By Gwyneth K. Shaw
“Berkeley Law Voices Carry,” hosted by Gwyneth Shaw, is a podcast about how the school’s faculty, students, and staff are making an impact — in California, across the country, and around the world — through pathbreaking scholarship, hands-on legal training, and advocacy.
This episode features Berkeley Law Professor Brian Galle, who’s just released a new book, How to Tax the Ultrarich, outlining a plan for fairer taxation at the federal level.
In the United States, the top 0.1 percent — about 340,000 people — now hold $1 in every $6 of private wealth, or roughly $23 trillion. In the book, published by the Roosevelt Institute, Galle proposes reforms to make the super wealthy pay taxes on the growth of their fortunes, with methods he argues could avoid being struck down by the U.S. Supreme Court.
Galle is also involved in efforts to put a tax on billionaires on the ballot in California in November.
He joined the Berkeley Law faculty in 2025 after a decade at Georgetown Law; he also taught at Boston College and Florida State. Galle holds a J.D. from Columbia and an LL.M. in taxation from Georgetown. In 2022 and 2023, he served as a senior fellow at the Securities & Exchange Commission, helping to draft and strategize major rulemaking for the commission. Before becoming a professor, he was a federal prosecutor in the Criminal Appeals and Tax Enforcement Policy Section at the Tax Division of the U.S. Department of Justice.
Galle teaches in the fields of federal income taxation and corporate tax law and policy.
What follows is an edited version of the conversation. Listen to the full episode below and visit the “Voices Carry” archive for all episodes.
GWYNETH SHAW: Let’s start with the basics. What is the problem you’re trying to solve and how would your proposal work?
BRIAN GALLE: Yeah, the problem that the book tries to solve is a small one, which is that our economy and our political system are teetering on the brink of a Turkey-like collapse towards 70% inflation rates and a flight of the most productive members of society. So just a small problem. Now, it’s not clear that the tax system by itself is going to arrest or stop that kind of slide, but it can make an incremental contribution.
The idea of the book is no one who looks at our tax system right now is going to say it’s fair, or it’s progressive, or it’s working for 99.9% of Americans literally. The difficulty is that today, the Supreme Court may be standing in the way of what seem like some common sense solutions. The book tries to work out how to balance the economic imperative of making the tax system fair and more progressive with the constitutional constraints that the Supreme Court is hinting that it would impose on anything that Congress tried to do.
The book is about federal legislation, it’s about nationwide efforts to address the unfair federal tax system that we have today. Separately, not in the book, I’m also involved in some policy efforts in California that people may have heard of, including helping to write the text of this thing called the 2026 California Billionaire Tax Act, which we’re hoping will be on the ballot in November of 2026.
Many of the things that I say in the book aren’t actually relevant for the California effort and vice versa, because the unique legal constraints that Congress is facing at the federal level are not actually barriers to state wealth taxes.
Every state in America had a wealth tax at the turn of the 20th century. These are longstanding traditional fiscal instruments that the states have used, and actually many of them still use today. So, there are no legal problems with taxing the super rich by taxing their wealth, for example, at the state level.
The book is all about balancing the economic imperatives with the legal obstacles at the federal level.
We don’t have great financial data about, proportionally, how rich Rockefeller was in the 19th century. But as best we can tell, this is the most gilded of Gilded Ages America has ever seen. The richest couple of hundred people seem to have a much larger share of U.S. wealth than has ever been true before.
In the economic literature, there’s no country that’s had concentrated growth like that and has gone on to have a successful, thriving economy. There’s a lot of evidence that when you have inequality and wealth concentration like that, lots of bad things happen to the economy. And it kind of makes sense — when you have that kind of concentrated growth, you have concentrated power. And the people with that concentration of wealth tend to steer the country so it does things that are good for them and that they like, and not necessarily things that are good for everyone else.
Countries with this kind of concentrated wealth, and high inequality, have more economic crises. They have more crises of all kinds because the leadership of the country is beholden to them and is not preparing for the worst for everyone else. They often have crippling inflation. Turkey is the example there.
They’re less innovative. They grow more slowly. It’s much harder to start new businesses, because the people who are established and in power are not interested in having new people come up and challenge them.
Ultimately, and sort of ironically, it’s not that different from a communist system, where the state just takes or demands most of the wealth from new entrepreneurs. In a system like the one in Turkey, you can only succeed by being on the side of the ins or by bribing them, and that means there’s not much incentive for economic innovation or growth.
The people who have good ideas go somewhere else, and that’s what ultimately strangles the economy. I don’t think anyone wants that to be the path that we continue on.
The tax system is one of the ways that you can de-concentrate the super concentrated wealth that we’re currently experiencing, and some of that is going to be a long-term effort. One of the things that the book tries to fix are inheritance taxes and the transmission of wealth and power from one generation to another.
How do we fix the system that we got through the tax system that we have? How do we use the tax system to try to make things a little bit more equal? Well, one obvious way is to try to impose a greater tax burden on the ultrarich.
Right now though their tax burden is exceptionally low. My UC Berkeley colleagues Emmanuel Saez and Danny Yagin and their co-authors find that the all-in tax rate that’s paid by the richest Americans is 20% lower than the median American household. The median American household has a net worth of zero, because they might have some assets, but they also have substantial debts.
So we’re talking about billionaires paying a 20% lower tax rate than a household with a net worth of zero. That’s obviously not a fair or progressive tax system. Why is it so out of whack?
It is true that we have progressive tax rates: The higher your income, the higher rate you’ll pay on that income. And the answer is because a very simple aspect of our tax system is when an investor makes money, we only tax that investor when she actually chooses to sell the investment asset.
The technical tax term for it is the realization rule. And indeed, if you make it to the end of your life without ever selling your investment, there will never be any tax on the investment gains that happen during your lifetime. Your heirs get to receive that asset without ever paying any income tax.
Now there is an estate tax in America, but it’s badly broken, and so it’s quite possible for heirs to receive vast fortunes of hundreds of billions of dollars while paying essentially zero tax. The family could pay zero tax more or less in perpetuity. And that’s a big problem.
Reasonable people during the Biden administration, smart people, suggested for instance that maybe we ought to raise the tax rate on investment gains. And the problem is if you try to raise the tax rate what’ll happen is investors will respond by selling less of their assets and finding other ways to live their lives.
A weird wrinkle of our tax system is when you borrow money, that doesn’t count as taxable, and so one thing among many options that billionaires have is sometimes called “buy, borrow, die.” They acquire their assets, they borrow money to sustain their lifestyle, and then they die without ever paying any tax.
It actually turns out you don’t have to borrow a lot if you’re a billionaire. You have so much money that you can’t possibly spend even the small trickle of income that comes off of that giant pile of wealth each year. You pay a tax on only a small fraction of your giant pile of wealth, but that turns out to be enough to sustain a lifestyle with multiple helicopters.
So what do we do? We want to raise the effective tax rate on these very wealthy individuals, but if we raise the tax rate they’ll just respond by borrowing more, probably. A couple of the conventional answers are a wealth tax, or something very similar to a wealth tax called a “mark-to-market tax.”
It’s just a tax each year on your untaxed investment gains. Each year, when your stuff goes up in value you include that, and if your stuff goes down in value you take a deduction for that. That’s a mark-to-market tax.
Here’s the problem. In 2024, the Supreme Court decided a case about a small narrow provision that the challengers said was a mark-to-market tax. The Supreme Court ultimately disagreed, and said, we think it’s basically a standard income tax. But along the way, the Supreme Court said we’re not saying that a wealth or mark-to-market tax would be constitutional. Because there’s this thing, the 16th Amendment.
The 16th Amendment says that the Congress can tax incomes from whatever source derived. And what the Supreme Court said in 2024 is, we’re not sure whether a change in the value of an asset from year to year before it’s sold counts as income under the 16th Amendment. And in fact, there were four conservative justices who went so far as to say, we’re sure and we’re sure it’s not income. And then two of the other conservative justices who didn’t feel the need to take a position on that yet, but they definitely hinted.
The solution that the book proposes is, let’s tax things at sale, then we’re going to tax them at the same rate that the investor would have gotten essentially if they had been paying tax each year all along. So another way to put that is imagine that you start with $100 million and then each year you were subject to a mark-to-market tax, so you were taxed on the changes in the value of that thing as it goes up to $1 billion. And as the pre-tax value went up to $1 billion, if you were paying mark-to-market taxes all along, maybe you would’ve been left at the end of that period with $700 million.
So under my proposal, which I call the Fair Share Tax or FAST, when you sell that originally $100 million asset, you will pay $300 million in tax, where $300 million is exactly the amount that the government would’ve collected over time from a mark-to-market tax.
Why does that make sense? Well, from the taxpayer’s perspective, there is no longer any reason to wait until death to sell because the longer they wait, the higher the tax rate they’ll pay. The more appreciated the asset is, the higher tax rate they’ll pay.
After adjusting for the kind of the value of waiting, they can’t reduce the amount of tax that they pay. Putting it another way, they can’t walk away with more money by waiting than they get by selling. They come out in the same place either way.
So we get the same progressivity, and the same revenues, as the mark-to-market tax. We get the same incentives that the taxpayer has. The only thing that’s different is the timing — it doesn’t happen until the taxpayer sells.
In theory, the sales should happen a lot faster — pun intended — under the FAST because there’s no longer this tax reason to wait. Waiting is costly, and it costs money to wait to sell your stuff. Why spend that money to wait if you aren’t saving anything by doing it? That’s the core insight behind the proposal.
GWYNETH SHAW: What are some of the arguments that you can see, politically or legally, against this?
BRIAN GALLE: I think one important political worry is that if we wait until people sell to collect the tax, that actually after the Congress that enacts this tax there’ll be another Congress that repeals it before anyone ever has to pay?
So one of the bells and whistles in the book is this is set up to encourage people to choose to pay sooner than sale. Why would they do that? The idea is you make the option to prepay a little bit more advantageous than waiting until sale.
For instance, the capital gains tax rate is 20%, but you could make it 19% if you prepay, or 19.5%. Almost everyone who’s super rich is going to want to prepay, because prepaying is essentially the same as if you could borrow at a low rate to pay off a loan at a higher rate.
One way to think about what the FAST is doing is it’s taking that mark-to-market tax and treating it as if the government lent you the money to pay the mark-to-market tax, then it’s collecting back on that loan plus interest when you sell. And the interest rate you’re paying when you sell is the same rate of return that your investment was earning,
So if you’re Jeff Bezos, your Amazon stock has grown by about 2000% since 2000, or about 40% a year on average. Obviously Bezos could borrow to actually pay off a tax that he volunteered to pay at way less than 40% a year.
So it’s a super good deal for him to take the prepayment option, go out and actually borrow if he doesn’t have the cash to pay off the tax, and he’ll probably pay an interest rate of something like 5% or 6%. So borrowing at 6% to invest in an asset that’s earning 40%, that’s a really good deal. So most people are going to want to prepay and policymakers can add extra sweeteners in order to encourage them to do that.
GWYNETH SHAW: You mentioned that this is an unprecedented situation, at least in American history, in terms of wealth concentration. How did we get here? Because those of us who remember the Gilded Age from history class can remember both the people who were concentrating wealth in that period and also some of the reforms and laws that were put into place.
How did we get from that moment to now?
BRIAN GALLE: It’s an excellent, hard question, and better social social scientists than me have written all about it. All I can do is give you the tax system perspective.
We radically cut top tax rates in 1986 as part of a deal the Reagan administration made with Congressional Democrats. Before 1986, there were a bunch of loopholes that very rich households were exploiting, including some really silly ones — like, it turned out that having an alpaca farm was a really good way to save on taxes.
The thinking behind the 1986 bargain was that the top rates would be cut by a lot but all the loopholes would be closed. So the top rate was eventually set at 37%, but everyone was supposed to really pay that number. Except it turns out people don’t really pay that number because over time a few things happened.
One, rich people and their lawyers discovered new ways to reopen those loopholes. I don’t know if it’s alpaca farms exactly — or maybe it’s llamas these days — but there’s a lot of good reporting showing a lot of those loopholes now are more open than we thought.
The other thing is that there was a vast increase since the ’80s in the wealth that top individuals hold in the form of their investments, whether it’s the share of a private equity fund that a manager gets paid with, or the stock of a publicly traded company that a CEO or founder has, or it might just be kind of the sweat equity of somebody who built a network of seven used car dealerships. But overwhelmingly, way more wealth in America is held in the form of investments, and when wealth is in the form of an investment we have a double problem. One, the top rate is much lower: It’s effectively 23.8% for high-earning Americans. Two, most of those people get to choose when to pay tax, and unsurprisingly the answer they generally choose is “never.”
GWYNETH SHAW: This is also an issue in California right now and you’re working on some of the proposals. Can you explain those and what the differences are between taxation at the state and federal levels?
BRIAN GALLE: California, in addition to kind of the general situation that the U.S. is facing, has a fiscal crisis right now because in July, in order to pay for yet more huge tax cuts that the administration gave to millionaires and billionaires, Congress cut about $100 billion in funding for healthcare in California over the next five years. Also, they cut some significant amount of money, it’s unclear exactly how much, but probably multiple billions of dollars for food security, especially food security for kids, and also some education funding.
So California is looking at a bunch of holes, but kind of the most urgent one that the 2026 Billionaires Tax Act is focused on is this $100 billion hole for healthcare.
The health workers and health providers in California are concerned about the impact directly on their members, but also indirectly on the California economy. When there’s not enough money to pay for healthcare, healthcare providers don’t generally turn people away. Instead, they have to figure out how they pay their bills.
Typically, what that means is they raise costs on the people who have coverage, so health insurers raise costs for people who are paying the premiums. That means more out-of-pocket costs for you and me, higher premiums, especially for small business owners.
There are about four million small business owners in California, and it would be harder for people who have three employees to get coverage for them. They might not be able to hire a fourth employee. A person who’s thinking of quitting their job to start a new business might not be able to afford to do that now because they won’t be able to afford a marketplace plan.
All those kinds of things would cause a direct effect on the healthcare industry in California, and then there’s all these indirect effects on the California economy. So it’s a pretty urgent fiscal problem of very considerable size. And the question was, where do you get that $100 billion?
And they asked people like me and we said, well, a good place to get it would be from California billionaires. There’s a lot of them. They have about $2.2 trillion as of the end of 2025, and a little bit more today.
We think that the economics of taxing billionaires is pretty good, right. Taxes are costly, and somebody’s got to pay, and there’s always going to be some damage to the economy, usually in people changing their behavior to avoid taxes.
But the thing is, when you’re taxing a billionaire and you’re taxing them, in the proposal, 1% a year for five years, they’re probably not going to notice the 1%. We know from that same study by the Berkeley colleagues I mentioned earlier that billionaire wealth has grown by an average of 7.5% since the ’80s.
So instead of your wealth growing at 7.5%, it’s going to grow at 6.5% a year for a five-year period. That’s pretty comfortable, especially when you consider that the average millionaire wealth has only grown by about 2%. So billionaires are still going to be doing three times as well annually as millionaires after paying the billionaire tax.
Given that, it’s hard to imagine people are going to make significant, meaningful changes to how they live their lives to avoid a small reduction in the growth of the giant pile of wealth that is too high for them ever to climb. That’s the theory.
Now, you might worry, what about the 16th Amendment problem that I mentioned earlier? Is it permissible to impose a 1% annual tax on the wealth of billionaires for five years in California? And the answer is yes, because the 16th Amendment only applies to Congress. It’s only about federal taxing power.
And in fact, in that opinion in 2024, Justice Thomas, one of the most conservative justices, wrote a separate opinion where he said, the reason that I think this isn’t permissible at the federal level is because I think the states can do it and should do it. I’m not saying he was saying the states should enact a wealth tax. What he was saying is if this were to happen, he thinks it would have to be at the state level.
GWYNETH SHAW: So you mentioned the response of billionaires to this tax proposal. What we’ve seen so far is a lot of people saying, “I’ll move out of state.” As I understand it, this proposal has some ways to keep them from being able to do that. What are those?
BRIAN GALLE: I think the first and most important thing to say is talk is cheap, right? It is very easy to say, “I’m leaving. If you tax me, I’m going somewhere else.” And indeed, we know it’s easy because almost every previous effort to tax millionaires and billionaires has been accompanied by lots of news stories saying they’re going to flee.
Despite the noise, I think it’s very unlikely that a meaningful amount of billionaire wealth is actually going to leave. One reason is if the initiative gets on the ballot in November and if it becomes law, it’ll impose a 5% one-time tax or, at the option of the billionaires, 1% a year over five years, on everyone who is a California legal resident for tax purposes on January 1, 2026.
So obviously, January already happened. And so it is too late for people who are threatening to leave to leave.
GWYNETH SHAW: What else is in the book that we haven’t talked about?
BRIAN GALLE: People may have heard that our estate tax doesn’t work very well. Taxes at death are not especially popular even though, in a sense, we all share the intuition it’s not fair for some people to start out life with hundreds of millions of dollars and the opportunities and power that that comes with, and nearly all of us not to start out with those opportunities.
We have this intuition that that situation is unfair, that those folks should actually owe a little something back, but we also don’t like taxes at death. How do we reconcile those two intuitions? One of the things that the book does is it says that this system that we can use for waiting until people sell to tax them on their investment assets is also a thing that you can do to reconcile our two kinds of conflicting moral intuitions about inheritances.
So instead of taxing people at death, you wait until the heirs sell the things that they have inherited. But the key move, again, is when the heirs sell, you charge them interest for the amount of time that they’ve waited since they got that property and the amount that it’s appreciated since it was acquired by the person who left it to them. Because the interest meter is running while the heirs are holding the assets, they will be eager, typically, to pay tax sooner to turn off the interest, right?
So they’ll opt into paying earlier, but technically they don’t owe anything until they sell. And that accomplishes a bunch of good things. One is it takes away our kind of instinctive distaste for having the moment of death be a moment that the tax collector is showing up, and instead says the moment of tax is going to be when the heir enjoys the fruits of what they’ve inherited.
That makes more sense. Also just as a matter of running the legal regime, it’s sometimes hard to figure out the value of what people have inherited, and there’s nothing about the moment of death that tells us what those things are worth. So one of the many ways our current estate tax system is broken is the IRS litigates the value of inherited property.
If you tax heirs instead when they sell, you know exactly what that thing is worth, because they just sold it. If they opt to pay sooner, you can use a valuation regime that’s a little fairer to the government.
In the more technical parts of the book, I make the point that this basic mechanism solves problems in other important areas of the tax system, including the problem of inherited wealth.