America has become incredibly good at creating wealth, but wages and wealth don’t play by the same rules. This post looks at tax policy, billionaire wealth, borrowing against assets, and why AI-driven productivity makes one question more important than ever: Who gets to share in the upside?

Let’s do some math.

Nothing complicated.

No 47-tab spreadsheet.

No economist explaining that everything is technically going wonderfully if we’d all kindly stop looking at our checking accounts.

Imagine someone makes $50,000 a year.

They get a 5% raise.

That’s another $2,500 per year.

About $208 a month before taxes.

Not bad.

Now imagine a CEO has a $20 million total-compensation package and it increases 10%.

That’s another $2 million.

The CEO’s percentage increase is twice as large.

The additional dollars?

800 times as large.

Those aren’t directly comparable take-home raises. Executive compensation frequently includes stock awards, bonuses and benefits instead of somebody direct-depositing $20 million every other Friday.

But that’s also the point.

Percentages can hide scale.

And I’ve been thinking a lot lately about scale.

Specifically:

When a company succeeds, who actually gets to participate in that success?

Not theoretically.

Not eventually.

Not through a PowerPoint slide explaining shareholder value.

Who actually feels it in their life?

The Trillion-Dollar Elephant in the Room

Elon Musk recently gave us a particularly absurd way to ask that question.

On June 12, 2026, Forbes declared Musk the world’s first trillionaire after SpaceX began trading publicly. Forbes estimated his fortune at roughly $1.1 trillion that morning. His wealth has moved substantially since then, which is itself a useful reminder that net worth is not the same thing as salary or cash in a checking account. Forbes

A trillion dollars is such an enormous number that it almost stops meaning anything.

Musk did not receive a trillion-dollar paycheck.

Most of that fortune represents ownership of businesses that became extraordinarily valuable.

That’s an important distinction.

And this isn’t going to be a post about why Elon Musk sucks.

It would be intellectually lazy to turn one man into the explanation for decades of tax policy, corporate governance, technological change and wealth concentration.

Musk is useful because he’s the biggest visible example of a much larger system.

The more interesting question is:

How did America go from a country with a handful of billionaires to a country capable of producing a trillionaire?

And what happened to everybody else’s share of the success along the way?

Before Reagan, the Tax System Looked Very Different

This is where internet arguments usually become useless.

You’ll hear:

Rich people used to pay 90% taxes!

Then someone replies:

Nobody actually paid 90%!

Both statements contain a piece of the truth.

The top marginal federal income-tax rate was 91% in the early 1960s. It fell to 70% after the Kennedy-Johnson tax cuts and stayed around that level through the 1970s. The first Reagan tax cut reduced the top rate to 50%, and the 1986 reform ultimately brought the top statutory rate down to 28% beginning in 1988. Tax Policy Center

But a 91% top marginal rate did not mean a wealthy person handed Washington 91 cents of every dollar they earned.

That’s not how tax brackets work.

The highest rate applied only to income above a high threshold, and deductions, shelters, different forms of income and other provisions meant actual effective tax rates were substantially lower.

So instead of meme economics, let’s look at something more useful.

CBO estimates that households in the top 1% had an average federal tax rate of about 35% in 1979.

By 1986?

About 25%. Congressional Budget Office

That’s still not the same thing as saying every wealthy household received a ten-percentage-point Reagan tax cut. Household situations differ, and the figure reflects the federal tax system as a whole.

But it shows just how dramatically the tax environment around high incomes changed during that period.

Reagan Changed the Math

Ronald Reagan came into office with a fundamentally different philosophy about taxation.

The supply-side argument went roughly like this:

Very high tax rates discourage investment, entrepreneurship and additional economic activity.

Reduce those rates.

People have more incentive to invest.

Companies grow.

Productivity rises.

Jobs get created.

Workers eventually benefit from the larger economy.

That’s an actual economic argument.

It deserves better than being reduced to either:

REAGAN SAVED CAPITALISM

or:

REAGAN DESTROYED THE MIDDLE CLASS.

The Economic Recovery Tax Act of 1981 began phasing in broad individual tax reductions and cut the top marginal rate from 70% to 50% beginning in 1982. It also effectively reduced the maximum tax rate on certain long-term capital gains from 28% to 20%. IRS

Then came the Tax Reform Act of 1986.

By 1988, the basic statutory individual rates had been collapsed to 15% and 28%, although an intermediate phaseout produced an effective 33% marginal rate over part of the income range. The law also eliminated or restricted numerous deductions and shelters, so it wasn’t simply a case of cutting rates while changing nothing else. IRS

Still, look at the broad arc:

70% top rate.

Then 50%.

Then 28%.

In less than a decade.

That’s not tuning the carburetor.

That’s replacing the engine.

Then America Started Producing Billionaires at Industrial Scale

When Forbes published its first Forbes 400 list in 1982, only 13 Americans were billionaires.

By 1999, Forbes counted 267. Forbes

Now jump to 2026.

The Forbes 400 requires a minimum fortune of $4.4 billion just to get through the door.

And Forbes says there are another 590 American billionaires who aren’t rich enough to make the Forbes 400.

In other words, Forbes’s current figures imply roughly 990 American billionaires. Forbes

Apparently becoming merely a billionaire now comes with the indignity of not making the list.

That’ll keep a person humble.

Did Reagan Create the Billionaires?

No.

That’s much too simple.

Start with inflation.

A billion dollars in 1982 represented considerably more purchasing power than a billion dollars today.

Then consider everything else that happened.

Personal computing.

The internet.

Globalization.

Software.

Mobile technology.

Biotechnology.

Cloud computing.

Massive capital markets.

Network effects.

Social media.

Artificial intelligence.

Companies capable of serving billions of customers while adding comparatively little marginal cost.

Microsoft made Bill Gates enormously wealthy.

Amazon made Jeff Bezos enormously wealthy.

Meta made Mark Zuckerberg enormously wealthy.

Tesla and SpaceX account for much of Musk’s fortune.

None of those companies became enormous merely because Ronald Reagan signed tax legislation.

That would be a hell of a presidential superpower.

But Tax Policy Isn’t Irrelevant Either

Here’s where the evidence gets interesting.

Economists Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva studied changes in top tax rates across countries and found that reductions in top marginal tax rates were associated with increases in the pretax income share flowing to the top 1%.

They did not find a corresponding association with faster overall economic growth.

Their research also found evidence consistent with compensation bargaining playing a role. CEO pay was more responsive to favorable circumstances outside executives’ control when top rates were lower. American Economic Association

That doesn’t mean:

Lower taxes automatically create greedy CEOs.

Humanity managed greed long before we invented Form 1040.

It means incentives matter.

If extracting another $10 million in compensation means keeping dramatically more of the marginal dollar, the economic reward for negotiating that extra compensation changes.

But even those researchers wouldn’t justify reducing forty years of economic change to tax policy alone.

Technology matters.

Globalization matters.

Financial markets matter.

Labor bargaining power matters.

Corporate governance matters.

Equity compensation matters.

Taxation is one part of a much larger machine.

What Isn’t Really Debatable Is That Wealth Became More Concentrated

Saez and Gabriel Zucman’s long-term research on U.S. wealth found a striking U-shaped pattern.

Wealth concentration was extremely high early in the twentieth century.

It fell substantially through the middle decades.

Then, beginning around the late 1970s, it started rising again.

Their estimates put the wealth share of the top 0.1% at about 7% in 1979, rising to roughly 22% by 2012 in that methodology. National Bureau of Economic Research

A later distributional analysis from Saez and Zucman likewise found significant increases in top income and wealth concentration after the late 1970s. National Bureau of Economic Research

Again:

Correlation isn’t causation.

But correlation also isn’t something we should pretend doesn’t exist because it makes the story inconvenient.

There’s Another Difference: The Wealthy Don’t Use Money the Way Most of Us Do

This part is probably less understood than the tax rates.

When Forbes says someone is worth $10 billion, that doesn’t mean there’s $10 billion in checking with an absolutely terrifying debit-card limit.

Most giant fortunes are assets.

Stock.

Private-company ownership.

Real estate.

Investments.

And those assets operate very differently from wages.

If I go to work and receive a paycheck, the income has happened.

Federal income taxes.

Payroll taxes.

Potential state taxes.

Everybody gets their piece.

There isn’t a checkbox on the paystub that says:

Would you prefer to recognize this income sometime after 2047?

Apparently payroll software lacks imagination.

But imagine I own stock that I bought for $1 billion and it eventually becomes worth $10 billion.

I now have $9 billion of unrealized appreciation.

The IRS generally calculates a capital gain when a capital asset is sold by comparing the amount realized with the owner’s adjusted basis. Simply watching a stock appreciate does not itself create a realized capital gain. IRS

So now suppose I want $100 million in cash.

I have choices.

Option One: Sell the Stock

I sell some shares.

Depending on my basis in the shares I sell, that transaction can generate a taxable capital gain.

Fairly straightforward.

But there is another option available to people with enough assets.

Option Two: Borrow Against It

Banks and brokerage firms offer securities-backed lending where investments serve as collateral.

FINRA describes securities-backed lines of credit as a way to access cash without liquidating the underlying investments.

It explicitly notes that one attraction can be avoiding a capital-gains event that might occur from selling the securities. FINRA

So instead of selling $100 million of stock, our hypothetical billionaire pledges securities and borrows $100 million.

Now they have cash.

They still own the stock.

If the stock rises, they continue participating in that appreciation.

And there’s another important difference.

Borrowed money generally isn’t income.

The IRS explains that loan proceeds aren’t included in gross income when received because the borrower has an obligation to repay them. If the debt is later forgiven, then taxable income may arise, subject to various rules and exceptions. IRS

So:

Sell appreciated stock?

Potential taxable gain.

Borrow against appreciated stock?

Debt.

Different tax event.

That’s Not a Secret Billionaire Magic Trick

Ordinary people do versions of this too.

A home-equity loan uses the same broad concept.

Your house increased in value.

You don’t sell the kitchen to generate liquidity.

You borrow against the asset.

The difference is scale and access.

FINRA says a securities-backed credit line can commonly allow borrowing equal to roughly 50% to 95% of eligible account assets, depending on the securities and lender. It also warns that these loans carry very real risks: falling asset values can trigger maintenance calls, forced sales, interest costs and potential tax consequences. FINRA

So this isn’t free money.

The debt has to be serviced.

The lender can want its money back.

Markets can fall.

Collateral can get sold.

But having $10 billion of assets gives you access to a financial toolkit that someone living primarily from wages simply doesn’t have.

That’s the real distinction.

The rich don’t merely have more dollars. Their dollars can behave differently.

Musk Is a Useful Example, Not the Villain

Elon Musk is useful here because Tesla’s own SEC filings provide unusually clear documentation of this mechanism.

Tesla disclosed in earlier filings that financial institutions had extended personal loans to Musk that were secured partly by pledged Tesla shares. One filing described a $200 million Morgan Stanley loan, secured in part by Tesla stock, and warned that declines in Tesla’s stock price could require Musk to post more collateral or sell shares. SEC

Earlier filings documented similar secured lending arrangements. SEC

That’s not evidence Musk did something improper.

He didn’t invent securities-backed lending.

The point isn’t:

Look at the sneaky thing Elon did.

It’s:

Look at how financial life changes once most of your economic power comes from appreciating assets instead of a paycheck.

Musk simply makes the mechanism visible because everything involving him comes with several additional zeros.

And Then There’s “Buy, Borrow, Die”

This strategy has acquired a cheerful little nickname:

Buy. Borrow. Die.

It has even been the subject of Senate Finance Committee hearings, although claims about how widespread or central it is should be treated separately from the underlying mechanics. Senate Finance Committee

The basic idea is pretty simple.

Buy

Own an asset that appreciates.

A business.

Stock.

Real estate.

Borrow

Instead of selling and realizing the gain, borrow against the asset.

The borrowing provides liquidity.

The asset stays invested.

No sale means the appreciation has not been realized through that transaction, and the loan proceeds themselves generally aren’t taxable income because they’re debt. FINRA

Die

Here’s where things get really interesting.

Under current federal rules, the basis of inherited property is generally adjusted to its fair-market value at the owner’s death.

It’s commonly called the step-up in basis. IRS

Imagine someone bought an asset for $10 million.

It becomes worth $1 billion.

They never sell it.

They die with it worth $1 billion.

Subject to the rules and exceptions involved, the heir may receive a basis close to the asset’s fair-market value at death.

That means the roughly $990 million of appreciation during the original owner’s lifetime may never face the capital-gains income tax that would have been triggered had the original owner sold it.

That’s a massive distinction.

But There Are Some Very Important Asterisks

Before we turn this into another internet infographic with a flaming dollar sign, there are caveats.

Estate taxes exist.

Debt still has to be repaid.

Not every asset receives identical treatment.

Not every billionaire is financing their lifestyle entirely through secured debt.

Collateral can crash.

Lenders can force sales.

And some wealthy people sell enormous amounts of stock and pay enormous tax bills.

So:

Billionaires pay no taxes because they borrow forever

isn’t a serious description of the tax system.

But neither is:

A billionaire’s appreciating assets are taxed just like your paycheck.

They’re not.

That’s the important part.

Work Is Taxed When It Happens. Wealth Can Wait.

This may be the simplest way I can describe the structural difference.

For most working Americans:

Work → income → tax.

It happens continuously.

For an investor holding an appreciating asset:

Buy asset → asset appreciates → no realized capital gain yet.

That appreciation may continue for years.

If the owner needs liquidity, borrowing may provide access to some of the economic value without requiring a sale.

That is not illegal.

It isn’t inherently unethical.

It is simply how the system works.

And this is why I think arguments focused exclusively on the top income-tax rate miss a huge piece of modern wealth.

Very wealthy people frequently do not become wealthy primarily because of salary.

They become wealthy because things they own become dramatically more valuable.

You can raise or lower the tax rate on wages all day.

That’s not the entire machine anymore.

“The Rest of Us Hold the Bill” Needs Some Nuance

This phrase captures something real, but I don’t want to misuse it.

It does not mean:

A billionaire avoided $1 in capital-gains tax, therefore a middle-class worker gets a $1 invoice.

Federal finance doesn’t work like splitting appetizers at Applebee’s.

And wealthy households absolutely do pay substantial federal taxes. CBO’s analysis shows the federal tax system remains progressive overall. Congressional Budget Office

But somebody ultimately finances government.

Over roughly the last half-century, CBO says individual income taxes have generated an average of about 46% of federal revenue, payroll taxes another 34%, and corporate income taxes roughly 10%. Congressional Budget Office

Individual income and payroll taxes are therefore doing an enormous amount of the lifting.

And wages are unusually difficult to defer.

Your employer reports them.

Taxes are withheld.

Social Security and Medicare taxes get collected.

Every paycheck.

Tick.

Meanwhile, significant unrealized appreciation can remain outside the income-tax base until a realization event occurs.

If governments reduce revenue without reducing spending equivalently, there are only so many places for the arithmetic to go:

Higher deficits.

More debt.

Lower spending.

Higher taxes elsewhere.

Or some combination.

That’s the sense in which the rest of us can end up holding part of the bill.

Which Brings Us Back to the Modern Corporation

This isn’t just a tax story.

Look at compensation.

Equilar and the Associated Press found that median S&P 500 CEO total compensation reached $17.7 million in 2025, up 5.9%.

The median company CEO-to-worker pay ratio in that study was about 200 to 1. Equilar

Meanwhile, BLS says private-industry wages rose 3.3% during 2025.

Adjusted for inflation, wages rose about 0.7%.

By June 2026, private-industry wages were up 3.1% nominally over the previous year but down 0.4% after inflation. Bureau of Labor Statistics

That doesn’t mean every CEO flourished while every employee suffered.

But it brings us back to the first example.

A percentage isn’t the whole story.

A 5% increase on $50,000 is $2,500.

A 5% increase on $20 million is $1 million.

Both statements can appear in a compensation report as:

Pay increased 5%.

Only one of those changes someone’s ability to buy an island.

And Corporate Tax Cuts Can Work Without the Gains Spreading Evenly

Here’s another area where I think both political camps frequently oversimplify things.

A major 2026 American Economic Review study examined the effects of the 2017 corporate tax cuts using linked employer-employee tax records.

The researchers found that the corporate tax reductions increased:

investment,

sales,

profits,

employment,

and payrolls.

That’s meaningful evidence in support of the idea that lower corporate taxes can encourage economic activity.

But here’s the other half.

The earnings gains were concentrated among highly paid workers.

The researchers’ short-run estimate found that 87% of private-income gains went to the top 10% of the income distribution. TopCat

So did the policy create growth?

The evidence says yes.

Did everyone share equally in that growth?

The evidence says no.

Two things can be true.

I’m told this is still allowed.

The 2025 Tax Law Has a Similar Distribution Question

The 2025 reconciliation law changed both taxes and government spending.

CBO estimates that households, on average, receive more resources under the law than under its previous baseline.

But those effects aren’t evenly distributed.

CBO projects resources decreasing for households toward the bottom of the income distribution, largely because of changes to Medicaid and SNAP, while households in the middle and toward the top generally gain, primarily because of federal tax changes. Congressional Budget Office

Separately, CBO estimates that legislation enacted during the first session of the 119th Congress will reduce revenues and increase cumulative deficits substantially over the 2025–2034 period. Congressional Budget Office

Again, this isn’t evidence that tax cuts are inherently bad.

It is evidence that:

Economic growth, government revenue and distribution are three different questions.

We should probably stop answering all three with one slogan.

Now AI Is About to Pour Gasoline on This Conversation

This is the part that really makes this a Next Is Human story instead of an economic-history essay.

AI has the potential to produce enormous productivity increases.

We already have real evidence.

A published Quarterly Journal of Economics study followed 5,172 customer-support agents.

Giving workers access to a generative AI assistant increased issues resolved per hour by 15% on average.

Less-experienced and lower-skilled workers benefited the most, with less-experienced workers seeing productivity improvements around 30% on that measure. OUP Academic

That is fantastic.

This is exactly the version of AI I want.

Not:

AI replaces the worker.

But:

AI makes the worker substantially better.

Except now we have a question.

Who Gets the 15%?

Seriously.

If an employee becomes 15% more productive because of AI, where does that 15% go?

Does the worker earn 15% more?

Does the company capture it through increased output?

Do customers get lower prices?

Do shareholders receive higher profits?

Does the worker get shorter hours?

Does the company eliminate a future position?

Does management simply raise the worker’s quota by 15%?

Technology doesn’t answer that.

The AI model doesn’t decide how productivity gains get distributed.

People do.

And historically, we’ve been considerably better at creating productivity than agreeing how the benefits should be shared.

Sometimes AI Won’t Take Your Job. It’ll Take the Job That Would Have Been Next to You.

This is an important distinction.

Imagine six employees were traditionally needed to handle a workload.

AI enables five employees to do it.

Nobody necessarily gets fired.

The company simply doesn’t hire number six.

There is no termination.

No viral LinkedIn announcement.

No newspaper headline reading:

AI ELIMINATES JOB THAT NEVER EXISTED

But something still changed.

For the company?

Greater productivity.

For the existing employees?

Potentially useful technology.

For the person trying to enter the profession?

One fewer door.

This transformation may happen far more quietly than people expect.

This is where I think we should be intentional.

We’re currently drowning in phrases like:

AI transformation.

AI optimization.

AI efficiency.

Margin expansion.

Operating leverage.

Headcount efficiency.

A truly magnificent collection of corporate nouns.

But if AI makes workers 15%, 30% or eventually 100% more productive, and essentially all of that additional value flows upward, we are going to create an economic problem much larger than whether employees used ChatGPT to compose emails.

Employees don’t need to receive every dollar.

Companies need profits.

Investors took risks.

Customers should benefit from lower costs.

Businesses need capital to keep growing.

But there’s an enormous amount of territory between:

Employees get everything.

and:

Congratulations on delivering record productivity. Here’s a branded Yeti cup.

One option isn’t particularly exotic.

Profit sharing.

Not:

Leadership may consider discretionary bonuses depending upon company performance.

That’s corporate for:

Ask again in December.

I’m talking about a defined formula.

If profits exceed a threshold, some defined portion goes into an employee pool.

Eligibility is known.

The formula is known.

The calculation can be audited.

There’s evidence behind this.

A study of France’s mandatory profit-sharing system found that the policy increased labor’s share of firm income by about 1.8 percentage points, while finding no statistically significant effect on investment or productivity in that setting. National Bureau of Economic Research

That doesn’t prove every American business should copy France.

It does suggest that shifting some profits toward workers does not automatically cause the machinery of capitalism to burst into flames.

Useful discovery.

Ownership Shouldn’t Stop at the Executive Floor

There’s another obvious reason executives accumulate extraordinary wealth.

Ownership.

When the company becomes ten times more valuable, people who own part of it become richer.

Workers paid almost entirely in wages do not automatically participate in that appreciation.

Broad employee ownership can help close that gap.

But it needs to be structured carefully.

If your:

job,

salary,

health insurance,

and retirement savings

all depend on one company succeeding…

you haven’t built a retirement plan.

You’ve created a single point of failure.

Ask Enron.

So employee ownership should supplement reliable pay and diversified retirement savings.

But if equity is one of the primary engines through which modern fortunes get built, there’s no obvious reason participation has to stop at the C-suite.

Workers Need Some Say in How AI Changes Their Jobs

AI isn’t merely an IT purchase.

If deploying AI changes:

hiring,

headcount,

performance expectations,

compensation,

training,

career paths,

and the number of humans needed to perform the work,

then employees have a pretty obvious stake in the decision.

There are multiple ways to create that voice.

Unions.

Employee councils.

Consultation.

Profit-sharing committees.

Board representation.

Formal workforce agreements.

Different organizations will choose differently.

Treasury’s review of economic literature estimates a union wage premium of roughly 10% to 15%, while also finding benefits around retirement plans, scheduling and workplace practices. U.S. Department of the Treasury

That doesn’t mean every workplace needs the same labor model.

It means bargaining power affects outcomes.

That shouldn’t be particularly surprising.

Everyone negotiates differently when the alternative isn’t just completing an anonymous engagement survey that disappears into the corporate abyss.

Maybe Productivity Should Give Us Some Time Back

This one matters to me.

Technology has been promising to give us more free time for decades.

Email made communication instantaneous.

So naturally we now receive 400 emails.

Smartphones let us work anywhere.

So naturally we work everywhere.

Teams made meetings incredibly easy.

Humanity may never recover.

If AI genuinely makes it possible to accomplish five days of productive work in four…

maybe the answer shouldn’t always be:

Wonderful. Here’s another day’s worth of work.

Some of those productivity gains could become:

shorter workweeks,

additional vacation,

more flexible schedules,

paid training,

or simply fewer hours spent completing administrative garbage nobody became an adult hoping to do.

Money isn’t the only way workers can share productivity.

Time counts too.

We Need a Better Scoreboard

Companies measure everything.

Revenue.

Profit.

EBITDA.

EPS.

ARR.

Margins.

Pipeline.

Customer retention.

Stock price.

Return on capital.

We’ve become incredibly sophisticated at measuring what companies receive from people.

Maybe we should become equally serious about measuring what people receive from company success.

Imagine an annual employee outcomes report showing:

median employee pay,

inflation-adjusted pay,

profit sharing,

employee ownership,

hours worked,

benefit access,

internal promotions,

training,

hiring,

positions eliminated,

and what changed after AI was deployed.

Don’t eliminate the shareholder report.

Add another scoreboard.

Because if we’re going to write:

Our people are our greatest asset

in every annual report ever printed…

maybe those people deserve a line item.

This Isn’t About Punishing Success

I want to make this part crystal clear.

I don’t think executives have to lose for workers to win.

I don’t think entrepreneurship is bad.

I don’t think investors are villains.

I don’t think becoming wealthy is morally suspicious.

I don’t think lowering taxes is automatically wrong.

I don’t think raising taxes automatically produces fairness.

And I absolutely don’t think America would be better off if successful companies became less successful.

I want people to build things.

Take ridiculous risks.

Start companies.

Invent technologies.

Create jobs.

Make fortunes.

I hope somebody sitting in a garage right now builds the next trillion-dollar company.

The question is what happens after it works.

Reagan Didn’t Create the Trillionaire. But He Belongs in the Story.

It’s historically indefensible to say:

Ronald Reagan cut taxes, therefore Elon Musk became a trillionaire.

Technology did a tremendous amount of the work.

So did capital markets.

Entrepreneurship.

Globalization.

Public policy.

Corporate structure.

And, frankly, Musk’s willingness to take some extraordinarily large risks.

But Reagan’s tax reforms were still an important structural change.

The top statutory individual rate fell dramatically.

The taxation of investment income changed.

The effective federal tax rate on the top 1% declined sharply during the early 1980s.

And in the decades that followed, income and wealth became increasingly concentrated at the top.

Research suggests top-tax reductions contributed to rising top incomes, even though they clearly don’t explain the entire phenomenon. Congressional Budget Office

So Reagan isn’t the explanation.

He’s part of the story.

History has an irritating habit of being complicated.

And Borrowing Against Wealth Belongs in the Story Too

This may be just as important as the headline tax rate.

The American tax system largely taxes realized income.

Wages are realized immediately.

Much investment appreciation is not.

And people who own enormous amounts of appreciating assets can sometimes use those assets as collateral to create liquidity without first realizing a capital gain.

That’s not a conspiracy.

That’s not Musk cheating.

That’s not secret.

FINRA literally explains the product to investors. FINRA

Combine that with the general step-up in basis available on inherited assets, and you can understand why focusing exclusively on someone’s annual taxable income may tell you surprisingly little about their actual economic power. IRS

Work is taxed when it happens. Wealth can wait.

That’s not the entire tax system.

But it’s a distinction worth understanding.

The Part I Keep Coming Back To

I don’t think this is fundamentally a story about whether Elon Musk deserves a trillion dollars.

I don’t know what a human being is supposed to do with a trillion dollars.

Apparently buy Twitter and see where the evening takes you.

But Musk isn’t really the point.

The point is that America has built an extraordinary machine for creating wealth.

In 1982, Forbes counted 13 American billionaires.

Today, its numbers imply roughly 990.

Eventually, one crossed a trillion dollars. Forbes

That’s an astonishing story of economic expansion, entrepreneurship, technological progress and asset appreciation.

It’s also reasonable to ask whether our definition of success is complete.

Because I don’t think the useful question is:

How do we stop rich people from becoming richer?

It’s:

Can ordinary people build a secure life through their work and meaningfully participate in the value they help create?

If a company becomes dramatically more productive because of AI, employees should see some benefit.

If profits explode, the people who helped create them should participate somehow.

If ownership is how fortunes compound, ownership shouldn’t necessarily stop at the executive floor.

If technology removes tedious work, maybe humans should occasionally get some of that time back.

And if tax policy encourages investment and creates economic growth, we should also be willing to measure who receives the gains instead of assuming growth and distribution are the same question.

They aren’t.

The Rich Don’t Have to Become Poor for Everyone Else to Do Better

That’s ultimately where I land.

I don’t want an economy where success is punished.

I also don’t want one where success becomes so concentrated that the rest of the country is asked to accept that extraordinary wealth at the top is proof that the system is working for everyone.

Those are not the only two choices.

The rich don’t have to become poor for working people to become more financially secure.

But working people shouldn’t have to become relatively poorer for wealth at the top to continue compounding either.

America has proven beyond much doubt that it knows how to create wealth.

We’re ridiculously good at it.

Now AI may give us another enormous leap in productivity.

Maybe this time we should decide beforehand what we want that success to look like.

More output?

Absolutely.

More profitable businesses?

Hopefully.

More valuable companies?

Sure.

More entrepreneurs getting rich because they built something genuinely valuable?

I’m all for it.

But also:

Better wages.

More ownership.

More financial security.

Better retirement.

More opportunity.

Maybe even some time back.

Because if AI really delivers the abundance everyone keeps promising us, the defining question won’t simply be:

How much value did it create?

It will be:

Who got to keep it?

And that’s not really an AI question.

It’s a human one.

Because what comes next shouldn’t just be more productive.

It shouldn’t just be more profitable.

What comes next should be human.

Sources & further reading

For the historical federal tax-rate changes, IRS historical data and the Tax Policy Center document the decline from the 70% top marginal rate before the Reagan reforms to 50%, and ultimately 28% after the 1986 reform. IRS

CBO’s historical distribution analysis is useful for separating statutory tax rates from what high-income households actually paid; its estimate for the top 1% ranges from a 35% average federal rate in 1979 to 25% in 1986. Congressional Budget Office

For the connection between top tax rates and top incomes, Piketty, Saez and Stantcheva examine taxation, compensation bargaining and economic growth, while Saez and Zucman’s work documents the longer-run rise in U.S. wealth concentration. American Economic Association

For borrowing against investment assets, FINRA’s securities-backed lending guidance and IRS guidance on capital gains, borrowing and inherited-property basis explain the underlying mechanics without requiring anyone to believe a TikTok accountant. FINRA

For modern CEO compensation and worker wages, the current Equilar/AP CEO Pay Study and BLS Employment Cost Index provide the underlying figures. Equilar

And for the AI/productivity side, the Quarterly Journal of Economics study of 5,172 customer-support workers provides unusually useful real-world evidence of how generative AI can increase worker output, while the NBER profit-sharing research offers one example of how companies might distribute more of the resulting upside. OUP Academic

If the Company Wins, Shouldn’t the People Who Built It Win Too?

From Reagan-era tax cuts to billionaires borrowing against stock and AI-driven productivity, America has become astonishingly good at creating wealth. The harder question is who actually gets to share in it.