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Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat E verybody Else Paperback – January 4, 2005
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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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Top customer reviews
There is a class war going on in this country and it began when some of the rich decided that the fruits of their own efforts was not enough.
Mr. Johnson observes that "our tax system now forces most Americans to subsidize the lifestyles of the very rich, who enjoy the benefits of our democracy without paying their fair share of it's price."
There are examples of tax "engineers" that for a large fee will share schemes that allow tax evasion by exploiting a plethora of tax loopholes.
Of the many means employed to cheat on taxes, the deferral of compensation was an interesting and very common method. The battle over jet-travel perks was another expensive tax avoidance controversy.
The chapter "Big Payday" on executive's compensation was an eye-opener.
Is anyone worth some of these compensation packages? No! But that's corporate greed in it's most blatant form. The author demonstrates that greed is not owned solely by corporations and is often not easily detected. It is also rarely prosecuted.
Some more of the topics that struck me the most are:
The myth of the estate tax causing a loss of family farms. Most interesting is the the reason why the rich like Warren Buffett, George Soros, and Bill Gates, Sr. support the estate tax. Mr. Johnston states a disturbing fact- "Some of the biggest fortunes in America have never been taxed, not even once."
The hidden side-effects of the Alternative Minimum Tax or otherwise called the "Stealth Tax".
How tax evasion vehicles are promoted by tax advisers and large financial firms in an open fashion. Some of those advisers were former IRS employees. The 861 position was investigated.
The business philosophy employed by a few notorious CEOs which basically amounts to squeezing the pay and numbers of workers and then rewarding the executive on a ridiculous level.
How patriotism (remember the old logo "Made in America?) has taken a back seat while American corporations "expatriate" offshore.
The details of oil companies tax dodging schemes such as claiming profits in a foreign country and claiming expenses in the U.S.
The "moral hazard" of the limited liability partnerships(LLPs).
These partnerships limit the accountability of partners, removing potential incentive to monitor each other.
"What is in short supply in America is not capital, but income- at least for the half of Americans getting by on less than $28,000 per year- and educated minds. But our policy is aimed at more capital in the hands of the few, not at higher incomes for most so that they can acquire more assets..." Page 312-313.
"Transparency is good for the taxpayers overall, bad for the favored few." Page 315.
Those are a few of the astute observations made by the author.
If you only read one book the politics of taxes and the rich, I recommend reading "Perfectly Legal" by David Cay Johnston!
Some of the chapters I found most interesting were on how CEOs have enough flexibility to defer their income almost indefinitely to avoid paying taxes on anything they aren't ready to spend, and on how the IRS enforcement budget is mis-allocated - they have plenty of funding to audit the poor, but real-estate partnership returns aren't even matched up with individual income tax returns to make sure they're consistent. If that sounds interesting to you then you'll enjoy the book; if it sounds boring then you might not.
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congressional complicity.....Read more