on January 9, 2004
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.
on January 8, 2004
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for rich families to seek to tilt the tax system in their favor, that the problem is that the middle class has largely withdrawn from politics and the members of Congress -- many of whom, I have interviewed -- have their minds focused on the concerns of their donors, who are a narrow and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).
on January 8, 2004
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.
on January 15, 2004
If you are wondering whether you should read this book, I strongly say YES. I just finished reading Perfectly Legal, I have a Ph.D. in economics and business administration and was not sure that I would learn that much. Boy, was I wrong!
What an outstanding book! He writes so cleanly and clearly, it is no surprise he has a Pulitzer for stories he has written for the New York Times. The research and logic is world class and very disturbing. We need to fix the situations described before it is too late. To do this we need to get our friends and associates to read it as well. Get the word out. Buy it and give it to your friends, (you get free shipping if you buy more than one :-) suggest it to book clubs, talk about when ever you can.
The Miami Herald book club is reading and reviewing it this month. We need more of this to happen. Dave Johnston has written an investigative masterpiece in the tradition of Upton Sinclair book The Jungle. He and has done a great service to America in writing this book! As Upton Sinclair created a political revolution in 1906 when his book was published - this book should create a revolution in 2004. If we do not fix what David has identified, America and the world will indeed be in a sorry state.
Just one example out of hundreds and hundreds from the book that must be reversed. David points out that the upper 10% of U.S. tax payers saw their income rise by 88% and their share of national income go from 33% to 48% from 1970 to 2000. The the bottom 90% of US taxpayers saw their income stagnate and their share of national income went from 67% to 52%. And as David points out if the current "Perfectly Legal" tax loopholes continue, this disparity with grow!
Your future and your family's future are in the balance. This is not a republican or democratic issue, it's an American issue! America will not be great nation if it becomes a nation of haves and have nots. Get the word out about this book, e-mail your family and friends, it is the most important thing you can do this year. We need the changes that Upton Sinclar's book brought about, and David Cay Johnston's book can do that. It is even more important to our contry in 2004 than Sinclar's was in 1906. To make this happen we must do our part.
The next time a friend invites you dinner, bring this book instead of a bottle of wine or 6 pack of beer. Your friends will forget the wine or beer they will never forget this book! And they will thank you over and over for it. My friends have.
on January 2, 2004
Perfectly Legal by NYTimes Pulitzer Prize writer, David Cay Johnston, is the one book that all of us struggling to make ends meet cannot live without. In clear, indignant prose, Johnston writes about the political manipulations of our tax system so the superrich get richer and the poor get children--or jobs as checkers at Wal-Mart. Johnston shows how our tax system cheats most Americans out of their ability to save--or spend--while low taxes on investment incomes fill the pockets and swell the bankbooks of the super-rich to overflowing. Indicting both Republicans and Democrats, presidents and members of Congress, Johnston recommends tax reforms that will benefit the majority of Americans--not just the Super-Rich.
Johnston's call to arms to the Everyday American is must reading. As Johnston writes, "It is by our actions, or inactions, that we create our own future. We can go on with what we have and pay a heavy price in lost opportunity. Or we can speak up one by one until we are heard. Ultimately, we can create a tax system actually promotes long-term prosperity." Placing the responsibility squarely on our shoulders, Johnston urges us, "Reform begins with you."
Book Clubs owe it to themselves to adopt and discuss Perfectly Legal. And those of us who are lonely readers trying to figure out why we work so hard and have so little will find Perfectly Legal an investment in bettering our futures.
on January 28, 2004
David Cay Johnston has received two Pulitzer Prizes for his economic writing in the New York Times. His privileged vantage point provides him with the experience and insight to write a book delineating the potential disaster confronting America from the manipulation of the federal tax system to benefit the wealthy at the expense of the rest of society.
Many years ago H.L. Hunt, the Texas oil magnate then reputed to be the world's richest man, revealed his confident arrogance about the federal tax system, indicating that "even if they taxed us 99%" that the wealthy would prevail and pay nothing, leaving the rest of society to bear the responsibility. He had reason to be confident, as noted by Johnston's informative investigation. As for ferreting out tax cheats, the current IRS weakesses are appalling. Johnston noted that after locating the 16,000 worst suspected tax cheats, the IRS then investigated only a paltry 4% of the perceived malefactors.
Johnston exposes the gimmick of pandering members of Congress who showboat on behalf of the wealthy to insure continuing tax breaks. A particularly egregious example was the drama put on by Senator Trent Lott of Mississippi, who lost his Senate Majority Leader status for his tribute to former ardent segregationist, Senator Strom Thurmond. Lott's histrionics focused on perceived abuses by the IRS which were never corroborated. The performance related to keeping the heat on those who wanted to change the system by presenting the image of an aggressive IRS trampling on the rights of the wealthy patrons Lott sought to protect.
While focusing much criticism on presidents Ronald Reagan and George W. Bush for helping skew the federal tax code in the direction of the wealthy through their massive tax cuts, Johnston notes that to attempt to focus too much of the blame on these individuals would be a grave mistake. It is much broader than these two individuals, as powerful as they were and as fervent as their efforts have been in that direction. The special interests have woven their magic in bringing prominent as well as less than prominent Democrats and Republicans onto their team with the situation deteriorating over a long period of time. For instance, remember footage of so-called "seminars" at posh country club retreats? Scores of these have been organized by the corporate sector to "inform" elected officials from the House and Senate on how to properly deal with the tax system. Needless to say, these seminars are best conducted in comfortable surroundings. Unsurprisingly, those who cooperate find themselves back in office, assisted by special interest largesse. Those who do not generally find themselves out of office.
Grover Norquist is a successful tax lobbyist with his own think tank. He is a prominent adviser to Bush, Cheney, and Rove. Knowing how the system is played, Norquist has referred to bipartisan congressional cooperation as "date rape." As for basic federal programs enjoyed by taxpayers, such as park systems and educational benefits, Norquist takes a harsh view. He has stated his desire that federal government activity, absent defense spending and anti-crime activity, belongs "flushed in a toilet bowl." He knows that if the system is top heavy enough in the corporate direction, with the middle class confronting the burden, that a plutocracy will result more in the tradition of eighteenth century France's pre-revolutionary phase than the New Deal, Fair Deal, and New Frontier administrations of presidents Roosevelt, Truman, and Kennedy.
You see, France can be used as a sensible model, after all, by Bush partisans! Freedom fries, anyone?
on February 26, 2004
Many have criticized this book for being anti-GOP. Just a note for you, Mr. Johnson is a registered Republican. However, he reserves the right to criticize both parties and will not blindly follow the party line like many Americans do.
The book is fairly objective. No matter what side of the political spectrum (or the $87,000 S.S. cutoff line) you are, you will enjoy this investigation into what's wrong with our Social Security system and why a lockbox or any other panaceas will not save us!
FYI: I am an independent but a conservative ideologically.
on January 12, 2005
Perhaps one of the most telling statements was that the overall tax burden for federal taxes is 15.3 cents, while that of the top 400 taxpayers (if the 2003 tax cuts were in effect) were 17.5 cents. When one adds in state, local, and property taxes, the poorest fifth pay 18 cents, while the richest fifth pay 19 cents. There is a great deal of background information about the effect on deferred executive compensation on corporate profits, the effect of the AMT (alternate minimum tax) on people who are not rich, and the propensity of the IRS to focus a great deal of resources on auditing the wage earner, who can hide very little of his income since it is reported on W-2 and 1099 forms anyway. But, with reduced IRS audit resources, auditing the little guy provides statistics, while the complexity of the wealthier tax shelters requires resources and reduces the numbers. But, auditing the tax shelters is where the tax recovered is greatest, but it is not often done. If the tax structure would be changed to a consumption (sales) tax, then the retiree would face double taxation since the retiree is spending after tax income for something that is then taxed. There are a lot of insights into the tax shelters available to the extremely wealthy (with an 'entrance fee' sometimes in the millions, not too many can enter into those deals). If there are tax dodges that are not caught, then it is wrong. If they are simply using loopholes then it is a value judgment although how they were created shows the power of money. If there is a bottom line, it is that adequate resources need to be made available to enforce the tax laws so that the tax laws apply to everyone. Note I term 'enforce the tax laws', not whether they are fair. If the laws are not enforced, it has the effect of allowing the system to break down. Taxes are necessary for society and society can make the rules they wish. The author also makes an interesting observation that auditors sometimes leave the IRS to set up tax shelters for wealthy clients using information they have gleaned from loopholes in the tax code. Another interesting statement is that the 'tax letters' used in setting up shelters are only opinions, but if they are written into hundreds of pages of detailed verbage, it can have the effect of getting the IRS to back down, or at the very least provide 'cover' for the client. One thing that should get most people angry is the statement that if seems that the IRS does not really penalize the abuser of tax shelters, even when they are found illegal.
on January 3, 2004
As one who has been following David Cay Johnston's work for years in the newspaper, I am delighted that he has found a venue for laying out--in all its gruesome detail--how certain politicians, lobbyists and business leaders (enjoying great favor under the Bush Administation) have siphoned off America's middle class wealth to make the rich richer. This is a shocking story. Instead of wasting their time on talk shows and conspiracy theories, people should read the facts--just the facts--and make their reaction known through the political system. Are the Democratic candidates listening?
on February 21, 2005
While I found much to dismay and horrify me within this book, I suspect I also often did not interpret things in the way the author intended. The author seems to hold a viewpoint in which if you avoid paying a tax--even legally--you have gained income, rather than merely avoided an expense. The author seems to hold the view there is a fixed amount of tax that is the right amount to collected, and if one person or entity reduces its tax burden, it thereby increases the burden on everyone else, cheating them. This is a judgment without any regard to the other side of the coin, government spending. While I agree that at the extremes (many of which are portrayed in this book), there is clear-cut cheating and not paying a fair share by any reasonable standard, I would not agree that all or even most legal tax avoidance falls into that category. Those who favor limited government and balanced budgets are likely to have a similar reaction to much of what the author writes.
That said, however, he makes a very strong case that the U.S. tax system is unfair and corrupt, that the IRS is limited in its ability to go after tax cheats who are breaking the law, and that the net effect is to give tremendous benefits to the richest of the rich, while the burden on everyone else (regardless of whether those taxes are being collected for legitimate or frivolous purposes) has increased.
He has chapters on how the alternative minimum tax (AMT) is completely broken and is now impacting a growing number of the middle class, how tax-exempt insurance companies are being exploited as a mechanism for storing hundreds of millions of dollars in investments and avoiding taxes on the gains, on those who simply refuse to file or pay income taxes at all, on
the effects of Reagan-era payroll tax increases, on tax-evading partnership schemes and the IRS's complete inability to devote any resources to detecting them, on American companies moving their headquarters to Bermuda to avoid taxes, and on the destruction of pensions at many large companies. All are fascinating reading.
I agree with the author that something should be done, and that something should include a complete overhaul and simplification of the U.S. tax code, to make it fair and enforceable. But I am not optimistic that anything will be done--I think the level of corruption in the federal government is so high, and that because the behavior of bureaucrats and legislators is more accurately described by public choice theory than by political science, that it is unlikely we'll see radical change in a positive direction.