Why the Tax Code Is the Real Wealth Gap Villain (And What Nobody Wants to Admit)

The Tax Code Is Not Broken. It Is Working Exactly as Designed.

I wrote back in 2008 that we needed to shoot the tax code into the sun, and I meant every word of it. At the time, George W. Bush and Nancy Pelosi were handing out checks in what I called the Vote Buying Incumbency Protection Act of 2008. Nothing has changed. If anything, it has gotten worse.

The tax code is not a neutral system designed to fund the government. It is a weapon, and it is aimed directly at people who work for a living. Doctors, lawyers, entrepreneurs, blue collar workers. Honest people who earn a paycheck. They pay the highest percentages. Meanwhile, the people who control the most wealth also control the laws, the loopholes, and the legislators who write them.

The Wealth Gap Numbers Should Shock You

Let me give you some numbers that should stop you cold:

• The 100 wealthiest Americans hold roughly $5.5 trillion in assets
• The bottom half of the country, meaning 170 million people, holds $4.3 trillion
• 100 people have more wealth than 170 million of their fellow Americans

And here is the part most commentators skip over. Those assets at the top are assets you can borrow against. You do not have to sell. You do not have to realize income. You do not have to pay taxes. The tax code enables this. It was designed to enable this.

Executive Compensation Is a Tax Code Scam

I have said this consistently on the program. C-suite executives should not be compensated primarily in stock. Aaron Judge does not get paid in New York Yankees ownership. He gets a salary. A great CEO should get a great salary and get taxed on it like everyone else.

Stock grants should be reserved for everyday employees inside a company, not for the people at the very top who already control compensation policy, board decisions, and in many cases, legislative priorities. When you pay executives in stock, you allow them to defer taxation indefinitely while their wealth compounds. That is not a reward for performance. That is a tax shelter disguised as one.

There Is No Real Capitalism Without Competition

This is the part that bothers me most. People throw the phrase free market around like it still means something. It does not, and here is why.

You cannot have capitalism without competition. When entire sectors of the economy are dominated by three or four companies, those companies generate enormous wealth, acquire political power, and then use that power to determine tax policy, competition policy, and compensation rules. The cycle is self-reinforcing and nearly impossible to break from within.

• Innovation gets crushed because dominant players buy out or squeeze out challengers
• Small businesses and entrepreneurs face a tax structure that punishes income while rewarding passive wealth
• Political access is priced out of reach for ordinary citizens but readily available to those writing large checks

My colleague Dylan Rattigan, one of the most honest journalists in this business, burned out covering this exact dynamic. He is getting back in the game and writing again. He came to the same conclusion I have. There is no meaningful capitalism operating in America right now.

What Actually Needs to Happen

A wealth tax in California is not the answer. It is unworkable, and the people it targets will find ways around it within months. That is not cynicism. That is just history.

The answer is a fundamental overhaul of the tax code that eliminates the loopholes created to benefit people who fund political campaigns. It means taxing compensation as compensation, regardless of the form it takes. It means restoring actual competitive markets by enforcing antitrust policy with teeth.

Until the tax code is rebuilt from the ground up, the people who work for a living will keep carrying the burden while the people who control the rules keep writing themselves exemptions. I said it in 2008 and I will say it again. Shoot the thing into the sun and start over.