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ProPublica

What Trump and Musk Want With Social Security

The Atlantic

www.theatlantic.com › newsletters › archive › 2025 › 03 › what-trump-and-musk-want-with-social-security › 682056

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The idea that millions of dead Americans are receiving Social Security checks is shocking, and bolsters the argument that the federal bureaucracy needs radical change to combat waste and fraud. There’s one big problem: No evidence exists that it’s true.

Despite being told by agency staff last month that this claim has no basis in fact, Elon Musk and President Donald Trump have continued to use the talking point as a pretext to attack America’s highest-spending government program. Musk seems to have gotten this idea from a list of Social Security recipients who did not have a death date attached to their record. Agency employees reportedly explained to Musk’s DOGE team in February that the list of impossibly ancient individuals they found were not necessarily receiving benefits (the lack of death dates was related to an outdated system).

And yet, in his speech to Congress last week, Trump stated: “Believe it or not, government databases list 4.7 million Social Security members from people aged 100 to 109 years old.” He said the list includes “3.5 million people from ages 140 to 149,” among other 100-plus age ranges, and that “money is being paid to many of them, and we’re searching right now.” In an interview with Fox Business on Monday, Musk discussed the existence of “20 million people who are definitely dead, marked as alive” in the Social Security database. And DOGE has dispatched 10 employees to try to find evidence of the claims that dead Americans are receiving checks, according to documents filed in court on Wednesday.

Musk and Trump have long maintained that they do not plan to attack Social Security, Medicare, and Medicaid, the major entitlement programs. But their repeated claims that rampant fraud exists within these entitlement systems undermine those assurances. In his Fox interview on Monday, Musk said, “Waste and fraud in entitlement spending—which is most of the federal spending, is entitlements—so that’s like the big one to eliminate. That’s the sort of half trillion, maybe $600, $700 billion a year.” Some observers interpreted this confusing sentence to mean that Musk wants to cut the entitlement programs themselves. But the Trump administration quickly downplayed Musk’s comments, insisting that the federal government will continue to protect such programs and suggesting that Musk had been talking about the need to eliminate fraud in the programs, not about axing them. “What kind of a person doesn’t support eliminating waste, fraud, and abuse in government spending?” the White House asked in a press release.

The White House’s question would be a lot easier to answer if Musk, who has called Social Security a “Ponzi scheme,” wasn’t wildly overestimating the amount of fraud in entitlement programs. Musk is claiming waste in these programs on the order of hundreds of billions of dollars a year, but a 2024 Social Security Administration report found that the agency lost closer to $70 billion total in improper payments from 2015 to 2022, which accounts for about 1 percent of Social Security payments. Leland Dudek, a mid-level civil servant elevated to temporarily lead Social Security after being put on administrative leave for sharing information with DOGE, pushed back last week on the idea that the agency is overrun with fraud and that dead people older than 100 are getting payments, ProPublica reported after obtaining a recording of a closed-door meeting. DOGE’s false claim about dead people receiving benefits “got in front of us,” one of Dudek’s deputies reportedly said, but “it’s a victory that you’re not seeing more [misinformation], because they are being educated.” (Dudek did not respond to ProPublica’s request for comment.)

Some 7 million Americans rely on Social Security benefits for more than 90 percent of their income, and 54 million individuals and their dependents receive retirement payments from the agency. Even if Musk doesn’t eliminate the agency, his tinkering could still affect all of those Americans’ lives. On Wednesday, DOGE dialed back its plans to cut off much of Social Security’s phone services (a commonly used alternative to its online programs, particularly for elderly and disabled Americans), though it still plans to restrict recipients’ ability to change bank-deposit information over the phone.

In recent weeks, confusion has rippled through the Social Security workforce and the public; many people drop off forms in person, but office closures could disrupt that. According to ProPublica, several IT contracts have been cut or scaled back, and several employees reported that their tech systems are crashing every day. Thousands of jobs are being cut, including in regional field offices, and the entire Social Security staff has been offered buyouts (today is the deadline for workers to take them). Martin O’Malley, a former commissioner of the agency, has warned that the workforce reductions that DOGE is seeking at Social Security could trigger “system collapse and an interruption of benefits” within the next one to three months.

In going anywhere near Social Security—in saying the agency’s name in the same sentence as the word eliminate—Musk is venturing further than any presidential administration has in recent decades. Entitlement benefits are extremely popular, and cutting the programs has long been a nonstarter. When George W. Bush raised the idea of partially privatizing entitlements in 2005, the proposal died before it could make it to a vote in the House or Senate.

The DOGE plan to cut $1 trillion in spending while leaving entitlements, which make up the bulk of the federal budget, alone always seemed implausible. In the November Wall Street Journal op-ed announcing the DOGE initiative, Musk and Vivek Ramaswamy (who is no longer part of DOGE) wrote that those who say “we can’t meaningfully close the federal deficit without taking aim at entitlement programs” are deflecting “attention from the sheer magnitude of waste, fraud and abuse” that “DOGE aims to address.” But until there’s clear evidence that this “magnitude” of fraud exists within Social Security, such claims enable Musk to poke at what was previously untouchable.

Related:

DOGE’s fuzzy math Is DOGE losing steam?

Here are four new stories from The Atlantic:

Democrats have a man problem. There was a second name on Rubio’s target list. The crimson face of Canadian anger The GOP’s fears about Musk are growing.

Today’s News

Senate Minority Leader Chuck Schumer said that Democrats will support a Republican-led short-term funding bill to help avoid a government shutdown. A federal judge ruled that probationary employees fired by 18 federal agencies must be temporarily rehired. Mark Carney was sworn in as Canada’s prime minister, succeeding Justin Trudeau as the Liberals’ leader.

Dispatches

Atlantic Intelligence: The Trump administration is embracing AI. “Work is being automated, people are losing their jobs, and it’s not at all clear that any of this will make the government more efficient,” Damon Beres writes. The Books Briefing: Half a decade on, we now have at least a small body of literary work that takes on COVID, Maya Chung writes.

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Evening Read

Illustration by John Gall*

I’d Had Jobs Before, but None Like This

By Graydon Carter

I stayed with my aunt the first night and reported to the railroad’s headquarters at 7 o’clock the next morning with a duffel bag of my belongings: a few pairs of shorts, jeans, a jacket, a couple of shirts, a pair of Kodiak work boots, and some Richard Brautigan and Jack Kerouac books, acceptable reading matter for a pseudo-sophisticate of the time. The Symington Yard was one of the largest rail yards in the world. On some days, it held 7,000 boxcars. Half that many moved in and out on a single day. Like many other young men my age, I was slim, unmuscled, and soft. In the hall where they interviewed and inspected the candidates for line work, I blanched as I looked over a large poster that showed the outline of a male body and the prices the railroad paid if you lost a part of it. As I recall, legs brought you $750 apiece. Arms were $500. A foot brought a mere $250. In Canadian dollars.

Read the full article.

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Stephanie Bai contributed to this newsletter.

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Buy, Borrow, Die

The Atlantic

www.theatlantic.com › ideas › archive › 2025 › 03 › tax-loophole-buy-borrow-die › 682031

America’s superrich have always found ways to avoid paying taxes, but in recent years, they’ve discovered what might be the mother of all loopholes. It’s a three-step process called “Buy, Borrow, Die,” and it allows people to amass a huge fortune, spend as much of it as they want, and pass the rest—untaxed—on to their heirs. The technique is so cleverly designed that the standard wish list of progressive tax reforms would leave it completely intact.

Step one: buy. The average American derives most of their disposable income from the wages they earn working a job, but the superrich are different. They amass their fortune by buying and owning assets that appreciate. Elon Musk hasn’t taken a traditional salary as CEO of Tesla since 2019; Warren Buffett, the chair of Berkshire Hathaway, has famously kept his salary at $100,000 for more than 40 years. Their wealth consists almost entirely of stock in the companies they’ve built or invested in. The tax-law scholars Edward Fox and Zachary Liscow found that even when you exclude the 400 wealthiest individuals in America, the remaining members of the top 1 percent hold $23 trillion in assets.

Unlike wages, which are taxed the moment they are earned, assets are taxed only at the moment they are sold—or, in tax terms, “realized.” The justification for this approach is that unrealized assets exist only on paper; you can’t pay for a private jet or buy a company with stocks, even if they have appreciated by billions of dollars. In theory, the rich will eventually need to sell their assets for cash, at which point they will pay taxes on their increase in wealth.

That theory would be much closer to reality if not for step two: borrow. Instead of selling their assets to make major purchases, the superrich can use them as collateral to secure loans, which, because they must eventually be repaid, are also not considered taxable income. Larry Ellison, a co-founder of Oracle and America’s fourth-richest person, has pledged more than $30 billion of his company’s stock as collateral in order to fund his lavish lifestyle, which includes building a $270 million yacht, buying a $300 million island, and purchasing an $80 million mansion. A Forbes analysis found that, as of April 2022, Musk had pledged Tesla shares worth more than $94 billion, which “serve as an evergreen credit facility, giving Musk access to cash when he needs it.”

This strategy isn’t as common among the merely very rich, who may not have the expensive tastes that Ellison and Musk do, but it isn’t rare either. Liscow and Fox calculated that the top 1 percent of wealth-holders, excluding the richest 400 Americans, borrowed more than $1 trillion in 2022. And the approach appears to be gaining momentum. Last year, The Economist reported that, at Morgan Stanley and Bank of America alone, the value of “securities-backed loans” increased from $80 billion in 2018 to almost $150 billion in 2022. “The real question is: Why would you not borrow hundreds of millions, even billions, to fund the lifestyle you want to live?” Tom Anderson, a wealth-management consultant and former banker who specializes in these loans, told me. “This is such an easy tool to use. And the tax benefits are massive.”

[Annie Lowrey: Trump says his tax plan won’t benefit the rich—he’s exactly wrong]

You might think this couldn’t possibly go on forever. Eventually, the rich will need to sell off some of their assets to pay back the loan. That brings us to step three: die. According to a provision of the tax code known as “stepped-up basis”—or, more evocatively, the “angel of death” loophole—when an individual dies, the value that their assets gained during their lifetime becomes immune to taxation. Those assets can then be sold by the billionaire’s heirs to pay off any outstanding loans without them having to worry about taxes.

The justification for the stepped-up-basis rule is that the United States already levies a 40 percent inheritance tax on fortunes larger than $14 million, and it would be unfair to tax assets twice. In practice, however, a seemingly infinite number of loopholes allow the rich to avoid paying this tax, many of which involve placing assets in byzantine legal trusts that enable them to be passed seamlessly from one generation to the next. “Only morons pay the estate tax,” Gary Cohn, a former Goldman Sachs executive and the then–chief economic adviser to Donald Trump, memorably remarked in 2017.

“All of this is completely, perfectly legal,” Edward McCaffery, the scholar who coined the term Buy, Borrow, Die, told me. But, he said, the strategy “has basically killed the entire concept of an income tax for the wealthiest individuals.” The tax economist Daniel Reck, who has spent his career documenting the various ways the rich evade taxation, told me that Buy, Borrow, Die is “the most important tax-avoidance strategy today.” The result is a two-tiered tax system: one for the many, who earn their income through wages and pay taxes, and another for the few, who accumulate wealth through paper assets and largely do not pay taxes.

Much of the debate around American tax policy focuses on the income-tax rate paid by the very wealthiest Americans. But the bulk of those people’s fortunes doesn’t qualify as income in the first place. A 2021 ProPublica investigation of the private tax records of America’s 25 richest individuals found that they collectively paid an effective tax rate of just 3.4 percent on their total wealth gain from 2014 to 2018. Musk paid 3.3 percent, Jeff Bezos 1 percent, and Buffett—who has famously argued for imposing higher income-tax rates on the superrich—just 0.1 percent.

The same dynamic exists, in slightly less egregious form, further down the wealth distribution. A 2021 White House study found that the 400 richest American households paid an effective tax rate of 8.2 percent on their total wealth gains from 2010 to 2018. Liscow and Fox found that, excluding the top 400, the rest of the 0.1 percent richest individuals paid an effective rate of 12 percent from 2004 to 2022. (Twelve percent is the income-tax rate paid by individuals who make $11,601 to $47,150 a year.)

One solution to this basic unfairness would be to tax unrealized assets. In 2022, the Biden administration proposed a “billionaire minimum tax” that would have placed a new annual levy of up to 20 percent on the appreciation of even unsold assets for households with more than $100 million in wealth. Experts have vehemently debated the substantive merits of such a policy; the real problem, however, is political. According to a survey conducted by Liscow and Fox, most Americans oppose a tax on unrealized gains even when applied only to the richest individuals. The Joe Biden proposal, perhaps unsurprisingly, went nowhere in Congress. Making matters more complicated, even if such a policy did pass, the Supreme Court would very likely rule it unconstitutional.

[James Kwak: The tax code for the ultra-rich vs. the one for everyone else]

A second idea would be to address the “borrow” step. Last year, Liscow and Fox published a proposal to tax the borrowing of households worth more than $100 million, which they estimated would raise about $10 billion a year. The limitation of that solution, as the authors acknowledge, is that it would not address the larger pool of rich Americans who don’t borrow heavily against their assets but do take advantage of stepped-up basis.

That leaves the “die” step. Tax experts from across the political spectrum generally support eliminating the “stepped-up basis” rule, allowing unrealized assets to be taxed at death. This would be far more politically palatable than the dead-on-arrival billionaire’s minimum tax: In the same survey in which respondents overwhelmingly opposed broad taxes on unrealized assets during life, Liscow and Fox also found that nearly two-thirds of them supported taxing unrealized assets at death.

Even a change this widely supported, however, would run up against the iron law of democratic politics: Policies with concentrated benefits and distributed costs are very hard to overturn. That’s especially true when the benefits just so happen to be concentrated among the richest, most powerful people in the country. In fact, the Biden administration did propose eliminating stepped-up basis as part of its Build Back Better legislation. The move prompted an intense backlash from special-interest groups and their allied politicians, with opponents portraying the provision as an assault on rural America that would destroy family farms and businesses. These claims were completely unfounded—the bill had specific exemptions for family businesses and applied only to assets greater than $2.5 million—but the effort succeeded at riling up enough Democratic opposition to kill the idea.

The one guarantee of any tax regime is that, eventually, the rich and powerful will learn how to game it. In theory, a democratic system, operating on behalf of the majority, should be able to respond by making adjustments that force the rich to pay their fair share. But in a world where money readily translates to political power, voice, and influence, the superrich have virtually endless resources at their disposal to make sure that doesn’t happen. To make society more equal, you need to tax the rich. But to tax the rich, it helps for society to be more equal.