03 / Politics, lobbying & the tax code

Politics & Power

Wealth concentration is not only an economic outcome. It is also written into law, and the law is written by people who are lobbied.

This page is about how the system works, not about who to blame for it. If a practice is used across the political spectrum, we say so, and if researchers dispute the evidence we show the dispute instead of picking the convenient side.

$5.08B Spent on federal lobbying in a single year, 2025. A record.
Source: OpenSecrets.

01 / The price of access

What influence
costs

Federal lobbying is legal, regulated, and publicly disclosed under the Lobbying Disclosure Act. These are the reported totals.

$5.08B

Federal lobbying, 2025

A record. Up 11% on 2024 even after adjusting for inflation.

OpenSecrets, from Lobbying Disclosure Act filings

15,768

Organizations that lobbied

Up from 14,061 the year before, a rise of nearly 12% in a single year.

OpenSecrets, 2025

$15.9B

Cost of the 2024 federal elections

Projected total for the cycle. Note: adjusted for inflation, the 2020 cycle was more expensive still, at roughly $18.3B in 2024 dollars.

OpenSecrets projection, October 2024

$2.6B+

Outside spending, 2024 cycle

Largely super PACs, and outpacing any previous cycle. Outside groups spend independently of candidates and face no contribution limits.

OpenSecrets, August 2024

02 / The rules that allow it

Four decisions
that set the terms

This is legal history, stated neutrally. Each ruling is a matter of public record and each has supporters and critics across the political spectrum.

1976 · Supreme Court

Buckley v. Valeo

The Court upheld limits on direct contributions to candidates but struck down limits on independent expenditures, holding that restricting political spending restricts political speech under the First Amendment.

This established the distinction that shapes everything after it: giving money to a candidate can be capped; spending money to advocate independently generally cannot.

2010 · Supreme Court

Citizens United v. FEC

A 5–4 decision holding that the government may not restrict independent political expenditures by corporations, unions, or other associations.

The ruling applies to labor unions as well as corporations, a detail frequently dropped when the case is described. It did not change the ban on direct corporate contributions to federal candidates, which remains in place.

2010 · DC Circuit

SpeechNow.org v. FEC

Decided weeks after Citizens United, this appellate ruling struck down contribution limits to groups making only independent expenditures.

Together the two decisions created the super PAC: an entity that may raise and spend unlimited sums, from individuals, corporations and unions, provided it does not coordinate with a candidate's campaign.

Tax code · 501(c)(4)

Undisclosed donors

Social welfare organizations organized under section 501(c)(4) of the tax code may spend on politics without publicly disclosing their donors, provided politics is not their primary purpose.

Money from these groups is commonly described as "dark money" because the original source is not traceable in public filings. Groups aligned with both major parties use the structure.

03 / Contested evidence

Whose preferences
become policy?

This is the most-cited research on the question, and it is genuinely disputed among political scientists. Presenting only the headline finding would break this site's own rules, so here is the whole exchange.

The finding Gilens & Page, 2014, Perspectives on Politics

The authors analyzed roughly 1,800 US policy outcomes over about two decades. They reported that economic elites and organized business interests had substantial, statistically independent effects on federal policy, while average citizens and mass-based interest groups had little or no independent influence.

The rebuttal Bashir, 2015, Research & Politics

A peer-reviewed critique argued the original statistical test is prone to underestimating the influence of citizens at the 50th income percentile by a wide margin, because the preferences of income groups are so highly correlated with one another.

Bashir also reported that, descriptively, when average Americans and elites disagreed, average Americans got their preferred outcome roughly as often as elites did.

The response Gilens, 2016, Research & Politics

Gilens replied that the simulation underpinning Bashir's critique is itself flawed in ways that undermine its conclusions.

Where this leaves it: the question is unresolved in the literature. This site reports that the finding exists, that it is contested, and that no consensus has been reached. Anyone citing the 2014 study as settled fact is overstating it, in either direction.

04 / The revolving door

From writing rules
to lobbying on them

Federal law

The cooling-off period

Former House members must wait one year before lobbying their former colleagues. Former Senators must wait two years.

The restriction applies to direct lobbying contacts. Strategic advice, consulting and firm leadership are not covered by the waiting period.

OpenSecrets

It is not a partisan practice

OpenSecrets, a non-partisan research group that tracks money in politics, found use of the revolving door between Congress and the private sector to be roughly evenly divided between Republicans and Democrats.

This is stated explicitly because the revolving door is often described as a problem belonging to one party. The tracking data does not support that description.

One sector, one year

672 former officials

At least 672 former government officials, military officers and members of Congress worked as lobbyists, board members or executives for the top 20 defense contractors in 2022.

That figure covers a single industry in a single year.

Financial disclosure

Who is in the room

Members of Congress must file annual financial disclosures under the Ethics in Government Act, strengthened by the STOCK Act in 2012.

Estimates place median congressional net worth in the low millions, against a median US household net worth of $192,900. Exact comparisons are imprecise by design: disclosures report assets in broad ranges and exclude a member's personal residence while still counting its mortgage as debt.

05 / Written into the tax code

Why wealth
compounds quietly

These are structural features of US tax law, not allegations. Each is public, legal, and available to anyone whose income arrives in the right form.

Rate structure

Work is taxed higher than ownership

The top federal rate on ordinary income (wages and salaries) is 37%. The top rate on long-term capital gains is 20%, plus the 3.8% Net Investment Income Tax where it applies, for a combined top rate of 23.8%.

A dollar earned by selling an asset held over a year is taxed at a lower top rate than a dollar earned by working. Long-term capital gains are taxed at 0%, 15% or 20% depending on taxable income.

Unrealized gains

Gains are taxed only when sold

Asset growth is not taxed as it accrues. Tax is owed when an asset is sold and the gain is realized. An asset that rises in value for forty years and is never sold generates no income tax over those forty years.

This is the mechanism behind ProPublica's "true tax rate" figure on the Sources page: wealth can grow enormously while taxable income stays comparatively small.

Step-up in basis

Some gains are never taxed at all

When an asset passes to an heir at death, its cost basis resets to the market value on that date. Appreciation during the original owner's lifetime is never subject to capital gains tax.

The Joint Committee on Taxation estimates stepped-up basis accounts for $72.5 billion in forgone federal revenue in 2026, roughly a quarter of all revenue from capital gains taxes.

Congressional Budget Office

Where that benefit lands

In 2019, the most recent year analyzed, 56% of the benefit from stepped-up basis, about $22 billion, went to the top 20% of decedents' estates.

$7 billion of that went to the top 1%.

06 / The sequence

Buy, borrow, die

Tax practitioners have a name for the standard way a very large fortune is held without generating a tax bill. It is three steps, and every one of them is legal. Nothing below describes fraud.

Step 1

Buy assets and never sell them.

US law taxes a capital gain when it is realized, meaning when the asset is sold. An asset that rises in value for decades produces no income tax bill in any of those years, however large the gain on paper becomes.

Internal Revenue Code, realization principle. IRS Topic 409.

Step 2

Borrow against them instead of selling.

Selling to raise cash would trigger the tax. Borrowing does not. A securities-backed line of credit lets an owner pledge a portfolio as collateral and draw cash against it, typically up to around half its market value. Loan proceeds are not income, so no income tax is due on money spent this way.

The asset stays owned, keeps appreciating, and keeps producing no taxable event. The arrangement carries real risk: these lines are callable, and a fall in the collateral can force a sale at the worst moment, which triggers the tax it was structured to avoid.

Securities-backed lines of credit are offered by most major US brokerages.

Step 3

Die, and the gain is erased.

When the asset passes to an heir, its cost basis resets to the market value on the date of death. The entire lifetime gain, the one that was never realized and never taxed, is never taxed at all. The heir can sell the next day and owe capital gains tax only on any movement since that date.

Federal estate tax is the remaining backstop. In 2026 it applies only above $15 million per person, or $30 million for a married couple.

Stepped-up basis: Internal Revenue Code §1014. Estate tax exemption: IRS, 2026.

07 / The measured effects

What goes
uncollected

These are published federal estimates of tax that is owed and not paid, and of revenue the government forgoes by design. They are separate things and are labeled separately.

$696B

The annual tax gap

IRS projection of tax owed but not paid on time for tax year 2022. After late payments and enforcement, $606 billion of it is never collected.

IRS Publication 5869

$539B

From underreporting alone

The largest component. Non-filing accounts for $63B and underpayment for $94B. Individual income tax makes up $514B of the $696B total.

IRS Publication 5869

$72.5B

Forgone to stepped-up basis, 2026

Roughly a quarter of all federal revenue from capital gains taxes. This is legally forgone revenue, not unpaid tax.

Joint Committee on Taxation

1.1%

Of millionaire returns audited

In 2022, down from 8.4% about fourteen years earlier. GAO found the rate for incomes above $10 million fell from 21.2% in 2010 to 3.9% in 2019.

GAO; IRS data

0.2%

Of estates owe any estate tax

Fewer than one in five hundred. Estates that do owe pay about 14.1% of their value on average, against a top statutory rate of 40%.

CBO; IRS

$63.1B

Carried interest, over ten years

Joint Committee on Taxation estimate of revenue from fully closing the provision that lets some investment managers' pay be taxed as capital gains rather than as income. Narrower versions score at $15.6B.

Joint Committee on Taxation, 2023

Scale

What those numbers sit next to

In fiscal year 2025 the federal government collected $5.2 trillion in revenue, more than half of it from individual income tax. It ran a deficit of $1.8 trillion, and net interest on the national debt passed $1 trillion for the first time.

The $696 billion tax gap is about 13% of total federal revenue for that year.

We are not claiming one figure causes the other. Both are published here so the scale can be compared. Revenue that is not collected is made up by borrowing, by other taxes, or by spending less, and which of those happens is a political decision, not a measurable fact.

Read this carefully

Three limits on the numbers above

Avoidance is not evasion. Steps 1 to 3 in the section above are legal. The tax gap measures tax legally owed and not paid, which is a different thing. Mixing them up overstates both.

The tax gap is not only wealthy filers. It covers every US taxpayer and includes honest error as well as deliberate evasion. The IRS does not attribute it to any one income group, and neither do we. The voluntary compliance rate across all taxpayers is 85.0%.

Forgone revenue is not lost revenue. Stepped-up basis and the capital gains rate are deliberate features of law passed by Congress. Economists disagree about their effects on investment, growth and revenue. This site reports the estimates and does not take a position on whether any of it should change.

What people can do about it → Check every source

08 / Where corporate cash goes

Who is on the
receiving end

When a company has surplus cash it can raise wages, invest, cut prices, pay dividends, or buy back its own shares. Buybacks raise the value of the remaining shares, so the benefit lands on whoever owns the stock. The Federal Reserve publishes exactly who that is.

$942.5B

S&P 500 share buybacks, 2024

An annual record, up 18.5% on 2023's $795.2 billion. With dividends included, total shareholder returns reached $1.572 trillion.

S&P Dow Jones Indices

50.1%

Of all US stock is owned by the top 1%

Corporate equities and mutual fund shares held by US households total $55.2 trillion. The top 1% hold just over half of it.

Calculated from Federal Reserve DFA, Q1 2026

87.3%

Owned by the top 10%

The bottom 50% of households own 1.06% of all US corporate equities and mutual fund shares, about $0.59 trillion of $55.2 trillion.

Calculated from Federal Reserve DFA, Q1 2026

SEC Rule 10b-18

Buybacks were not always routine

Large open-market repurchases carried serious legal risk of being treated as stock price manipulation until 1982, when the Securities and Exchange Commission adopted Rule 10b-18, creating a safe harbor for companies buying their own shares within set conditions.

A company choosing buybacks over wages is making a lawful allocation decision. The measurable part is the destination: because stock ownership is distributed as above, money returned to shareholders is concentrated far more tightly than money paid in wages.

The STOCK Act, 2012

Lawmakers trading in what they regulate

Members of Congress may buy and sell individual stocks. The STOCK Act requires them to disclose each trade within 45 days and bars trading on non-public information obtained through their office.

The standard penalty for filing a disclosure late is a $200 fee. Media organizations and watchdog groups publish running tallies of late filings each year; this site does not reproduce those counts because they are not compiled by a federal agency.

House Clerk: financial disclosures ↗

A note on neutrality

No party owns
this problem

Rule

What this page will not do

It will not name a party as responsible, endorse a candidate or platform, or describe any policy as good or bad. Lobbying, super PACs, dark money and the revolving door are used by organizations aligned with both major parties, and the tracking data is cited above showing exactly that.