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How the rich turn sludge into money
When the second Trump administration’s so-called Department of Government Efficiency (DOGE) started gutting the IRS, aiming for a 40% reduction in its workforce, critics rightly anticipated that such actions would impact economic inequality. Trump, Musk, and the many other billionaires in the administration could sleep soundly knowing that the few remaining IRS agents would have their hands full just trying to keep up, with little time to detect tax evasion among the wealthy. But even when the IRS was in full force, tax evasion was only one strategy wealthy families used to keep their wealth out of the government’s hands. Then and now, wealthy families often use another, far less obvious tactic to protect their wealth: paperwork. Lots of paperwork.
In a recent ethnographic study published in the American Sociological Review, I spent six months observing a “family office”—a boutique wealth management firm that manages the investments, philanthropy, taxes, and “lifestyles” of American families with over $50 million. I also interviewed 30 additional managers working in similar offices across the United States. At the beginning of the study, I expected to see a barrage of professionals busy preserving elite wealth. What I did not expect to see was family members actively engaging in what I call “bureaucratic practices,” which included conducting formal meetings, sending emails, signing documents, and delivering PowerPoint presentations.
These bureaucratic practices, I found, are central to how elite families preserve wealth across generations. They constitute formal behaviors that can be presented in court to demonstrate that legal tools like trusts and foundations are “real” and independent—and therefore legitimate. They serve as protective barriers shielding elite wealth from threats like divorce, resentful heirs, disgruntled business associates—and yes, the IRS.Most people find such practices tedious. In contrast to the wealthy families I observed, less wealthy individuals typically deploy bureaucratic practices to counter what behavioral scientists call “sludge.” Sludge creates friction in processes through elements such as complicated forms, long waiting times, and archaic rules. The bureaucratic practices that counter sludge include signatures, consultations, and outsourcing. Ironically, the quintessential example of sludge in America is filing taxes. Americans despise the process because it involves so many arcane forms, complex calculations, and esoteric knowledge—a result of decades of lobbying efforts by tax filing companies that profit from addressing sludge. But many ultra-wealthy Americans—the kind of people who can afford to buy private jets and sports teams—use sludge strategically against the IRS, rather than the other way around. These wealthy families see the IRS as an existential threat—one against which even the most supportive presidential administration cannot provide sufficient protection. Thus, these families take matters into their own hands by using bureaucratic practices to fend off the IRS and other threats to their wealth.
Beyond preserving wealth, bureaucratic practices also create complicated dynamics in wealthy families. For instance, Frank Martino was a wealthy retired man who had built a business worth hundreds of millions of dollars and wanted to take his family on a luxury vacation. To avoid certain taxes, he transferred money to pay for the vacation to a trust that he could not legally control. This meant that his adult nephew Paul, whom he appointed as trustee, had to approve every vacation guest with a formal note—including Frank’s new girlfriend. If one of his children wanted to modify the vacation plans, they would need to obtain unanimous consent from a board made up of three rotating family members. Additionally, to do so, they would have to wait for one of the board’s biennial meetings, where they might be required to pitch the idea through a formal PowerPoint presentation.
Family members were often trained in bureaucratic practices from a young age; even pre-teen children used PowerPoint presentations to pitch their kin on the philanthropic causes close to their hearts. Bureaucratic practices do not amount to full-time jobs, but they nonetheless weighed on wealthy family members and fundamentally shaped the tenor of family life. Although lawyers, accountants, and investment advisors performed most of the wealth-preserving labor and designed most of the infrastructure, even relatively distant family members were active participants.Viewed from the outside, wealthy elites might seem like worry-free individuals sitting on an ever-growing pile of coins. But wealthy individuals seldom act independently, and wealth preservation in America requires active participation in familial wealth-preservation practices, regardless of how unglamorous they may appear. Wealthy families pursue bureaucratic practices as families to sustain their wealth across generations. In turn, bureaucratic practices change them as families.
Doron Shiffer-Sebba is in the Department of Sociology at Northwestern University. He studies families, wealth, and inequality.
