Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat Everybody Else [Paperback]

David Cay Johnston (Author)

Book Description

Release date: January 4, 2005

Now updated with a new prologue!

Since the mid-1970s, there has been a dramatic shift in America's socioeconomic system, one that has gone virtually unnoticed by the general public. Tax policies and their enforcement have become a disaster, and thanks to discreet lobbying by a segment of the top 1 percent, Washington is reluctant or unable to fix them. The corporate income tax, the estate tax, and the gift tax have been largely ignored by the media. But the cumulative results are remarkable: today someone who earns a yearly salary of $60,000 pays a larger percentage of his income in taxes than the four hundred richest Americans.

Pulitzer Prize-winning investigative reporter David Cay Johnston exposes exactly how the middle class is being squeezed to create a widening wealth gap that threatens the stability of the country. By relating the compelling tales of real people across all areas of society, he reveals the truth behind:

• "middle class" tax cuts and exactly whom they benefit
• how workers are being cheated out of their retirement plans while disgraced CEOs walk away with millions
• how some corporations avoid paying any federal income tax
• how a law meant to prevent cheating by the top 2 percent of Americans no longer affects most of them, but has morphed into a stealth tax on single mothers making just $28,000
• why the working poor are seven times more likely to be audited by the IRS than everyone else
• how the IRS became so weak that even when it was handed complete banking records detailing massive cheating by 1,600 people, it prosecuted only 4 percent of them

Johnston has been breaking pieces of this story on the front page of The New York Times for seven years. With Perfectly Legal, he puts the whole shocking narrative together in a way that will stir up media attention and make readers angry about the state of our country.

Editorial Reviews

Amazon.com Review

Most Americans would agree that they are duty bound as beneficiaries of our democracy to pay taxes, and the majority of us do pay—-exorbitantly. But what about those who do not pay their fair share? David Cay Johnston, a Pulitzer Prize-winning reporter for the New York Times, here reveals how fairness and equity have eroded from the American tax system. Johnston describes in shocking detail the loopholes our government provides the "super rich"--from private individuals to profitable corporations—-to hide their wealth, to defer or evade tax payments, and to pass the bill to law-abiding middle-class Americans. The loss in revenue "imposes a severe cost on honest taxpayers" through reduced services, increased federal debt, and a weight on the middle class that threatens to impede its ability to achieve upward social mobility.

Admitting the extreme complexity of our economy and by extension our tax code, Johnston points out that the very wealthy do, of course, pay taxes. However, because of shelters that allow them to understate most of their income, they pay little more on average than most Americans on the dollar. This is regressive, and unquestionably favors the superrich. Johnston includes examples of outrageous corporate malfeasance (such as companies that establish off-shore tax addresses) and exposes the tax benefits of the particularly loathsome practice made famous by Jack Welch, in which thousands of wage earners are laid off while a handful of executives are granted hundreds of millions of dollars through deferred compensation, company stock options, and lucrative retirement packages, all at stock holders' xpense. In addition to these offenses, he describes the tax evasion methods of those who simply defy the law and are emboldened by a beleaguered IRS that is too underfunded to serve as an effective deterrent to tax cheats. Johnston calls for a complete overhaul of the system. But because those who most benefit from these laws comprise the "donor class" that supports the government power structure, our prospects for reform remain very bleak. --Silvana Tropea --This text refers to an out of print or unavailable edition of this title.

From Publishers Weekly

Since he began writing about taxes for the New York Times in 1995, Johnston's investigative reporting has earned two Pulitzers. The journalistic legwork informs every page of this expos‚ of the ways in which, he says, America's taxation system is stacked in favor of the wealthy. Johnston evades the imposing abstractness of the tax code by keeping the story focused on individuals, from working-class parents facing audits to Internal Revenue Service officials desperate for the resources to revamp their procedures. Chapters addressing the inability of the IRS to go after the worst tax cheats, thanks in part to opposition from grandstanding members of Congress, are particularly effective in putting a spotlight on the problem, but there's plenty of space given to revealing how canny tax attorneys come up with legal (and barely legal) ways to get around the system. And for those who can afford it, he reports, there's always a new dodge available once the law has caught up to the latest tricks. At some points, dealing with numbers becomes unavoidable, but even here Johnston displays a knack for breaking the story down into easily grasped components. Though the tax cuts engineered by Presidents Reagan and George W. Bush receive most of the criticism, Democrats come in for their fair share of opprobrium. Genuine reform, he suggests, will require serious and sustained attention from the public, not just reflexive griping. His book is a thoughtful overview for any citizens willing to educate themselves on the issue.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. --This text refers to an out of print or unavailable edition of this title.

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Product Details

• Paperback: 352 pages
• Publisher: Portfolio Trade; First Edition edition (January 4, 2005)
• Language: English
• ISBN-10: 1591840694
• ISBN-13: 978-1591840695
• Product Dimensions: 5.6 x 0.8 x 8.5 inches
• Shipping Weight: 11.2 ounces (View shipping rates and policies)
• Average Customer Review: 4.3 out of 5 stars  See all reviews (140 customer reviews)
• Amazon Best Sellers Rank: #185,933 in Books (See Top 100 in Books)

More About the Author

David Cay Johnston, a Pulitzer Prize-winning reporter for The New York Times, has hunted down a killer the police failed to catch, exposed LAPD abuses, caused two television stations to lose their licenses over news manipulations, and revealed Donald Trump's true net worth. He has uncovered so many tax dodges that he has been called the "de facto chief tax enforcement officer of the United States." His last book, Perfectly Legal, was a New York Times bestseller and honored as Book of the Year by the journalism organization Investigative Reporters and Editors. Over his forty-year career he has won many other honors, including a George Polk Award.

Most Helpful Customer Reviews

279 of 294 people found the following review helpful

5.0 out of 5 stars Must Read January 9, 2004

By A Customer

Format:Hardcover

I am a traditional conservative who has been bothered by tough coverage of the tax code in WSJ for years, but I am deeply troubled by Johnson's book. I have spoken with three tax attorneys who read it and found it accurate. What upsets me most is that THEY are not outraged. It does not do justice to this remarkable popularizationof an extremely complex subject to say merely that we always knew that the tax system was unfair. Cynicism is not Johnson's issue. The tax code is not understood by ANY of officials we have elected and rely on to represent our interests,. It is a black hole that makes incalculable (literally) national wealth disappear from our common enterprise. While we argue about deficits or unfunded mandates, hundreds of billions of untaxed profits of the very rich are sheltered and deferred in ways unavailable to wage earners who will soon be further burdened by a perversion of the "alternative minimum tax."

It is worth thousands of dollars to you, in all probability, to read this book carefully and then bring a copy to your Senators and Congressman with the demand that it be read. No vague review should divert every serious citizen from reading this clear and detailed explanation of why your government takes so much money from you while not securing your financial future.

101 of 107 people found the following review helpful

5.0 out of 5 stars Perfectly Legal January 8, 2004

By L. Hobson

Format:Hardcover

Written by David Cay Johnston

I do not attack the Bush family in my book.

In my book I explicitly state that it is perfectly proper for rich families to seek to tilt the tax system in their favor, that the problem is that the middle class has largely withdrawn from politics and the members of Congress -- many of whom, I have interviewed -- have their minds focused on the concerns of their donors, who are a narrow and rich group of Americans. That Congress behaves as it does fits perfectly with classic economic theory (I went to the Chicago graduate school of economics on a fellowship 31 years ago).

I certainly say that the rich overall -- and they are not monolithic -- have changed our tax system and that the results we see today re not the result of normal capitalism, but a rigged market.

But frankly I am just skimming here what commentators who have read the book, left and right and in the middle, have all been describing as -- and these are not my words, but theirs -- with terms like "extraordinary achievement," "One of the most important documents in the history of the Republic," "even handed," "the most extraordinary work of journalism I have ever read"..... Yesterday on the radio a leading lobbyist for the rich on taxes, who opened up on a radio interview with an attack, soon found himself saying again and again that he agreed with what I was saying.......

So I hope you take the time to read the book, which is not an attack on the Bush family (and, indeed, makes no mention of any Bush other than the two presidents in their official role as President except for my examination of George W. Bush's income tax return to make a particular point about the tax system and the IRS).

60 of 64 people found the following review helpful

5.0 out of 5 stars SHOCKING TAX THRILLER January 8, 2004

By PR

Format:Hardcover|Amazon Verified Purchase

This is one of the most amazing books about taxes I have ever read. Mr. Johnston proves, in convincing detail, how the US tax system has been hijacked by the super-rich. He does this in a wonderful prose and without ever resorting to exaggerations, just stating the embarrassing facts. If you ever wondered how so many executives can fly around to private vacations in corporate jets, this book will tell you why - the taxes they pay for this fringe benefit are less than they'd pay for the cheapest coach ticket, courtesy of the US Congress. There are dozens of other examples, such as this one. This is a book that will ruffle some powerful feathers that should have been dipped in tar a long time ago.