| PERFECTLY LEGAL The Covert Campaign to Rig our Tax System to Benefit the Super Rich— and Cheat Everybody Else David Cay Johnston New York: Penguin Group, 2003 |
Rating: 5.0 High |
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| ISBN 1-59184-019-8 | 338p. | HC | $25.95 | |
There are books which delight. Brimming with engrossing plot elements, richly drawn and affecting characters, or carefully researched and clearly presented details about technology or the natural world, they leave the reader feeling exalted. Then there are those books which, equally meritorious in preparation, cause the reader's fists to clench.
Perfectly Legal is one of the latter kind.
Over about the last twenty years, certain economic trends have become common knowledge. These include the growth of compensation for top executives of American corporations, relative to that of low-level workers, and the shift of more and more of the federal tax burden away from the very rich. But what is commonly known is not always true. That is why books like this one are so important.
Its author, David Cay Johnston, was hired by the New York Times to work the tax beat — typically a deadly dull assignment. Johnston, however, had something different in mind. His investigative reporting won him a Pulitzer1 in 2001 and led to this fact-filled volume. It documents many of the corporate excesses alluded to above, such as how certain CEOs collect tens of millions in pay and perquisites while hiding their take from the public and even from the shareholders, or the fantastic loopholes associated with corporate jets. Then it goes further, probing the multitude of tax dodges made possible by the Byzantine complexity of the tax code and associated regulations, most of which can be laid on the doorsteps of Congress and the past six presidential administrations.
The problems Johnston describes are diverse. But they share a common result: They move discretionary income away from those who are paid least while allowing the wealthiest people to accumulate more and more wealth, often without paying their fair share of taxes. At bottom, these problems have arisen because of corporate greed and the fact that wealth confers greater access to the makers of government policy. Thus while politicians give lip service to economic justice, the measures they enact do little to curb the abuses the existing tax law permits. Meanwhile, those who avoid taxes in ways that are illegal know that the enforcement powers of the IRS are hobbled by outdated equipment, incomplete data recording, and severe underfunding. Political pressure is also a factor; many promising investigations have been shut down on orders from the top of the agency.2 Finally, the performance metric for IRS agents is not amounts of unpaid taxes recovered but numbers of cases successfully completed. Therefore, the majority of enforcement actions the IRS can undertake are directed against the "small fry".
As Johnston points out in his final chapter, the situation — as well as being unfair on its face — will stunt America's productivity in the long term and threatens the basis of our democratic system. It might even, as he hints, lead to a revolution. He ends the book by reminding us that, as citizens of a representative republic, we can change these outcomes (page 317).
Time invested in serious examination of our tax system, in a debate that engages you, me and everyone else, can pay us huge rewards. 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 that actually promotes long-term prosperity. |
Reform begins with you. |
The painstaking research Johnston presents in this book is a valuable contribution to that much needed reform. In the main, his writing is clear and accurate. There are typos (listed on the Errata page), but not an excessive number of them. The book's main defect is a tendency to drown the reader in floods of abstruse data. Some topics are supplemented with tables of financial data, and these enhance the reader's understanding of the complex information presented. I felt the book would have benefited from even more such tables. In addition, more white space and topic headings would have greatly enhanced its readability, especially in chapters 7, 12 and 20 — as, I think, would another editing pass to tighten up the narrative throughout. There are notes on sources and an excellent index. This book is in general quite readable and certainly worth reading, for it illuminates matters vital to every American's current well-being and to the future of our country.
To contact Chris Winter, send email to this address.