Book makes taxes interesting, alarming

If every American read, understood — and believed — Perfectly Legal, David Cay Johnston’s new book on the U.S. tax system, there would be riots in the streets and a third party would gain control of Congress this fall.

Johnston, who won a Pulitzer Prize for his reporting on the IRS for The New York Times, manages to make tax issues as interesting as a political novel. Through his vivid prose, he is able to convey to the layperson his concerns over the current system, which he believes “is becoming a tool to turn the American dream of prosperity and reward for hard work into an impossible goal for tens of millions of Americans and into a nightmare for many others.”

The general case, that the rich are getting richer while the poor and the middle class foot the bill, has been made before, yet rarely so persuasively. Johnston uses numbers effectively to drive home his point that Joe Citizen is getting the shaft while Joe Billionaire kicks back and takes advantages of tax loopholes big enough to sail a yacht through.

Many of Johnston’s bugbears will be familiar to the observer of current events — moving companies offshore, corporate corruption that threatens retirement accounts and an IRS that does not go after rich tax criminals.

The book includes a chapter on how the estate-tax debate became the “death tax” debate and how a repeal of the tax would benefit not family farms, as argued by the tax’s opponents, but the richest Americans.

While Johnston’s case is compelling, the warning against “lies, damn lies and statistics,” may need to be applied here. I think not all the numbers are as clear-cut as presented in the book. For instance, sometimes Johnston discusses the top 20 percent of taxpayers; other times the top 5 percent. One senses he does so in order to strengthen whatever argument he happens to be making at the time.

Just as Johnston is revered as the tax-loophole reporter (personally, I wish he had included his personal income-tax filings as an appendix), there is a sense that the author admires some of the tax lawyers who create shelters and locate loopholes for the richest Americans.

He faults the system more than the individuals taking advantage of it and puts a lot of the blame for the status quo on Washington politicians. He argues that politicians’ thirst for political contributions to fund their election ads allowed “Corporate America” to get members from both parties to do its bidding. In fact, the author claims that “Congress often behaved as a wholly owned subsidiary of Corporate America.”

As a result, Johnston argues, lawmakers passed bills that they had not read, the implications of which were not clear.

Calling for a broad overhaul of the tax system, he writes, “As Orwell taught us, ours is like all systems in which some animals are more equal than others — it is the pigs who grow economically fat off the tax system.”

The book concludes with a call to action. Johnston writes that if enough taxpayers take up the issue they could create a movement that would offset the access to the halls of power that the biggest tax cheaters have enjoyed for decades. “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,” writes Johnston.

Hill sources have said that Johnston’s book is already making waves among the Democratic caucuses and staffers on the tax-writing committees as Democrats forge their tax legislation strategy for 2004. Still, many members of Congress, and their wealthy benefactors, may not want this book to be read.

To them, I suggest creating a tax loophole making purchases of Johnston’s book tax deductible.

Book reviewed:
Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich — and Cheat Everybody Else
By David Cay Johnston
352 pages; $25.95
Portfolio, 2003