed strict rules to prevent wealthy investors from gaming them for tax avoidance. As proposed by that nonprofit Trump knows nothing about, they would make our class divisions even worse. And that would truly be unaffordable.

Do you have $100 million? I don’t. Heck, I don’t even have $50 million! Which is why I’m not worried about the likes of President Joe Biden and maybe-president Kamala Harris and Rep. Barbara Lee and Sens. Elizabeth Warren, Ron Wyden, and Bernie Sanders—all of whom have proposed various levies on excessive wealth over the past five years—taxing my unrealized capital gains.

I do have unrealized capital gains. Maybe you do, too. My wife and I bought our house in Oakland, California, almost 20 years ago, and it’s worth more now than when we bought it. We also own shares of some stock funds that have appreciated over the years. Those paper gains are “unrealized” because we haven’t sold the assets. Unless they are sold, and the profits “realized,” they won’t be taxed under current law.

This gives America’s richest families a convenient way to avoid income tax. If you, like our thousand-ish billionaires, have vast stock holdings, you can have your tax lawyers and accountants arrange your affairs so as to minimize your realized income. Then, instead of selling long-held assets to fund your lavish lifestyle—and paying a capital gains tax of 20 percent plus a 3.8 percent surcharge known as the Net Investment Income Tax (NIIT)—you simply borrow against your holdings at a few percent interest, tops.

Guys like Bezos and Bloomberg and Buffett (who needs first names?) take advantage of this tactic, which is why ol’ Warren can accurately say he pays a lower overall tax rate than his secretary does. Per ProPublica‘s analysis, the wealth of the 25 richest Americans totaled $1.1 trillion at the end of 2018, but their combined 2018 tax bill? A scant $1.9 billion.

Several of the aforementioned wealth tax proposals, including Biden’s (which Harris generally supports), aim to shrink our obscene wealth gap by taxing the unrealized gains of the super-rich. But the $100 million Biden-Harris cutoff means that fewer than 10,000 people would be affected.

TikTokkers are having fun with this...

@mayagouliard

They arent talking about us. The capital gains tax has nothing to do with us. Aside from trying to reign in the uber greed of the already mega wealthy in our country. Trickle down economics failed. #harriswalz #capitalgainstax #taxtherich #99percent

♬ original sound – theshamingofjay

The TikTok dad below, Dean, sums up the situation nicely: Taxing unrealized gains “sounds really ridiculous, and it’s very, very complicated,” he says. “But the key thing everyone needs to know, which is why I don’t care about it,” he says, is the cutoff: “I’d love to have this problem. It means I’m freakin’ worth $100 million!”

@alexisanddean

Should we be worried about the proposed capital gains tax by Kamala Harris? #capitalgains #capitalgainstax #kamalaharris #harris2024 #tax #taxes #capitalgains #uspolitics #politics #trump #trump2024 #taxcuts #taxpolicy #economics #useconomy #ustaxes #taxation #econ101 #fintok #finance #finance101 #financialfreedom #financialliteracy #financialeducation #financetiktok #invest #investing #investor

♬ original sound – Alexis and Dean

The people who are freakin’ worth $100 million oppose such a tax, of course. The New York Times reports that a group of venture capitalists calling themselves VCs for Kamala has been whispering in her ear to dissuade her from trying to tax unrealized gains. In a survey, 75 percent of the group’s members reportedly agreed that doing so would “stifle innovation.”

Bob Lord, a tax attorney who advises Patriotic Millionaires, a group of affluent people seeking fairer tax policies, isn’t buying it. Wouldn’t that innovation-stifling argument “apply equally to their realized gains? And to their tax rates?” he asks in an email. “The logic would justify them having a negative tax rate, so we could spur innovation.”

“As I see it,” adds Lord (who helped write Rep. Barbara Lee’s Oligarch Act of 2023, and who has contributed to this publication) “any tax on the ultra-rich is significant to them only for how it impacts their wealth. Taxes don’t impact their spending decisions, their career decisions, college affordability, retirement decisions, or whether a spouse needs to work full time.” 

Those taxes also won’t affect you if you have the following issue:

@dadified

Just a quick PSA #capitalgains #taxes #kamalaharris #repairs

♬ original sound – Freddie

VCs for Kamala did not respond to questions I sent via their media contact, but those rich kids may not have to worry either. Congress has thus far been unwilling to touch unrealized gains, in part because, as Dean noted, it sounds ridiculous—even un-American—when applied to ordinary people.

I know. These aren’t ordinary people. But remember how, when Congress passed $80 billion in funding so the IRS would finally have sufficient resources to go after wealthy, sophisticated tax cheats? And remember how Republican lawmakers, including Donald Trump, widely (and falsely) shrieked that the Biden administration was hiring 87,000 new IRS agents to fan out and harass regular people just like you? Yeah, that was hogwash. But it was politically effective hogwash that helped set the stage for the GOP to claw back tens of billions of that funding as part of a subsequent debt ceiling deal.

Something similar would almost certainly happen if Congress got close to imposing a tax on unrealized gains. It’s simple politics: “We don’t feel in general that it’s fair to tax people when they don’t have the ability to pay,” explains Harvey Dale, an attorney who advises ultra-wealthy clients on tax matters. “Suppose I am a farmer. My family has owned this 1,000-acre spread for four generations, and in a good year I make $30,000 farming. But the land, wow, that could be worth $10 million now.”

(Note: That farmer, lacking $100 million in assets, would be unaffected by the Harris plan.)

The Supreme Court “is all but certain to strike down a tax on wealth, and the wealth transfer tax system we have has effectively been neutered through avoidance strategies.”

One could, of course, write exceptions into the law, “as long as you could figure out what all of those kinds of issues are,” Dale says. Or you could take a different approach: “Why don’t you say, in general, we won’t tax unrealized gains, but we’ll make exceptions and tax them—for example, if the asset in question is freely marketable, like securities, and we won’t do that for people below a certain level of wealth or income.”

As things stand, investors already get a sweetheart deal. When you profit from the sale of an asset today, you pay a far lower tax rate than you would if you made the money by working. Sometimes you pay no tax at all: Uncle Sam, for instance, lets a married couple pocket the first $500,000 in gains from the sale of their primary residence. (Sorry, renters.)

Stock is different. If you sell shares you’ve held at least a year, any profits are taxed at a rate based on your overall income. For 2024, a couple making up to about $94,000 pays no capital gains tax. From there up to $583,750, the rate is 15 percent plus that 3.8 percent NIIT on incomes north of $250,000. Families raking in even more pay 20 percent—23.8 percent with the NIIT.

That’s a great deal for people whose incomes derive largely from investments. It means that a couple with wage income of $1 million in 2024 owes the IRS about $321,000, whereas a couple with $1 million in investment income owes only $181,000. (These simple figures ignore tax credits, deductions, etc.)

Why structure our tax code this way? Some people say it’s to incentivize investment, but I’m skeptical. As long as the government isn’t taking 90 percent of your profits, people will keep investing. What else are you gonna do—shove your excess cash under the mattress? Bury it in the yard?

Another rationale, says Dale, who has taught tax at New York University’s law school for decades, involves “bunching.” If my job pays $100,000 a year and I work for five years, I pay 22 percent annually to the federal government. But suppose capital gains were taxed the same as wages. If an investor who’s held a bunch of stock for four years then sells that stock the fifth year for a $500,000 profit, their income is the same as mine, but because it came all at once, their tax rate would be closer to 28 or 29 percent. “So if you want the theoretical justification, it is to average out the bunching,” Dale told me.

For people who make more than $1 million a year, Biden has proposed taxing capital gains at the same top rate as ordinary income—currently 37 percent. Last week, Harris softened that proposal, saying she’d only raise the rate to 28 percent. She and Biden also both seem to support raising the NIIT to 5 percent on incomes north of $400,000. Which means wealthy investors would pay a total of 33 percent on realized gains.

But you don’t make $1 million a year, so never mind.

Trump hasn’t specified his plan for capital gains—maybe, as with health care, he only has a “concept of a plan.” But Project 2025, the Heritage Foundation blueprint created by conservatives from Trump’s first administration, proposes cutting the top rate to 15 percent and eliminating the NIIT. If that happens, America’s one-percenters will pay a tax rate on investment profits that’s less than half the rate they pay on their salaries. And it means wealthy families whose income comes largely from investments will pay a lower tax rate than workers who bring home the nation’s median pay: roughly $60,000 a year.

For hectomillionaires, people with $100 million or more, the Biden-Harris plan would impose a minimum tax of 25 percent on all income, realized and unrealized. But that faces long odds, because even if Congress passes it, the Supreme Court might slap it down.

As the Tax Policy Center’s Steven Rosenthal has written, in the case of Moore v. United States, four of the justices “expressly declared that realization is a constitutional requirement” for taxation. If either Chief Justice John Roberts or Justice Brett Kavanaugh joins with their fellow conservatives, most of those wealth tax proposals would be in trouble.

Lawyers specializing in trusts and estates have long been engaged in “an ongoing, very complicated game to reduce the taxes paid by the wealthy.”

Tax attorney Lord sees a window: “The court is all but certain to strike down a tax on wealth, and the wealth transfer tax system we have has effectively been neutered through avoidance strategies,” he says, “so that leaves a tax on true economic income [including unrealized gains] as the only plausible option.” 

Dale says he likes the Harris plan, and “it’s not clear that SCOTUS would declare unconstitutional a 25 percent tax on unrealized gains of people whose net worth is over $100 million, but it’s also not clear that SCOTUS would approve or sustain such a tax.”

That uncertainty, he adds, will affect how Congress views the proposal: “At least some senators and representatives would decide to vote against it because of its possible unconstitutionality. Others in Congress will vote against it because they will dislike such a tax.”

Dale’s NYU colleague, former Biden Treasury official and tax expert Lily Batchelder, is more optimistic about the Supreme Court sustaining a minimum income tax for extremely high-wealth individuals: “The majority in Moore expressed concern about how the petitioners’ arguments would deprive the government and the American people of trillions of dollars in tax revenue by eliminating a vast array of existing provisions, including multiple provisions that already tax unrealized income,” she notes in an email. “I think the case educated the justices about the ‘blast radius’ that would result if they read some sort of realization requirement into the Constitution.”

It’s always been somewhat of a challenge to effectively tax the superwealthy, who wield political power and guard their hoards as jealously as Smaug, the Tolkien dragon. But Congress isn’t without options. It could, as Sens. Wyden and Angus King have proposed, restrict abusive trusts that allow billionaires to transfer massive sums to their heirs without paying a dime in tax. And lawmakers could cap federally subsidized retirement accounts to prevent wealthy retirees from taking excessive government handouts.

They also could do away with carried interest once and for all and strengthen the rules for Roth IRAs—retirement accounts meant for the middle class—that have famously allowed Silicon Valley’s Peter Thiel to parlay a $1,700 retirement fund contribution into billions of tax-free dollars.

And they could, as Biden has proposed, eliminate the socially corrosive “step-up in basis” rule: Suppose your father bought $5,000 worth of stock in 1960 and now it’s worth $5 million. If he dies and leaves it to you, under today’s rules, the “cost basis” of the stock—what it cost him originally—resets to the current market value. Boom! Your family just sidestepped taxes on almost $5 million in investment profits.

His estate wouldn’t have to pay any tax on that transfer, either: As of 2024, the IRS lets a couple give their kids up to $27.2 million, free of any gift or estate tax. This generous exemption is yet another rule that Congress could target. In fact, it’s set to revert to half that amount at the end of 2025, so I guess we’ll see whether our lawmakers will stand up to the oligarchs.

“There are $5 trillion of offsets in the president’s budget that raise revenue exclusively from large corporations and individuals earning more than $400,000 in income,” Batchelder points out. “Every member of Congress has different views about which of these options are most appealing, so the most doable reforms will depend on who are the marginal votes in Congress after the election, but there are many, many options.”

Dale figures the best way to shrink the wealth gap is to target inheritances—closing loopholes, restricting trusts, and generally strengthening the rules on intergenerational wealth transfers, which are taxed at only about 2 percent overall, per Batchelder’s 2020 analysis. The wealth industry will find workarounds, and you’ll never get a perfect system, he says, but you could make inheritance taxes harder to circumvent.

“A nontrivial portion of my practice was estate planning,” a field that has long engaged in “an ongoing, very complicated game to reduce the taxes paid by the wealthy,” Dale says. “It would be sweet, I suppose, to say, here is one simple thing that could be done that your readers can understand. But the loopholes are very, very sophisticated. If I tell you that the right thing to do is to repeal 664(c)(1), your eyes would glaze over. But there are trillions of dollars in that simple thought.”

This story was originally published by Grist and is reproduced here as part of the Climate Desk collaboration.

Following the release of a major climate report last year, UN Secretary-General António Guterres warned that the “climate time bomb” was ticking. Standing behind a podium emblazoned with the United Nations symbol of a globe encircled by olive branches, Guterres declared, “Our world needs climate action on all fronts—everything, everywhere, all at once.”

That call to action (possibly inspired by the movie of the same name) turns out to be a decent summary of what it takes to tackle rising carbon emissions. According to a new study out Thursday in the journal Science, countries have managed to slash emissions by putting a price on carbon, but the biggest cuts came from adopting a combination of policies. Seventy percent of the instances where countries saw big results were tied to multiple actions that generated “synergy.”

“There really isn’t a silver bullet,” said Felix Pretis, a co-author of the study and an economics professor at the University of Victoria in British Columbia, Canada. “That goes a bit against the conventional wisdom that economists have been saying that carbon pricing is the one thing we should push for.”

“I feel like there’s so much gloom and doom around climate policies, that nothing really happens, but actually, we’ve made a fair amount of progress.”

Pretis and researchers in Germany, France, and the UK looked for big drops in countries’ emissions and compared those results against the policies that had been adopted. Using machine learning, they analyzed 1,500 policies across 41 countries between 1998 and 2022, and found just 63 instances in which countries substantially slashed emissions. In total, these cuts added up to between 600 million and 1.8 billion metric tons of carbon dioxide. 

“I feel like there’s so much gloom and doom around climate policies, that nothing really happens, but actually, we’ve made a fair amount of progress,” Pretis said.

Part of the reason that the study only found 63 success stories is because it set a high bar in terms of emissions reductions, Pretis said. “But at the same time, we also see lots of policies having been implemented that don’t really bite.”

Governments are falling short of their climate targets set in the 2015 Paris Agreement by about 23 billion metric tons of CO2. The problem isn’t just caused by a lack of ambition, the study says, but a lack of knowledge in terms of what policies work in practice.

Carbon pricing, whether through a carbon tax or a cap-and-trade program, was “a notable exception” in that it sometimes led to large emissions cuts on its own, the study says, and worked particularly well for emissions from industry and electricity. However, “it works even better if you complement and package it up as a policy mix,” Pretis said.

The study doesn’t capture policies “that would have been wildly successful but didn’t pass precisely because they would have been so effective.” 

For example, the United Kingdom saw a 19 percent drop in emissions from the electricity sector between 2012 and 2018 after the European Union introduced a carbon price for power producers. Around the same time, the UK had implemented a host of other steps, including stricter air pollution standards, incentives for building solar and wind farms, and a plan to phase out coal plants. Similarly, China cut its industrial emissions by 20 percent from 2013 to 2019 through a pilot emissions-trading program, but also by reducing fossil fuel subsidies and strengthening financing for energy-efficiency investments.

To cut emissions from transportation and buildings, the study shows that it’s an even better idea to pair together multiple tools. Regulation is the most powerful policy for reducing emissions from transportation, and it can work well alongside carbon pricing or subsidies. The study also stresses that different policies might be effective in different contexts. The researchers found that carbon pricing was less effective in developing economies, places where regulations to limit pollution and investments in green technologies might be a better fit.

Gernot Wagner, a climate economist at Columbia Business School, said the study shows what measures to curb carbon emissions have been politically possible, but it shouldn’t necessarily serve as a guide for future policymaking. “It doesn’t capture policies that never passed—including those that would have been wildly successful but didn’t pass precisely because they would have been so effective.” 

Because of the bounds of the study, it also missed some of the most significant climate policies, Wagner said, pointing to the carbon taxes Sweden’s government passed in the early 1990s and the Inflation Reduction Act, signed by President Joe Biden in 2022. The United States’ landmark climate law invests hundreds of billions of dollars in clean energy and tax credits toward low-carbon technologies like heat pumps. The law is estimated to cut emissions by 40 percent by 2030, compared to 2005 levels.

“I wouldn’t be surprised if this exercise gets repeated five, 10 years from now, the Inflation Reduction Act would show up” as causing a big drop in emissions, Wagner said.

It’s fair to say that Michelle Obama stole the show at the Democratic Convention on Tuesday. (Husband Barack was on point in noting how hard an act she was to follow.) And to a journalist like me who covers wealth and inequality, one line in particular stood out. Listen:

Michelle Obama: She understands that most of us will never be afforded the grace of failing forward. We will never benefit from the affirmative action of generational wealth. pic.twitter.com/ywBjdwZl3E

— Acyn (@Acyn) August 21, 2024

The affirmative action of generational wealth. That’s a smart reframing of a longtime conservative hobby horse.

Republican politicians and right-wing media have regularly attacked programs designed to counter the generational impacts of government-sanctioned discrimination in housing, education, and veterans benefits. Now they’re targeting diversity, equity, and inclusion programs—see JD Vance’s recently introduced “Dismantle DEI Act“—and trying to brand Kamala Harris a “DEI hire.” That’s a laughable assertion. (New York Times columnist Lydia Polgreen argues that the moniker applies more aptly to Vance.)

But the critics of DEI and affirmative action want to have their cake and eat it too. For example, if you, like our Supreme Court, think the use of race as a factor in college admissions should be illegal, that’s your prerogative. But I hope you are similarly inclined to outlaw the practice of elite colleges giving an admissions boost to children of alumni and to students (like Jared Kushner) whose parents are major donors. Because isn’t that, too, a kind of affirmative action?

In just a handful of words, Michelle Obama managed to convey a simple truth, says Dedrick Asante-Muhammad, president of the Joint Center for Political and Economic Studies, a Washington think tank that focuses on the racial wealth-and-opportunity gap: “It is not those asking to break up concentrated wealth and opportunity that are asking for an unfair advantage, but rather those who are hoarding concentrated wealth.”

“Most of us,” as Obama noted, “will never benefit” from generational wealth. And that’s true of everyone, but even truer when you are Black or Hispanic. In the Federal Reserve Board’s 2019 Survey of Consumer Finances (SCF)*, about 47 percent of white respondents said they’d either received an inheritance or expected to receive one. Their median inheritance expected was $195,500 (in 2019 dollars).

Only 16 percent of Black respondents had received or expected an inheritance—and their median expectation was about half the white figure. Less than 12 percent of Hispanic respondents had received or expected an inheritance.

The disparities are similar when you look at federally subsidized retirement savings, which, according to the congressional Joint Committee on Taxation (JCT), will cost US taxpayers a whopping $1.9 trillion from 2020-2024. Most of that cash goes to the wealthiest 10 percent of Americans, who tend to be, yep, pretty white.

In 2021, the JCT identified 8,000 Americans with Individual Retirement Account (IRA) balances in excess of $5 million who were still getting tax breaks for their annual contributions—which is “shocking but not surprising,” noted Senate Finance Committee chair Ron Wyden. Peter Thiel, ProPublica reported, even managed, using questionable tactics, to amass a Roth IRA worth $5 billion.

Affirmative action for the rich.

According to the latest (2022) SCF, only 35 percent of Black families and less than 28 percent of Hispanic households even had a retirement account, compared with 62 percent of white families. The accounts of those white families were worth over $380,000 on average, more than triple the Black and Hispanic savings—and again, these numbers don’t account for the fact that a large majority of Black and Hispanic households have no private retirement accounts at all.

Then there’s land ownership—see “40 Acres and a Lie,” our acclaimed multimedia package exploring how the few Black families who received land reparations after the Civil War then had their acres cruelly rescinded a year and a half later. And consider these passages on the Homestead Acts, from a chapter of my 2021 book, Jackpot, titled “Thriving While Black.”

The two acts, passed during and after the Civil War, granted 160-acre parcels of public land—a foundation for generational wealth—to families willing to stake out the plots and make improvements. But the timing and circumstances made it extraordinarily difficult for Black Americans to participate:

It was a once-in-a-lifetime bonanza for white fortune-seekers. “The acquisition of property was the key to moving upward from a low to a higher stratum,” wrote author Everett Dick. “The property holder could vote and hold office, but the man with no property was practically on the same political level as the indentured servant or slave.” […]

Between the two acts, about 270 million acres of farmland—14 percent of the total landmass of the continental United States—was granted to 1.6 million white families, but only 4,000 to 5,000 Black families. [University of Michigan professor Trina] Shanks calculates that more than 48 million living Americans are direct descendants of those Homestead Act beneficiaries. Which means there’s a greater than one-in-four chance your forebears benefited directly from the biggest public-to-private wealth transfer in American history—if you’re white, that is. 

Affirmative action for the rich.

Obama hit the nail on the head. Asante-Muhammad says he was struck by her simple acknowledgement “that affirmative action for the privileged happens,” though “I wish there could have been a follow up to re-emphasize why programmatic affirmative action to advance more equal opportunity is necessary.”

But “it felt good,” he adds, “to hear a political speech that connects so personally with my political ideals, and to the challenges of the racial wealth divide and the action and ideals needed to bridge it.” 

*I used 2019 numbers here because the 2022 inheritance data was only available in raw form.

This story was originally published by the Guardian and is reproduced here as part of the Climate Desk collaboration.

The Inflation Reduction Act (IRA), passed exactly two years ago, was pitched as a policy that puts the “middle class first.” But the spending bill’s residential tax credits have so far disproportionately benefited wealthy families, new data indicates.

That’s a major challenge for the efforts to decarbonize the US economy in time to avert the worst consequences of the climate crisis. “If going green is just a niche lifestyle choice for the upper middle class, it won’t move the needle on emissions at a societal level,” said Matt Huber, a geography and environment professor at Syracuse University and the author of the 2022 book Climate Change is Class War.

A Treasury Department report published this month shines a light on the use of two IRA renewable energy tax credits: one that helped Americans boost the energy efficiency of their homes by installing heat pumps, electric water heaters, efficient windows and doors, or other upgrades; and another that helped households install small-scale renewable energy production—most commonly rooftop solar panels.

Households living paycheck to paycheck “do not have the savings or credit to buy a new heating/cooling system…even with a complicated incentive to do so.”

In 2023, about 3.4 million households, representing 2.5 percent of all tax filers, took advantage of at least one of these two subsidies, both of which were expansions of pre-existing incentive programs. That represents a 30 percent rise in the use of efficiency and clean energy tax credits over 2021 levels.

Nearly half of those who claimed at least one of these credits last year had incomes lower than $100,000. Yet roughly 75 percent of tax filers had incomes lower than $100,000 in 2023, and a closer look at the use of the credits by households within that bracket shows that wealthier Americans more frequently adopted both tax credits.

Of all filers making less than $100,000, just 0.7 percent claimed the clean energy tax credit, and just 0.9 percent claimed the efficiency incentive. In the over-$100,000 bracket, those percentages rose to 1.6 percent and a stunningly high 4.0 percent.

This dynamic, said Huber, was predictable. Tax credit programs can be difficult to navigate, especially for families who can’t afford to hire tax accountants, he said.

Further, though tax credits can make upgrades more affordable, they may not bring them into reach for Americans with lower incomes, especially because the programs come with spending caps for each household. “Most working-class Americans, living paycheck to paycheck, do not have the savings or credit to buy a new heating/cooling system…even with a complicated incentive to do so,” he said.

The tax incentives also favor those with higher tax burdens. If an upgrade is eligible for up to $2,000 in credits, for instance, filers must owe that amount or more in taxes to receive the full incentive amount.

This marked a substantial change from earlier proposals, which would have made the incentives available even for those with no tax burden. Lew Daly, a senior fellow with the climate justice group Just Solutions, said this was “a tragic political error” that should be changed by Congress.

“Without refundability, most of our country’s millions of moderate- and low-income homeowners are intentionally being excluded from the clean energy transition and its benefits in their everyday life, even as we are giving a massive fortune of tax dollars to big corporations and affluent households through the energy credits program as codified,” he said.

Instead of creating individual incentives, “why not work with utilities on a program that would aim to install heat pumps in every household for free.”

The two credits also require Americans to pay the up-front cost of home upgrades and wait until tax season to recoup costs—an option some households cannot afford.

It’s a major problem for lower-income Americans who are grappling with rising utility bills and a “threadbare social safety net,” said Daly. “The exclusionary design of the energy credits program is just piling on to create a future of worsening inequity.”

Despite these issues, when compared with similar tax incentives that pre-dated the IRA, the distribution of these credits has been more even, said James Sallee, energy economist at the University of California, Berkeley. One study showed 60 percent of benefits went to the top 20 percent of households from 2006 to 2020.

“But, the benefits are still regressive,” Sallee said. “In every income category, the more money you make, the more money on average people are claiming per tax return.”

The IRA does include provisions aimed at promoting equal distribution. The renewable energy tax credit, for instance, can be used to enroll in community solar—a helpful arrangement for renters and apartment dwellers who tend to have lower incomes than house-owners.

The bill also includes point-of-sale rebates for efficient appliances and upgrades, though their rollout has been slow because they are being distributed locally. Only two states have yet to offer rebates, though others could launch their programs within months.

Other changes could help change the distribution of tax credits, said Sallee. One of them: placing income caps on eligibility.

But ultimately, said Huber, to create green benefits that are easier for all Americans to access, they should be universal rather than means-tested.

“Instead of putting out incentives for individual households, why not work with utilities on a program that would aim to install heat pumps in every household for free,” he asked. “That might sound outlandish, but if we see solving climate change [as] critical to the public good, there’s no reason why decarbonization shouldn’t be seen as a core public service like healthcare or education.”

Just when the IRS was starting to get its mojo back, the Supreme Court had to go and throw a wrench into the works.

By now, most civic-minded Americans will have heard about the recent high court rulings that threaten to crush the administrative state, crippling the government’s ability to enact and enforce critical regulations that advance the nation’s interests and protect her citizens.

My colleague Jackie Mogensen recently described how a 2023 Supreme Court decision limiting the EPA’s jurisdiction has made way for polluted rivers. June’s rulings bode far worse, for both the natural environment and efforts to combat climate change. Colleague Nina Martin has examined how the new rulings will be weaponized to gut reproductive rights. The New Republic’s Timothy Noah covered how they may affect the banking sector—and the economy. Others have looked at impacts on health care. And so I set out to determine the extent of the chaos the court’s rulings will unleash on the federal tax system.

Short answer: Nobody knows, but it won’t be pretty.

Loper “unleashes so much chaos,” says Georgetown Law professor Brian Galle. “I think you will see a massive wave of antiregulatory lawsuits.”

Tax law is extraordinarily complicated. So much so that few lawmakers have any hope of understanding its nuances. Attorneys who specialize in tax, as one of my sources points out, tend to go beyond law school to obtain a master’s degree. Tax is also a realm that demands long-term planning by individuals and businesses. Stability is important. But with the Supreme Court latest actions, “what used to be fairly settled law now becomes potentially unsettled,” says attorney Harvey Dale, who has taught tax at the New York University School of Law for more than four decades. “It’s a very, very bad outcome.”

Two rulings in particular “will bring much more litigation into the federal courts. I’m talking hundreds, maybe thousands of litigations trying to take down regulations, some of which may be 50 years old. So that unsettles planning for the entire nongovernmental sector,” Dale says.

First and most notable is Loper Bright Enterprises v. Raimondo, wherein the Supreme Court majority killed the so-called Chevron deference. Chevron is the legal standard that has long guided career experts at federal agencies as they carried out the intent of Congress, translating broad legislative strokes into enforceable regulations related to climate, commerce, energy, health care, and other realms. The demise of Chevron makes it easier for special interests to successfully challenge federal agencies in court—and to tie up pending regulations with nuisance lawsuits.

Adding insult to injury was Corner Post Inc. v Board of Governors, in which the majority stunned observers by ruling that the six-year statute of limitations for challenging federal regulations begins not when a regulation is first enacted, but rather when the party who brought the complaint was first affected. Corner Post puts Loper on steroids, making almost any regulation fair game.

These decisions, Dale says, “emasculate” the rulemaking ability of highly technical federal agencies, “because they’re going to be worried—correctly—about the extent to which litigation will bring them to court, and maybe invalidate their regulations.”

Loper “unleashes so much chaos,” concurs Georgetown Law professor Brian Galle, who teaches courses in taxation, nonprofits, and behavioral law and economics. “I think you will see a massive wave of antiregulatory lawsuits.”

“A rule of judicial humility gives way to a rule of judicial hubris,” Justice Kagan wrote in her Loper dissent. “The majority disdains restraint, and grasps for power.”

Tribune Media Company barely let the ink dry on the Loper ruling before mounting a challenge to IRS guidelines designed to curb what it calls “abusive basis-shifting” by partnerships. Last Wednesday, a lawyer for the IRS commissioner wrote to a federal appeals court contesting the Tribune challenge and pointing out that the agency had not relied on Chevron in its determination.

The Tribune company, the letter said, tried “to abuse federal tax rules to avoid a prodigious tax bill when it sold the Chicago Cubs and related assets. That ran afoul of, among other things, the partnership anti-abuse rule, [which] is supported by a long and unbroken history of judicial doctrines and congressional enactments empowering the IRS to combat the kind of chicanery attempted here.”

The IRS seems to have a solid case here, but that’s not the point. The point is that the agency will be forced to divert more of its hard-won and embattled resources to fend off the coming firehose of legal actions. “There’s such a long list, especially when you start talking about small businesses,” Galle says. Major law firms, Dale points out, have been reaching out to clients and holding webinars on what these rulings might mean for them. (This one highlights various “opportunities” and “avenues for challenge.”)

Lawmakers, too, have taken a keen interest in weaponizing Loper. Also last Wednesday, House Republican committee chairs sent letters to a host of agencies and Cabinet heads—including Treasury Secretary Janet Yellen—asking them to describe how Chevron‘s demise will affect their rulemaking. “We’ve already seen how frequently federal agencies will abuse their authority,” House Majority Leader Steve Scalise (R-La.) said in the announcement. “We intend to ensure agencies are held accountable following the court’s ruling and observe the proper checks on their power.”

“The big picture to me is the court grabbing power,” says Steven Rosenthal, who drafted tax law for Congress as a former staff attorney for the bipartisan Joint Committee on Taxation. “If that goes unchecked, it vastly diminishes the ability of Congress to write statutes and the executive branch to administer them. Everything becomes an interpretive question to be resolved by the courts.”

Justice Elena Kagan had a similar reaction. The Loper majority “flips the script,” she wrote in her scathing dissent (see page 82). “A rule of judicial humility gives way to a rule of judicial hubris…The majority disdains restraint, and grasps for power.”

Tax is a peculiar beast. Lawmakers, recognizing that they often have no clue what they’re doing, give the IRS and Treasury Department an unusual degree of statutory authority to craft workable tax rules and “fill in the details,” as Chief Justice John Roberts wrote for the Loper majority. (See page 17.)

“When the best reading of a statute is that it delegates discretionary authority to an agency,” Roberts wrote, the court’s role is “to effectuate the will of Congress subject to constitutional limits.” These last four words, Rosenthal fears, may signal the court’s future willingness to rule that Congress is delegating more of its power to an agency than the Constitution allows.

Justice Kagan wrote in her Loper dissent that the majority, in killing Chevron, had revived a legal test from the 1944 case Skidmore v. Swift, which held that “agency interpretations ‘constitute a body of experience and informed judgment’ that may be ‘entitled to respect,’” she wrote, but, “If the majority thinks that the same judges who argue today about where ‘ambiguity’ resides [in statutory language] are not going to argue tomorrow about what ‘respect’ requires, I fear it will be gravely disappointed.”

Indeed, the issue for the IRS is that lawyers for corporations and ultrawealthy taxpayers are already starting to throw spaghetti at the wall to see what will stick.

Every time the IRS moves to close an abusive loophole, it is “interpreting the statute to say that can’t be what Congress meant,” Galle told me. Such interpretations, he says—which would include the aforementioned partnership guidelines and the IRS’s warnings about wealthy taxpayers claiming “inappropriately large deductions” for conservation easements—are now more vulnerable to legal challenges.

The justices “had the hubris to believe that they alone can solve problems. They interpret the Constitution in a way that that leaves our government in disrepair.”

Let’s not forget that the IRS has only just begun to recover from decades of Republican-imposed shortfalls, and is still a long way from being fully back on track. “It’s hard to even fathom how far behind their rulemaking is,” says Galle, who is interested in rules around charitable giving. The IRS, for example, has long been mulling rules for donor advised funds, “the new kind of pet charities of a certain group of rich people,” he says. The agency “was supposed to create those rules in 2009, and they haven’t even proposed some of them yet.”

Galle also foresees “upstream pressure” on “the drafters and the general counsel’s office” to make rules that are more resilient to litigation—“which the IRS is not staffed for: They have kind of had their hands over their eyes and their fingers in their ears to warnings that the anti-regulatory tide is eventually going to pull them out to sea.”

Rosenthal finds the notion of so much judicial intervention hard to stomach. If Congress doesn’t have the capacity to deal with the intricacies of tax, he says, “the courts are even worse positioned. Each justice has, like, three or four clerks who are three years out of law school. Congress at least has technical experts like myself—lawyers and economists and others.”

“The court doesn’t have any of those facilities,” Rosenthal continues. “They just had the hubris to believe that they alone can solve problems. They interpret the Constitution in a way that that leaves our government in disrepair, and I think that’s by design. I think that’s what they want.”

Dale predicts the rulings will result in a year or two of gridlock in the federal courts, at which point “Chief Justice Roberts is going to say, this is a terrible problem and in order to allow people to have their rights determined, we need more federal judges. And the Congress is going to say okay. And so we’re going to have an enlargement of the federal judiciary, all of whom serve for life terms.”

If that happens, Dale says, whomever happens to be president will have the opportunity to make lots and lots of appointments, and “we’ll see the policy impact for 40 or 50 years.”

Just when the IRS was starting to get its mojo back, the Supreme Court had to go and throw a wrench into the works.

By now, most civic-minded Americans will have heard about the recent high court rulings that threaten to crush the administrative state, crippling the government’s ability to enact and enforce critical regulations that advance the nation’s interests and protect her citizens.

My colleague Jackie Mogensen recently described how a 2023 Supreme Court decision limiting the EPA’s jurisdiction has made way for polluted rivers. June’s rulings bode far worse, for both the natural environment and efforts to combat climate change. Colleague Nina Martin has examined how the new rulings will be weaponized to gut reproductive rights. The New Republic’s Timothy Noah covered how they may affect the banking sector—and the economy. Others have looked at impacts on health care. And so I set out to determine the extent of the chaos the court’s rulings will unleash on the federal tax system.

Short answer: Nobody knows, but it won’t be pretty.

Loper “unleashes so much chaos,” says Georgetown Law professor Brian Galle. “I think you will see a massive wave of antiregulatory lawsuits.”

Tax law is extraordinarily complicated. So much so that few lawmakers have any hope of understanding its nuances. Attorneys who specialize in tax, as one of my sources points out, tend to go beyond law school to obtain a master’s degree. Tax is also a realm that demands long-term planning by individuals and businesses. Stability is important. But with the Supreme Court latest actions, “what used to be fairly settled law now becomes potentially unsettled,” says attorney Harvey Dale, who has taught tax at the New York University School of Law for more than four decades. “It’s a very, very bad outcome.”

Two rulings in particular “will bring much more litigation into the federal courts. I’m talking hundreds, maybe thousands of litigations trying to take down regulations, some of which may be 50 years old. So that unsettles planning for the entire nongovernmental sector,” Dale says.

First and most notable is Loper Bright Enterprises v. Raimondi, wherein the Supreme Court majority killed the so-called Chevron deference. Chevron is the legal standard that has long guided career experts at federal agencies as they carried out the intent of Congress, translating broad legislative strokes into enforceable regulations related to climate, commerce, energy, health care, and other realms. The demise of Chevron makes it easier for special interests to successfully challenge federal agencies in court—and to tie up pending regulations with nuisance lawsuits.

Adding insult to injury was Corner Post Inc. v Board of Governors, in which the majority stunned observers by ruling that the six-year statute of limitations for challenging federal regulations begins not when a regulation is first enacted, but rather when the party who brought the complaint was first affected. Corner Post puts Loper on steroids, making almost any regulation fair game.

These decisions, Dale says, “emasculate” the rulemaking ability of highly technical federal agencies, “because they’re going to be worried—correctly—about the extent to which litigation will bring them to court, and maybe invalidate their regulations.”

Loper “unleashes so much chaos,” concurs Georgetown Law professor Brian Galle, who teaches courses in taxation, nonprofits, and behavioral law and economics. “I think you will see a massive wave of antiregulatory lawsuits.”

“A rule of judicial humility gives way to a rule of judicial hubris,” Justice Kagan wrote in her Loper dissent. “The majority disdains restraint, and grasps for power.”

Tribune Media Company barely let the ink dry on the Loper ruling before mounting a challenge to IRS guidelines designed to curb what it calls “abusive basis-shifting” by partnerships. Last Wednesday, a lawyer for the IRS commissioner wrote to a federal appeals court contesting the Tribune challenge and pointing out that the agency had not relied on Chevron in its determination.

The Tribune company, the letter said, tried “to abuse federal tax rules to avoid a prodigious tax bill when it sold the Chicago Cubs and related assets. That ran afoul of, among other things, the partnership anti-abuse rule, [which] is supported by a long and unbroken history of judicial doctrines and congressional enactments empowering the IRS to combat the kind of chicanery attempted here.”

The IRS seems to have a solid case here, but that’s not the point. The point is that the agency will be forced to divert more of its hard-won and embattled resources to fend off the coming firehose of legal actions. “There’s such a long list, especially when you start talking about small businesses,” Galle says. Major law firms, Dale points out, have been reaching out to clients and holding webinars on what these rulings might mean for them. (This one highlights various “opportunities” and “avenues for challenge.”)

Lawmakers, too, have taken a keen interest in weaponizing Loper. Also last Wednesday, House Republican committee chairs sent letters to a host of agencies and Cabinet heads—including Treasury Secretary Janet Yellen—asking them to describe how Chevron‘s demise will affect their rulemaking. “We’ve already seen how frequently federal agencies will abuse their authority,” House Majority Leader Steve Scalise (R-La.) said in the announcement. “We intend to ensure agencies are held accountable following the court’s ruling and observe the proper checks on their power.”

“The big picture to me is the court grabbing power,” says Steven Rosenthal, who drafted tax law for Congress as a former staff attorney for the bipartisan Joint Committee on Taxation. “If that goes unchecked, it vastly diminishes the ability of Congress to write statutes and the executive branch to administer them. Everything becomes an interpretive question to be resolved by the courts.”

Justice Elena Kagan had a similar reaction. The Loper majority “flips the script,” she wrote in her scathing dissent (see page 82). “A rule of judicial humility gives way to a rule of judicial hubris…The majority disdains restraint, and grasps for power.”

Tax is a peculiar beast. Lawmakers, recognizing that they often have no clue what they’re doing, give the IRS and Treasury Department an unusual degree of statutory authority to craft workable tax rules and “fill in the details,” as Chief Justice John Roberts wrote for the Loper majority. (See page 17.)

“When the best reading of a statute is that it delegates discretionary authority to an agency,” Roberts wrote, the court’s role is “to effectuate the will of Congress subject to constitutional limits.” These last four words, Rosenthal fears, may signal the court’s future willingness to rule that Congress is delegating more of its power to an agency than the Constitution allows.

Justice Kagan wrote in her Loper dissent that the majority, in killing Chevron, had revived a legal test from the 1944 case Skidmore v. Swift, which held that “agency interpretations ‘constitute a body of experience and informed judgment’ that may be ‘entitled to respect,’” she wrote, but, “If the majority thinks that the same judges who argue today about where ‘ambiguity’ resides [in statutory language] are not going to argue tomorrow about what ‘respect’ requires, I fear it will be gravely disappointed.”

Indeed, the issue for the IRS is that lawyers for corporations and ultrawealthy taxpayers are already starting to throw spaghetti at the wall to see what will stick.

Every time the IRS moves to close an abusive loophole, it is “interpreting the statute to say that can’t be what Congress meant,” Galle told me. Such interpretations, he says—which would include the aforementioned partnership guidelines and the IRS’s warnings about wealthy taxpayers claiming “inappropriately large deductions” for conservation easements—are now more vulnerable to legal challenges.

The justices “had the hubris to believe that they alone can solve problems. They interpret the Constitution in a way that that leaves our government in disrepair.”

Let’s not forget that the IRS has only just begun to recover from decades of Republican-imposed shortfalls, and is still a long way from being fully back on track. “It’s hard to even fathom how far behind their rulemaking is,” says Galle, who is interested in rules around charitable giving. The IRS, for example, has long been mulling rules for donor advised funds, “the new kind of pet charities of a certain group of rich people,” he says. The agency “was supposed to create those rules in 2009, and they haven’t even proposed some of them yet.”

Galle also foresees “upstream pressure” on “the drafters and the general counsel’s office” to make rules that are more resilient to litigation—“which the IRS is not staffed for: They have kind of had their hands over their eyes and their fingers in their ears to warnings that the anti-regulatory tide is eventually going to pull them out to sea.”

Rosenthal finds the notion of so much judicial intervention hard to stomach. If Congress doesn’t have the capacity to deal with the intricacies of tax, he says, “the courts are even worse positioned. Each justice has, like, three or four clerks who are three years out of law school. Congress at least has technical experts like myself—lawyers and economists and others.”

“The court doesn’t have any of those facilities,” Rosenthal continues. “They just had the hubris to believe that they alone can solve problems. They interpret the Constitution in a way that that leaves our government in disrepair, and I think that’s by design. I think that’s what they want.”

Dale predicts the rulings will result in a year or two of gridlock in the federal courts, at which point “Chief Justice Roberts is going to say, this is a terrible problem and in order to allow people to have their rights determined, we need more federal judges. And the Congress is going to say okay. And so we’re going to have an enlargement of the federal judiciary, all of whom serve for life terms.”

If that happens, Dale says, whomever happens to be president will have the opportunity to make lots and lots of appointments, and “we’ll see the policy impact for 40 or 50 years.”