David Cay Johnston (Pulitzer) on taxes -- Streaming with Bernie Ward

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"Perfectly Legal" by David Cay Johnston

A Pulitzer-winning New York Times reporter argues that the rich have ruthlessly rigged the tax system against the rest of us. Aren't you shocked?

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By Farhad Manjoo



Feb. 9, 2004  |  In 1913, the year the United States created the federal income tax, a small company near Chicago, CCH Inc., published a handy little volume documenting every tax regulation newly on the books. At 400 pages, the "Standard Federal Tax Reporter" wasn't exactly a brisk read, but CCH's publishing decision proved prescient. Federal taxes, it turned out, were an idea with permanence; the U.S. tax code, in all its future labyrinthine intricacies, would be a growth industry. In the 91 years since it was first published, CCH's "Tax Reporter," now the tax accountant's Bible, has expanded nearly exponentially by the divine right of Congress; the 2003 volume outlining every tax rule in the land drones on for 45 times the length of the Good Book -- almost 55,000 pages.

David Cay Johnston, the New York Times' chief correspondent in the tax world, is fascinated and reviled by the people who live their lives in the thicket of regulations outlined in these 55,000 pages. Since the mid-1990s, when he took up his post, Johnston has been covering (or, better, uncovering) the mostly shameless, though often brilliant, antics of the leading experts in tax arcana -- the nation's elite accountants and lawyers who seek novel methods for their clients to avoid, if not evade, taxes. Now, in "Perfectly Legal," his new book on taxes, Johnston paints a picture of a system that is, he writes, fundamentally "rigged to benefit the super rich." For people wealthy enough to hire experts well versed in the thousands of pages of tax rules, life in America can be fabulous, Johnston writes. But the rest of us are "being duped into supplementing the incomes and extravagant lifestyles of the rich and powerful."

In his work for the Times, Johnston, who won a Pulitzer in 2001, has cultivated a reputation for being the kind of reporter unafraid to speak truth to power. He is diligent, persistent, and has a network of sources deep in government and in the corporate world. Every couple of months, one of his masterworks of reporting -- detailing some elaborate new corporate tax avoidance scheme, say, or revealing that the IRS audits more poor people than wealthy people -- will land on the front page, causing hundreds on Wall Street to reach for the Maalox. Johnston's work often alerts the government to the new schemes the rich are using to avoid paying taxes. In 2002, for instance, he discovered that a growing number of wealthy people were using loopholes in the laws governing the taxes on life insurance plans to pass tens or even hundreds of millions of dollars to their heirs, tax-free. Two weeks after Johnston reported the plan, the Bush administration shut it down.

Alas, "Perfectly Legal" is nothing like Johnston's measured, balanced newspaper reports. Instead, the book is a populist screed -- which, by itself, wouldn't kill the pleasure, except that this is a screed we've all heard more eloquently elsewhere. When it comes to writing on corporate and conservative efforts to harness the economic engine of America for their own ends, Paul Krugman, the Princeton economist and Times columnist, is pithier and less confounding than Johnston; for all his faults, Michael Moore's take on economic policy is at least (sometimes) funny. Johnston is erratic. "Perfectly Legal" is a puzzling book, at times serious and moralistic, at others sarcastic. Its main fault, though, is perhaps the most damning sin for any commercial book about the tax system -- it's just plain boring.

more... at http://www.salon.com/books/review/2004/02/09/johnston/print.html