Customer Reviews

The Cheating of America: How Tax Avoidance and Evasion by the Super Rich Are Costing the Country Billions--and What You Can Do About It

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4 star:		(2)
3 star:		(3)
2 star:		(3)
1 star:		(3)

 

 

Unlike the other reviewers, I liked this book. My biggest problem with it is its length. After hearing a few of the stories, it started to get a bit dull.

In a nutshell, this book is about people who have the money, power and lack of ethics to avoid paying their taxes. The result, of course, is that the rest of us have to make up the hundreds of billions of dollars lost.

This is muckraking in the best sense of the word. This book follows a middle class self-employed taxpayer through the bureaucratic hell caused by bad IRS advice, and her resulting tax bill and then contrasts it with the treatment big-time tax evaders get. If you are an ordinary person, the IRS will go after you. If you can afford fancy lawyers, the IRS is willing to compromise on pennies for the dollar.

This book is a better skim than a read, but it's an important message and the authors have clearly put a lot of work into it.

The Cheating of America is another superb peice of work by Chuck Lewis and his folks at the Center for Public Integrity. The CPIers reveal (once again) the exploits of the wealthy by constantly asking the question is it tax avoidance, tax evasion or somthing hazy in the middle which is refered to as avoision. The book highlights cases of people who simply aren't paying tax. The Center for Public Integrity doing what it does best . . . .taking every day public documents and going through them with a fine tooth comb - the forgotten art of investigative journalism. KEEP UP THE GOOD WORK!

This book is built around the IRS estimate that $190 billion in taxes is not being paid annually. This costs the average family over $1,500 a year in extra taxes to pay for what others don't pay, if the same amount of taxes were collected. The book details off-shore losses in tax havens, trusts designed to shift income, few audits of high-income taxpayers, special tax legislation in Congress, tax-loss carryforwards bought inexpensively, deduction timing methods, charitable trust operations, hiding money offshore, operating with cash, using untraceable Internet accounts, renouncing U.S. citizenship, investment banker- and auditor-led tax shelters, and tax protestor organizations. If you are not familiar with the methods people use to reduce taxes, this will be new information to you. If you are sophisticated about taxes, you will read mostly about cases that have received widespread publicity.

The book builds from two faulty premises. First, that it is a civic duty to pay income taxes just as progressively as the face of the tax law suggests. Most people would agree that if there are legal ways to pay less, that people are entitled to use them. Much of what is condemned in this book is not even controversial in terms of its legality. Honest differences may occur in how these alternatives are applied. Second, that few people should be able to escape the IRS's reach. To do that, we would either have to use a much simpler tax system (like a sales tax) or audit almost all medium and large income taxpayers. That later alternative would require an enormous increase in the size of the IRS and reduce the pleasure of being an American. We would have a tax police state focused on everyone's tax life. I think that few would want to live with that, even if they were not a target in a given year. We've all read the horror stories of what happens now to some unlucky people who run afoul of the IRS.

The book begins with an example of how a complex tax system can go wrong. A woman got a retirement fund distribution, and didn't know how to pay taxes on it. She called the IRS, got faulty advice, and then was hounded to pay up. The IRS mistake was no defense. So, the downside of the current system is that it can victimize those who do not know about taxes. This means we are headed towards a world in which almost everyone who pyas taxes has to employ tax professionals.

I certainly agree with the authors that the egregious tax cheats should be stopped. Interestingly, I'm not so sure that can be accomplished. I am even less sure that it will reduce my taxes. There is a tendency for government to collect as much revenue as possible, even when revenue increases.

I think the book should have focused more on how the current tax system is headed for a collapse because of its complexity and rapid increase in illegal ways to avoid it, and that fairness and funding the government require a new and simpler tax system.

After you have finished this book, also think about how the balance of fairness should work in government. How many guilty people should go free so that one innocent person is not punished? How much discretion should police and prosecutors have? How hard should the IRS try to collect before settling with the unsophisticated?

What is your fair share of the community's burdens? Are you meeting it?

Calling this "left-wing propaganda" and other editorial commentary in some reviews really just proves the premise that as America slips into decline, the only 'wealth' being created is tax cheating schemes, along with 'no-down-payment' real estate speculating courses, and "privatization" of public property such as utilities, or government research. This book has the scoop on all the famous tax cheat schemes, and consumer warnings against get involved in them. But precious little recommendations on how to solve the problem. But the main message of the book is that making money in America is no longer about producing a product, or providing a service, but about cheating on your income tax. Pretty much the USA is on the road toward becoming a corrupt third world bananna republic, like Mexico.

Thank you to the authors for their investigative approach to this book and highlighting the money trail. We have to stop the madness...Enron, Worldcom and Arther Anderson and even the execs that run these companies and the non-profits. Doesn't anyone think that "Character Counts" anymore. I like the fact that the book names the biggest offenders and how they do it.

I was immediately disappointed by the tone and content of this book. Having seen the writers in a public appearance recently(by the way, Charles Lewis and Bill Allison are not the actual writers of this book) I was intrigued by their presentation. However, rather than an interesting case study of the methods and successes of notorious tax cheats, what I found was a biased and superficial discussion of individuals and entities who have taken advantage of advanced tax and legal planning. While the book provides some actual but very simplified presentations of true criminal / improper activities (the Leona Helmsley case, for example) the authors tend to blur the distinctions between legal and illegal activities. As an attorney with some modest past-IRS employment, I wholeheartedly agree with the authors very legitimate view of the impenetrable U.S. tax code, but their dislike seems to have colored many of their observations. While the authors purport to recognize the difference between tax avoidance and tax evasion, the book's examples nevertheless take great liberties, sprinkling terms like "scheme", "sham" and "improper" through numerous descriptions of completely legal and commonplace corporate structurings. The authors make stunningly slanted conclusions, in more than one instance deriding a company or individual for their "unfair" tax planning, notwithstanding that the U.S. Tax Court found the taxpayer wholly innocent of what can only be characterized as trumped-up charges brought by the IRS. While I believe most people will find parts of this book interesting, I found it to be piecemeal and choppy, intermingling colorful summary examples with biased and oftentimes incorrect conclusions.

I profited from this book because the authors and their research staff related interesting stories of companies and their battles with the IRS using sources such as newspapers and Tax Court transcripts, and I bought a cheap used copy. The research was thorough and I skipped some of the tedious details. But, I fear that many other readers will buy into the denunciation of capitalism espoused by the authors. If you haven't already read books explaining why capitalism in Hong Kong, Singapore, and Ireland creates many more happy and prosperous people than U.S. and European socialism, then you would profit more from reading books such as "The Capitalist Manifesto" or "Capitalism: The Unknown Ideal" or "The Sovereign Individual."

The authors believe that because "taxes are the price we pay for a civilized society," the U.S. should continue taxing 35% of the economy and regulating another 10-15%. Unfortunately for the U.S., Hong Kong will be as rich as the U.S. in 10 years if current trends continue, and Singapore will be as rich in 20 years. Benevolent government is a delicate balance between anarchy and despotism, and the U.S. has long since descended into an anarchic despotic state where most government activities involve gathering everyone into numerous groups who steal from everyone else; or protecting people from their own foolishness; or operating military bases in 130 countries or acting as a referee in their civil wars. The authors fail to recognize that only a minor portion of U.S. federal government activity benefits the general welfare such as protecting property ownership and other individual rights; and that a special interest group can have millions of members who benefit from government spending at others' expense.

The authors assume that since rich people own a disproportionate share of corporations, and corporations have been paying a smaller share of total taxes during the last 30 years, that the IRS should pursue corporations more energetically; and that doing so will alleviate the crushing tax burden of individuals that are not rich. They fail to recognize that not only rich people, but also many ordinary people own shares in their pension plans; and to a large extent corporations are tax collectors that transfers taxes to their customers, most of whom are ordinary people. Even corporations selling luxury items to the rich still employ workers who suffer when the IRS drives corporations to manufacture elsewhere.

The authors lament the emigration of rich Americans to countries with lower taxes and advocate enforcement of a law that would prevent emigrants from visiting the United States after they renounce citizenship. They falsely believe that rich people cannot happily live luxuriously permanently outside the U.S. and enforcement of the law barring their return would discourage many from emigrating; and refuse to recognize that rich people can enjoy many other countries. The few that would be successfully discouraged would be offset by the many who would spend their tourist money elsewhere. London has successfully attracted the spending and capital of foreign billionaires using a favorable tax structure, and the U.S. could compete by emulating the practice (and making the airport experience more enjoyable). Millions of Mexicans emigrate to the U.S., rich and poor alike, and Mexico welcomes their return not only for the tourism industry, but as a humanitarian gesture. Building a Berlin Wall around the U.S. would be as counterproductive as it was in Germany.

Of course these taxes arent being paid! We've set up a system that allows it. The more complex a tax code is, the more exemptions that are allowed the more loopholes that are available to exploit. I seriously don't know why anyone would be shocked this happens.

The ironic solution to this mess, if you truely want to solve it, is to advocate a flat tax with no exemptions (maybe one) or a national sales tax and do away with national income tax.

If your concern is about the billions being wasted by the government over 50% of our budget is non-discretionary. That means congress can't touch it through yearly appropriation. That means it grows and grows and grows uncontrollably. This spending includes wealth transfers through welfare, corporate subsidies (WEalth transfer from poor to rich), and social security (poor to rich wealth transfer) to name a few. Ironically we spend billions to protect farmers the result of which is higher price for food and then billions more on food stamps so the poor can afford the higher priced food. Society as a result is hurt.

Well over 1 trillion is wasted in this manner...

I WROTE A SEMI REVIEW OF THIS BOOK FOR THE LOCAL PAPER, I DID NOT MENTION THAT IT WAS A TEASE IN THAT IT FELL SHORT OF MUCH ACTUAL FACTUAL MATERIAL ON A PER CASE BASIS. NOT SURPRISING CONSIDERING THE SECRECY INVOLVED. EVERYONE SHOULD SUPPORT MUCKRAKERS, IT IS THE ONLY SUPPORT FOR HONOR.DNB

First, what is the purpose of the Tax Code and the Internal Revenue Service (IRS)? Is the role of our tax system to maintain "equilibrium between the wealthiest and the poorest segments of society" as the authors imply, or to "lay and collect Taxes...to pay the Debts and provide for the common Defense and general Welfare of the United States" as stated in the U.S. Constitution?[2]

Second, is the authors' assertion that "upper-income taxpayers do not pay their fair share" true? That depends on how one defines "fair share." In their book, Lewis and Allison cite several carefully selected examples of wealthy Americans and corporations finding ways to avoid paying their fair share in federal income taxes, some legally and some illegally. Clearly, these extreme cases do depict specific situations that should anger and frustrate most taxpayers.

However, when one examines the bigger picture instead of looking at only an extremely small sampling of the very worst, the view is much different. For instance, while the authors tell the reader "The IRS recently reported that 2,680 filers with incomes of $200,000 or more claimed they owed no taxes, up from 612 in the mid-eighties, and 85 in 1977," they fail to mention that as our economy grows and incomes rise, there are many more people in these income brackets than in the past. As a result, despite the increase in the raw number of upper-income taxpayers reporting no taxable income, statistically the problem was less prevalent in 1998 than in 1985 or 1977.

In 1977 about 53,400 individuals claimed income of more than $200,000.[3] This compares to 296,500 in 1985[4] and nearly 2,074,000 in 1998.[5] This means that of individuals earning $200,000 or more per year, 0.16% claimed no taxable income in 1977, 0.21% in 1985, and 0.12% in 1998. While some people might feel it is unfair that someone with a high income can, in some circumstances, claim no taxable income, it is hardly an issue of epidemic proportions as the authors would lead us to believe, and is certainly less of an issue today than it was a few years ago.

Ironically, if the authors' implied definition of "tax cheating" was applied to the entire taxpaying population, the middle class would be "cheating" even more than the upper class.

Although our federal income tax system severely penalizes those who earn more money, even middle-class families can be hit with considerable tax bills. In the current tax year, for example, a family with two children under the age of 17 and an adjusted gross income of $40,000 could pay a federal income tax of roughly $2,200, even after taking the standard deduction, personal exemptions, and child tax credits. Yet the IRS reports that of filers earning between $40,000 and $75,000 per year, 0.26% (or 66,046 out of 25,860,161 filers) claimed no taxable income - on a percentage basis, more than twice as many as in the highest-income brackets.

The truth is, there are literally thousands of reasons individual taxpayers with income may pay little or no federal income tax. Certain investment income, such as that earned from municipal bonds, may not be taxable. Personal tragedies, such as disaster losses or high medical bills, can produce large offsetting deductions in any given year. And a dazzling array of tax credits, for everything from driving an electric car to adopting a child, can substantially reduce an initial liability.

Even more telling in the story about who is paying his or her "fair share" are the statistics of how much most wealthy Americans actually pay in tax. A rough comparison can be made with Internal Revenue Service (IRS) tax return data. Although individual situations vary widely, even within each income grouping, these statistics still provide a useful illustration of the inequities found in our Tax Code. According to the Spring 2000 Statistics of Income Bulletin, in 1998 tax filers reporting an adjusted gross income of under $200,000 (98.3% of all tax filers) paid an average federal income tax rate of 11.3%, or $3,852 each. In contrast, tax filers in the category earning more than $200,000 (about 1.7% of all tax filers) paid an average federal income tax of 26.8%, or $155,949 each. It should be noted that this figure averages in the wealthy individuals who found legal ways to report little or no income, as discussed in Lewis and Allison's book.

To look at it another way, the bottom 98.3% of tax filers pay a combined total of 60% of all income tax dollars, while the top 1.7% of tax filers carry the burden of paying 40% of all federal income tax dollars.[6] Obviously, someone earning more than $200,000 per year can afford to pay more than someone earning much less, but is the extreme discrepancy in the current Tax Code fair? With such a huge inequity, it is not surprising that wealthier Americans spend huge amounts of time and money seeking ways to lower their tax burden.