The Wealth Defense Industry and its politicians have seen to that.
www.motherjones.com
Tax Me If You Can
Oligarchs are robbing America blind, and the IRS is powerless to stop them.
Democracy, for most of its existence, has managed to coexist with oligarchy, but only on the condition that oligarchs exert their influence quietly. Citizens, including ordinary Americans, are generally willing to tolerate the super-rich, but the arrangement breaks down when a small group of exceedingly wealthy people are perceived to be distorting and impairing democracy for their own gain, disrupting the fragile illusion that they are not, in fact, running the show.
America’s oligarchs, at least historically, have kept their end of the bargain. But their accelerating wealth share and absence of serious political setbacks in recent decades have spawned a growing sense of entitlement and omnipotence—indeed, untouchability. When I started teaching a seminar on oligarchs at Northwestern University in 2007, students could barely conceive of the notion of oligarchy in America—only one hand went up when I asked whether they thought we had oligarchs or oligarchy here. By 2016, their worldview had already flipped: Only one hand went up when I asked how many students would describe our political system as a
democracy.
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The biggest spender during the 2024 cycle,
according to OpenSecrets, was Elon Musk at more than $291 million. Former Treasury Secretary Andrew Mellon’s grandson Timothy, a man few Americans knew existed, spent about $197 million, and Adelson’s widow, Miriam, ranked third with more than $148 million.
All told, 100 individuals invested $2.4 billion in the 2024 election—almost half the total cost of the presidential contest and 16 percent of all federal election spending. The problem is bipartisan—oligarchs poured money in for Democrats and Republicans alike.
How did America’s oligarchs grow so willing to openly rub their wealth power in our faces? Well, a big part of it has to do with their success in neutering perhaps the greatest threat to their dominance: the ability of the government to tax them and to hold those who cheat accountable.
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The IRS says its criminal investigation unit today has “
about 2,100” armed special agents, which is less than two-thirds the 1996 peak and roughly the same number as it had during the 1970s. In other words, the federal government is devoting about the same amount of resources to investigating major tax crimes, money laundering, and bank secrecy that it did a half-century ago, even though the number of taxpayers is vastly larger, the ranks of the ultrarich more bloated, and the Wealth Defense Industry at full maturity.
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There has been pushback from time to time against the forces of oligarchy. In 2022, under President Joe Biden, Congress approved an $80 billion increase in IRS funding over a decade, with more than half of it slated to restore the agency’s ability to go after the super-rich. This victory was short lived. By March 2025, Republicans had
slashed that $45.6 billion enforcement budget to just under $4 billion—a 91 percent decrease. A month later, the agency was ordered to abandon rules requiring that certain lucrative tax shelters be reported, making the work of overwhelmed auditors vastly harder.
The result: another $100 billion that America’s wealthy would never pay.
On Biden’s watch, the IRS had also set up a unit to audit complex partnerships that the Wealth Defense Industry uses to obscure its clients’ tax obligations. In September 2025, Jesse Drucker, now at the
New York Times,
reported that “nearly the entire senior team of IRS lawyers with partnership expertise has left the agency, an unusual mass exodus even for a new administration.”
By early 2026, the IRS was a
more debilitated institution than at any time in over a century.
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The IRS publishes data each year on the tax gap, the difference between the estimated amount due and what it collects. This is noncompliance, and the numbers are staggering. The agency estimated that the gap for 2022, the most recent year available, was $696 billion—roughly the combined 2024 budgets for the Departments of Agriculture, Education, Homeland Security, State, and Treasury. But that’s a gross underestimate, because in the realm of offshore tax havens, the IRS is flying blind. “The projections do not fully represent noncompliance,” the IRS report gingerly admits, “because data are lacking.” Charles P. Rettig, the IRS commissioner in 2021, put the gap at about $1 trillion per year, significantly greater than America’s bloated defense budget. For perspective, the 1975 tax gap was only $40 billion. In short, even as the ability of the government to collect taxes owed has declined enormously, the ability of certain Americans to evade them has exploded.
Noncompliance is not an option for most people. Not only do our employers report our earnings to the IRS, but they also withhold taxes from our paychecks and forward the money to Washington. Only 1 percent of wage earners misreport their income, because they
will be caught. Audits of ordinary workers are entirely computerized, meaning “there’s a limited ability for you
not to do the right thing when you have a W-2,” a retired special agent told me. The vast majority of US taxpayers “don’t have an opportunity to cheat.”
The lion’s share of the tax gap is caused by Americans who make money from money. There is no third-party reporting, so they can structure and hide their income as they wish. IRS data show that the misreporting and noncompliance rate for people in this category shoots up to 55 percent. The agency estimates that three-quarters of the tax gap is due not to corporations, but to individuals gaming the system.
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For the rare oligarch who gets into serious tax trouble, the IRS and the Department of Justice have proved reluctant to pursue criminal prosecutions. Attorneys often whittle strong cases down to minor civil charges, and the oligarch goes back to making billions after paying back taxes and penalties. This get-out-of-jail-free card erodes public trust in democratic institutions while emboldening other oligarchs to attempt ever-grander schemes.
Consider the case of Sam and Charles Wyly, whose initial fortune derived from their Texas data processing company, University Computing. In 2015, the IRS announced it would seek a staggering $3.2 billion in back taxes, interest, and penalties from Sam and the estate of his brother, who died in 2011 after his Porsche collided with an SUV. The brothers had evaded taxes for decades, committing their crimes, as
Forbes noted, via “a tangled web of offshore trusts.” They also had used their wealth to influence elections to the benefit of Republican candidates. In 2004, most notably, they helped derail the presidential campaign of Sen. John Kerry by bankrolling the notorious “Swift Boat Veterans for Truth” ad.
Sam, the surviving brother, spent millions building his defense team. It was money well spent. After a marathon four-year civil trial, his own $2 billion share of the IRS tab was reduced to $1.1 billion. “Let’s see how much of the $1.1 billion tax bill winds up getting paid,” a skeptical
financial analyst wrote. Those doubts were justified. In the end, Wyly settled with the IRS for only $300 million, an 85 percent discount on the original amount. He was never charged with a crime or even faced the threat of incarceration.
The case contains important lessons for understanding oligarchic power, and the role of the Wealth Defense Industry in making tax fraud possible and profitable. First, thanks to what the government called a sprawling “scheme of secrecy,” it was not the IRS but a group of computer wizards combing through data at a third-party financial institution who exposed the Wylys’ illegal activities. Second, the brothers’ high-priced advisers had combined secrecy and complexity in an effort to protect them: The brothers controlled 16 trusts in the Isle of Man, along with dozens of accounts and “48 corporations from Nevada to the Cayman Islands.” Unable to access information about offshore accounts or sort out who owned what, the only way the IRS could hope to bring a case was through informants or random luck.
The brothers’ use of professional wealth defenders also gave them a so-called reliance defense. Sam Wyly maintained that he was just following the advice of his lawyers and accountants, and it was all too much for him to understand. The litigation was so complex that one court ruling ran to 459 pages. Wyly replied with an emphatic “no” when asked if he had regrets or would do anything differently. And who can blame him? He sidestepped $1.7 billion in unpaid taxes and penalties and walked away a free man. Even his reputation was shielded in part by privacy provisions that bar the government from commenting on the situations of individual taxpayers.
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www.spiegel.de
