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


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.


Steve Weinberg, Cleveland Plain Dealer
Superb.


John Landry, Harvard Business Review
Eye-opening.


James K. Galbraith, The New York Times Book Review
Truly shocking.


Business Week
Want to know how business execs get nearly free personal trips on their corporate jets? Johnston is your man.


Amity Shlaes, Financial Times
Mr. Johnston exposes some fundamental problems with the tax code that Campaign 2004 seems to be overlooking.


Jim Hightower, author of Thieves in High Places
This book is vital, an infuriating call to action.


John C. Bogle, founder of The Vanguard Group
Reading Perfectly Legal is the first step to bringing American government back to its citizens.


Book Description
One of the country's top investigative reporters reveals how the richest people within the top 1 percent of the country has rigged the tax code and other laws in its favor. Pulitzer Prize-winning investigative reporter David Cay Johnston has been breaking pieces of this story on the front page of The New York Times for nine years, work for which one business school professor calls him ìthe de facto chief tax enforcement officer of the United Statesî. 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. And he has sound advice on what to do. Since the mid-1970s, there has been a dramatic shift in who benefits from the American economy and bears the burden of taxes. CEOs, big investors and business owners can delay paying their taxes for years and sometimes escape them almost entirely, while wage earners have their taken from each paycheck. Discreet lobbying by the political donor class has made tax policies and enforcement a disaster. Because of obligations to these donors Washington has been unable, or unwilling, to fix these problems. The news media have largely ignored official favors to those who are supposed to pay the corporate income tax, the estate tax, and the gift tax. Millions of families expecting tax cuts are losing some or all of them to a stealth tax that was originally enacted only to apply to the tax-avoiding rich, but that now stings single mothers making as little as $28,000. But the cumulative results are remarkable: the 400 richest Americans pay a smaller share of their income in taxes than someone making $100,000. The 400 richest pay less and less of their income in taxes while the middle class pays more and more. And while the incomes of the very rich skyrocketed over three decades, the average income for the bottom 90 percent fell. Johnston exposes exactly how the middle class is being squeezed to create a widening income 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 hundreds of millions * how some corporations avoid paying any federal income tax * how CEOs fly on vacation in corporate jets for less than you pay for a middle seat in coach ñ and stick you with most of the cost * 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


Download Description
"One of the country's top investigative reporters reveals how the richest 1 percent of the country has rigged the tax code and other laws in its favor 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."


About the Author
David Cay Johnston won a Pulitzer Prize in 2001 and was a finalist three other times since 2000 for his investigative reporting in The New York Times, for which he has written since 1995. Prior to that he wrote for the Philadelphia Inquirer, the Los Angeles Times, the Detroit Free Press, and the San Jose Mercury News. Johnston is a frequent guest on NPR's Fresh Air.

FROM THE PUBLISHER

The rapidly widening gulf between the super rich and everyone else is an American tragedy. Pundits have raged about it, but until now, no one has explained exactly how it happened, why it's not a normal part of capitalism, or how much damage it's really causing -- not just to the poor, but to 99 percent of all Americans. Whether your family makes $30,000 or $300,000 a year, you are being robbed because the IRS and other institutions have been systematically corrupted -- under both Republican and Democratic administrations -- to serve the needs of people who make millions.

If you're the kind of person who works hard and plays by the rules, prepare to be outraged. Perfectly Legal will show you why the American Dream is turning into a lie. This explosive book, by an award-winning investigative reporter, reveals exactly how the tax code and many other laws have been twisted over the past three decades to subsidize the richest and most powerful fraction of 1 percent of our country. For nine years, David Cay Johnston has been exposing this covert campaign, piece by piece, on the front page of The New York Times. His scoops about outrageous tax scams have ruffled the feathers of powerful business leaders, politicians, and members of the political donor class. He routinely exposes the CEOs who fly corporate jets to Myrtle Beach for a day of golf and stick you with the bill; the business owners who build overseas factories to earn tax-free dollars; the former IRS employees who now teach multimillionaires how to hide their assets from the government.

Now Johnston offers a raft of compelling new stories about real people across all areas of society. In Perfectly Legal, you'll meet sleazy accountants and brazen tax cheats, clueless congressmen and crafty lobbyists. You'll meet frustrated IRS agents who have been handcuffed from pursuing the most blatant lawbreakers. And you'll meet ordinary Americans who are struggling to make a decent living but whose future is being undermined in ways they don't even realize. Compared to thirty years ago, every American now lives in a society much less equal and much more fraught with financial risk. Perfectly Legal lays out the details in plain English and shows how we can stop these trends before it's too late.

FROM THE CRITICS

The New York Times

As Johnston knows, the real scandal of our federal tax system isn't so much what the rich didn't pay. It's what the rest of us now have to -- particularly the middle and upper middle classes, with incomes from $50,000 to $500,000. This is the group Bush is squeezing, to benefit what Johnston aptly calls the ''political donor class.'' This truly shocking story emerges later on in Perfectly Legal. — James K. Galbraith

Publishers Weekly