The Triumph of Injustice is written not exclusively for academic experts but for a general audience, presenting a clear analysis of tax inequality in contemporary America through empirical data while employing accessible language that avoids technical jargon. Saez and Zucman begin their work with a striking empirical finding: America’s ultra-wealthy pay remarkably low effective taxes - proportionally lower than those paid by the working class. In the United States, the income taxation operates as essentially a flat tax across all income levels except the top, where it becomes regressive at the highest income brackets, allowing wealthy individuals to benefit disproportionately from preferential treatment of capital gains and various tax avoidance strategies.

Throughout the book, the authors systematically analyze various data sources to demonstrate two key phenomena. First, they illustrate how and why the American tax system has lost its redistributive character since the 1980s, increasingly serving the interests of the upper classes and particularly the ultra-wealthy, whose tax obligations have become remarkably regressive. Second, they document the diverse strategies that the wealthy have developed to dodge their taxes.

This book reminds us that interpreting tax inequality on the grounds of individual efforts by the wealthy to avoid taxation would be erroneous. Instead, tax dodging is a systemic issue – the American tax system has been restructured to favor the wealthy, creating systematic opportunities for tax avoidance. In the post-World War II era, the tax system served democratic ideals by preventing wealth concentration. However, after the 1980s, it began to operate primarily for the interests of capitalist classes, a shift that cannot be explained only through the neoliberal counter-revolution of the Reagan era (Dominique Lévy 2006). With globalization, the previously progressive American tax system became subject to increasingly intense international tax competition. One could argue that tax competition vis-a-vis globalization has narrowed the tax bases of all developed countries and negatively affected their tax revenues. Similar to the US, EU countries have also largely ignored the issue of tax competition, which allows wealthy Europeans to transfer their wealth abroad to avoid taxation (Saez and Zucman, 2022: 60).

Most notably, multinational corporations (MNCs) started systematically shifting their paper profits to offshore tax havens, a practice that has intensified significantly from the 1980s onwards. According to Oxfam (2017), 50 largest American companies - including Apple, Pfizer, Wal-Mart, Chevron, and General Electric- stashed approximately $1.6 trillion in tax havens as of 2015. The corporate profits transferred by American companies to tax havens have risen from 5-10% of gross profits to approximately 25-30% since the 1990s (Cobham and Janský 2018). Tax havens cause governments, mostly in developed countries, to lose between $500-600 billion in corporate tax revenue each year (Shaxson 2019).

In recent decades, the most notorious tax havens are Panama (including the Cayman Islands), Bermuda, Ireland, Cyprus, Malta, and Luxembourg, where corporate tax rates are exceptionally low (typically at or below 10 percent). Given the concentration of tax avoidance activities in the Atlantic region, this geographic area is referred to as “Bermuland,” a portmanteau combining Bermuda and Ireland. These countries have effectively commercialized their sovereignty, transforming what scholars term “the commercialization of state sovereignty” into a highly profitable enterprise (Palan 2002). Despite offering reduced corporate tax rates, these tax-haven countries have generated substantial revenue over the past decades – revenue streams that would not be feasible under their domestic economic and political structures alone.

Today, tax dodging has become a significant market serviced by major accounting firms that provide “legal consultation services.” The Big Four accounting firms – PricewaterhouseCoopers, Ernst & Young, Deloitte, and KPMG – offer specialized services to MNCs for tax “optimization” strategies. The typical pattern involves creating shell companies or subsidiary structures abroad, as exemplified by Google’s establishment of Google Holdings in Ireland in the 2000s, followed by intra-company profit shifting. MNCs often report artificially low transfer prices or no market prices when moving assets and services between subsidiaries.

At this juncture, it is necessary to keep in mind that there is a difference between tax avoidance and tax evasion: while the former is legal, the latter constitutes illegal activity. Although MNCs claim they legally “avoid” taxes through profit-shifting and offshore company creation, this practice exists in a legal gray area where the line between avoidance and evasion becomes blurred.

The OECD has recently implemented measures to combat the tax dodging industry, primarily addressing the tax base by attempting to capture uncollected taxes. However, Saez and Zucman remind us that the fundamental issue concerns tax rates themselves. Globalization has triggered a “race to the bottom” in tax competition, resulting in a dramatic decline in average global corporate tax rates from 49 percent in 1985 to 24 percent in 2018. Consequently, establishing a common tax rate at the global level is essential; otherwise, MNCs will continue to migrate to countries with the lowest rates.

Ultimately, taxation targets either capital or labor income. Capital income taxation encompasses corporate income tax, property tax, estate tax, and levies on dividends and interest. Labor income taxation applies to wages and salaries, as workers typically lack alternative income sources—the bottom 90 percent of the population derives 90 percent of their income exclusively from wages. Over the past four decades, taxation on capital has diminished substantially, while the tax burden has increasingly shifted to the working class through higher payroll taxes and consumption taxes. Currently, payroll tax rates and corporate tax rates in the United States are approximately equivalent.

One of the strongest aspects of the book is that Saez and Zucman debunk several economic myths, especially regarding microeconomic theory. They deconstruct trickle-down theory, the concept of inelasticity of capital vis-a-vis elasticity of labor in terms of taxation (which basically tells us that “the most inelastic part of production bears the burden of taxation, while the most elastic one dodges it,” p. 100), and the related deadweight loss argument – the reductions in productivity. According to the estimations of Saez and Zucman, what boosts savings and capital accumulation is not low levels of capital taxes (or 0 percent corporate tax, as some libertarian or conservative economists have argued) but fiscal regulation. In the post-World War II decades, it was the regulatory environment that encouraged individual and corporate savings, which in turn led to stable economic growth rates. After the 1980s, the process of deregulation triggered huge levels of debt among individuals, primarily due to mortgage and consumer credit.

After the 1980s, we witness what can be characterized as “the death of progressive individual income taxes,” which Saez and Zucman identify as “the main progressive component of the modern tax system” in the US (p. 107). In response to this shift, upper and middle classes seeking to avoid income taxation began incorporating themselves as businesses. Wealthy individuals – including professionals such as doctors and lawyers – established their own corporations to circumvent tax burdens, since corporate tax rates were lower than individual income tax rates. This structure enabled the wealthy to classify personal expenses as legitimate business expenditures, thereby reducing their overall tax liability. This phenomenon explains the mushrooming of small corporations at the highest income levels, as virtually every wealthy individual has incorporated themselves to exploit these tax advantages. This transformation represents a fundamental restructuring of how affluent Americans organize their financial affairs, shifting from individual taxpayers to corporate entities primarily for tax optimization purposes.

Saez and Zucman propose a comprehensive and concrete action plan to combat the tax avoidance industry. This plan centers on implementing the economic substance doctrine, which they define as “the principle that makes illegal all transactions undertaken with the sole purpose of dodging taxes” (p. 137). Their proposal consists of four fundamental pillars: exemplarity, international coordination, defensive measures, and sanctions against free riders. The first pillar involves implementing a remedial tax, which the authors suggest should be set at 25 percent. Under this mechanism, if an American multinational corporation pays only 5 percent tax in the country where it reports profits, the United States would impose the remaining 20 percent to reach the minimum threshold. This approach requires that each country police its own multinational corporations. However, companies may still attempt to avoid taxes by relocating their headquarters to tax havens. To prevent this jurisdictional arbitrage, the second pillar emphasizes the necessity of international coordination among countries. The third pillar involves implementing defensive measures to protect domestic tax bases, while the fourth pillar calls for applying specific sanctions against countries that refuse to participate in this coordinated effort. This framework represents a systematic approach to closing loopholes in the international tax system by combining unilateral action with multilateral cooperation, ensuring that corporations cannot simply relocate to avoid their tax obligations.

Additionally, Saez and Zucman present several other measures to prevent tax avoidance, reduce wealth concentration, and achieve economic democracy. According to the authors’ estimations, the optimal average income tax rate should be 60 percent. They argue that every source of income should be taxed at the same rate in order to eliminate loopholes in the taxation system. For example, in the United States, capital gains have historically been taxed at lower rates than ordinary income, which enables ultra-rich individuals to pay taxes on only a minimal portion of their capital gains. The authors’ response to this disparity is encapsulated in their principle: “equal income means equal tax.” Under this framework, there should be no exemptions or deductions that disproportionately benefit the wealthy. According to Saez and Zucman, “[t]he proper way to tax the wealthy in the twenty-first century –and in particular to arrive at the optimal rate of 60%–involves three essential and complementary ingredients: a progressive income tax, a corporate tax, and a progressive wealth tax” (p. 145). The authors emphasize that without a wealth tax, progressive income taxation becomes largely ineffective, as the ultra-wealthy’s tax obligations are not significantly affected by income tax structures alone.

Saez and Zucman argue for moving beyond the classical Laffer theory, a conceptual framework frequently invoked by economic theorists in tax discussions. The Laffer curve illustrates the relationship between tax rates and tax revenue: with tax rates at either 0 or 100 percent, no revenue is collected. Revenue initially increases with tax rates, reaches a peak, then declines. The traditional focus is on finding the optimal tax rate for maximum revenue collection. However, Saez and Zucman contend that the Laffer curve is not relevant for their discussion. The primary objective should not be revenue maximization but wealth de-concentration, as excessive wealth concentration produces serious negative externalities – wealth translates directly into power asymmetries. This concentration enables the wealthy to wield disproportionate political influence over the poor, effectively allowing them to dictate policy preferences. Extreme wealth concentration grants the super-rich excessive power to influence government policy in their favor. Such dynamics create a tyranny of the rich minority that poses a fundamental threat to democracy. The authors underline that “[e]xcessive wealth concentration corrodes the social contract” (p. 157). Therefore, the goal is not merely tax collection –as the Laffer curve suggests– but wealth redistribution. Historical evidence supports the feasibility of quasi-confiscatory tax rates: before 1980, very high taxes coexisted with both democratic governance and economic growth. Between 1930-1980, the top marginal income tax averaged 78 percent, reaching nearly 90 percent between 1951-1963.

Another question that Saez and Zucman address is how to fund the American social state in the 21st century. In the US, Medicaid exists for the extremely poor and Medicare for the elderly, but beyond these programs, the healthcare sector remains entirely privatized. Education is also treated as a market commodity rather than a public service. To address this challenge, the authors propose creating a “national income tax.” All income –whether from capital or labor– would be subject to the national income tax, which would feature a single rate with no deductions and would not exempt savings. This proposal is conceived not as a replacement for existing income taxes, but as a supplementary progressive taxation mechanism. Importantly, the national income tax would replace insurance premiums, which are highly regressive in their current form. For the national income tax, the source of income would be irrelevant – labor income, business profits, and interest income would all be subject to the same tax rate. This approach would create a more equitable funding mechanism for social services while eliminating the regressive burden of private insurance premiums that currently finance much of America’s social safety net.

Nevertheless, the book has certain limitations. One significant limitation is its failure to sufficiently address the informal economy. The authors only briefly acknowledge that approximately 7 percent of the informal economy would remain outside the scope of their proposed national income tax (p. 189). However, progressive taxation proposals cannot be considered solely through the lens of tax avoidance. If opportunities exist for shifting economic activity into informal sectors, wealthy individuals may migrate to these areas when faced with higher tax rates. Within the informal economy, rich individuals may develop new quasi-criminal mechanisms – a pattern observed in many developing countries and authoritarian regimes like Russia. Another limitation of the book is its failure to account for multiplier effects. According to Keynesian multiplier theory, progressive taxation has significant potential and promising prospects for job creation and increasing effective demand. By redistributing income from high-saving wealthy individuals to lower-income groups with higher propensities to consume, progressive taxation could generate positive economic spillovers that the authors do not adequately consider in their analysis.

Despite these limitations, Saez and Zucman provide an excellent empirical analysis of tax inequality formation in America, grounding their arguments in concrete data. The authors’ commitment to avoiding the esoteric and alienating language of economic theory and making their work accessible to general readers is particularly commendable. Their approach demonstrates that complex economic phenomena can be explained clearly without sacrificing analytical rigor. Furthermore, the book’s relevance to contemporary policy debates about wealth inequality and tax reform makes it particularly timely. This book is an essential resource for students interested in wealth inequality, tax policy, and the political economy of globalization.

References

Cobham, Alex, and Petr Janský. 2018. “Global Distribution of Revenue Loss from Corporate Tax Avoidance: Re‐estimation and Country Results.” Journal of International Development 30 (2): 206–32. https://doi.org/10.1002/jid.3348.

Dominique Lévy, Gérard Duménil. 2006. “The Neoliberal (Counter-)Revolution.” In Neoliberalism: A Critical Reader, 9–19. London: Pluto.

Oxfam. 2017. “Rigged Reform.” Oxfam America. https://www.oxfamamerica.org/static/media/files/Rigged_Reform_FINAL.pdf.

Palan, Ronen. 2002. “Tax Havens and the Commercialization of State Sovereignty.” International Organization 56 (1): 151–76. https://doi.org/10.1162/002081802753485160.

Shaxson, Nicholas. 2019. “Tackling Tax Havens.” Finance and Development 56 (3): 6–10. https://www.imf.org/external/pubs/ft/fandd/2019/09/pdf/tackling-global-tax-havens-shaxon.pdf.

Book Review: The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, Emmanuel Saez and Gabriel Zucman. W.W. Norton, 2019.

By Ibrahim Kuran