Read Perfectly Legal: It could hold the key to a democratic victory in 04

[jerryfisher]

One of the most important books you will ever read and a key to a democratic victory in O4

I just finished reading the just published Perfectly Legal: The Covert Campaign to rig our tax system to benefit the super rich and cheat everyone else. I have a Ph.D in economics and business administration and thought I would’t learn that much. Boy was I wrong!!

Dave Cay Johnston the Pulitzer Prize winning NY Times reporter has written an investigative masterpiece in the tradition of Upton Sinclair in his book The Jungle, and has done a great service to America in writing this book! As Upton Sinclair created a political revolution in 1906 when his book was written this book should create, a revolution in 2004 that could, if it is used properly by the democratic candidates, sweep the democratic party to victory. I have said that to many of my friends and they ask for some specific examples of what I learned from reading the book and why I see it as critical for a democratic victory. Here are some to consider

The first one is something that I knew in the back of my mind but really never thought much about. Johnston points out that right now we are only using about 50% of the SS taxes to pay for current SS benefits. We will not be using all of them until the large portion of the baby boom generation begins collecting. He points out that the SS surplus should be going to pay down the U.S. debt so that when the baby boomer's apply for SS there will be the borrowing power to handle the extra benefit expenses. Instead we are using it to finance a tax cut for the super rich.

In effect, assuming a 15% FICA tax, right now the government is using 50% of the FICA taxes paid by the lower and middle class to make it possible for the wealthiest to have lower income taxes. As you may know, the SS tax is only paid on the first $90,000 of income. That is costing every American earning less than $90,000 per year 7.5% of their income to pay for income tax reductions for those making $500,000/more per year. (I say that because the amount of tax break give to the $500,000 plus income bracket is roughly equal to the SS surplus.) So if you earn $30,000/year you are paying $2,250/year to support tax cuts for the very wealthy people. If you earn $60,000 you are paying $4,500/year to support tax cuts for the rich and so on. A Johnston points out the FICA tax money is flowing upward. Every democratic candidate is proposing repeal of the Bush tax cuts for the super rich. They are planning on stopping the upward flow of FICA taxes to the super rich. This is an issue that is key for 90% of the voters, the democratic party just needs to tell the story better.


A couple of other points I found disturbing, from Perfectly Legal, and I knew about but never realized how bad it was, were how average employees/workers are losing their retirement plans - while CEOs leave the company with hundreds of millions in bonus pay. And it is as Johnston points out, it’s Perfectly Legal. The democratic party needs to pledge to make this illegal! Bush will never do that.

He details, again in a way I did not realized the details, how some corporations that are making a substantial profit, avoid paying any federal income tax. One particularly upsetting yet perfectly legal tax fact is how CEOs and other top executives fly on vacation in corporate jets for less than you pay for a middle seat in coach and how through tax loopholes you pay most of the cost. I say you, because I assume you are not one of the super rich getting this benefit. If you are, I don’t blame you for doing it, I blame the system for making it Perfectly Legal. We need to reform the system, as Johnston says before it is to late. We do not, in my opinion need a tax system that provides the very wealthy with a low cost vacation. If I had not read Johnston’s book, I would not know this is happening. Most every democratic candidate is proposing closing loopholes. Johnston's Perfectly Legal identifies the specifics.

Another fact that Johnston notes that is particular upsetting, and I was completely unaware of it, is that the working poor are SEVEN TIMES more likely to be audited by the IRS than everyone else. Linked directly to this and something just makes no sense, is that, while the IRS resources are targeted at the lower income audits, the IRS became so under funded, or is so miss-allocating its audit resources, that even when it was handed complete banking records detailing massive cheating by 1,600 very high income taxpayers, it prosecuted only 4 percent of them. We need the democrats in power to stop this Preying on the Poor!

Johnston points out how the tilt in the tax system to benefit the super rich has affected the national income and asset ownership distribution. From 1970 to 1999, wages have gone up by an average of a nickel an hour. The top 13,400 families in 1990 received 1% of the nation’s income; they now receive over 5%. The upper 1% of tax payers control 40% of the nation’s assets and pay only 25% of the nations taxes. And the trend is growing in favor of the super rich. The average income of the top 10% of American taxpayers rose 88.6% from 1970-2000 $119,249 to $224,877. There share of nation income went from 33% to 48% and it will rise substantially more under the newest tax cuts. The average income of the bottom 90% have stagnated at $27,060 in 1970 to $27,035 in 2000 and their share of nation income fell from 67% to 52% and it will accelerate it’s fall under the new tax cuts. If Bush stays as President this gets worse and worse and worse. We need a democratic to change this. Edwards is proposing to change it with his 2 America's theme, Kerry with his we are in danger of leaving to the next generation an America worse off than the one we started with. Dean is looking to provide major relief for the lower and middle class by providing health insurance ($5000 + benefit for each family) and SS tax credit etc. Clark also proposes the similar changes and the list goes on.

I could go on and on with this list. That is why it is so necessary to read this book and get others to read it. E-mail your preferred democratic candidate about the book. Get their campaign staff to read it and use in their stump speeches. Bring it to your friend’s house for dinner instead of a bottle of wine or 6 pack of beer. E-Mail your friends about this book. Otherwise we will have a nation super rich living in walled communities and nation of middle and lower class that become poorer and poorer. We have seen the effects of that elsewhere. That is not the kind of future I want for my family or my nation. But if we don’t change these laws, it is what the future will look like. This is not a democratic or republican issue, it is an American issue. The future of our country is at stake!

With great concern for the future of America and great hope for the democratic party.

Jerry Fisher

If you want more info on Johnston's book his web site is http://www.perfectlylegalthebook.com/indexie.htm If you want to hear his Jan 7, 2004 Interview with NPR’s Terry Gross on Fresh Air follow this link http://www.npr.org/features/feature.php?wfId=1587250 and click on Fresh Air Audio

[Pale Blue Dot]

1. I heard most of the Fresh Air interview.

The guy definitely sound like he knows what he's talking about.

[papau]

5. he does know what he's talking about - I worked in this area for 25 yrs

with 3 intense years in the mid 90's.

I was surprised that he knew as much as he did (every Morgan Stanley, or Accounting firm, or Bank, or world-wide Mutual fund, or leasing deal, or inter-corporate handshake deal came with confidentiality agreements - so his knowledge is hard to acquire)

[jerryfisher]

15. Terry is so cool, She get it

Yes, I was so jazzed when I heard that Interview. We need a revolution that changes these issues Johnston identifies. Independent voters are the key and they will be as angry about what Johnston points out as democrats. One simple example from Perfectly Legal that makes my blood boil, and that we need independent voters to read, and that any of the current democratic candidates would stop this is they were President. Here is the quote:

“In 2001 the IRS audited 397,000 of the nearly 20 million returns filled by the working poor who applied for the income tax credit. The IRS audited about 50,000 of the more than 7 million returns filled by people making $100,000 or more. That means that while there were close to 3 times as many working poor as affluent, the number of their tax returns chosen for audit was nearly 8 times as many: Indeed of all of the 744,000 individual tax returns that the IRS audited in 2002 more that half we filled by the working poor who account for lest that one in 6% tax payers.

The definition of working poor is a family with 2 children making between $11,550 and $13,350.

We need to fix this. This is outrageous. This is not the kind of America I want to pass on to the next generation. We need a democrat as our next President. Even swing voters know George Bush would not change this.

Another angering stat from the book in the chapter “The Rich Get Fabulously Richer” is while the bottom 90% of tax payers saw their income go flat. The top 13,400 households, that Use the Perfectly Legal tax loopholes the most saw their income go up 558.3%. When I saw it, I thought it was a miss print. HMMMM no, it just our tax policy at work! And George Bush's tax policy would worsen this and that is why the title of the book is Perfectly Legal: The Covert Campaign to rig our tax system to benefit the super rich and cheat everyone else. The title tells it like it is.

We need to change this, or 90% of America treads water, while upper 10% the bathes in financial delight of our tax polices that strongly hinders 90% of America. We need a democrat (any one of the current candidates instead of GBW) as our President, or we are faced with an America of the rich and an America of the stagnant 90% that just treading water. That is not class envy; I am part of the 10% that benefits from the Bush screw the working guy tax policy. That is not the type of America I want to live in, or I want my kids or grand kids to live in! And the way cool part is even many of the super rich agree, i.e. Bill Gates, Warren Buffet, and George Soros to mention only a few agree with my position. We just have to get the swing voters to know what Johnston writes about and all of us know about. We need to make it clear to all who read the book that a democrat is the president that will change this. 90% of the voters out there loss under George Bush's tax policy. We just need 8% of them to know this and this book Perfectly Legal could make that happen.

As I said before, if anyone you want to have an America that offers, opportunity for all, then get this book to them to your friends, e-mail the democrat you want for the nomination and get him and his campaign to read it and use it in their stump speeches. This book could create a revolution like Upton Sinclair did in 1906 But it is up to us. Bring it to your friend’s house for dinner instead of a bottle of wine or 6 pack of beer. E-Mail your friends about this book. Tell them if they want a change we need a democrat as President. Otherwise we will have a nation super rich living in walled communities and nation of middle and lower class that become poorer and poorer. We have seen the effects of that elsewhere. That is not the kind of future I want for my family (and I am sure that independent voters want for their's) or my nation. But if we don’t change these laws, it is what the future will look like. This is not a democratic or republican issue, it is an American issue. The future of our country is at stake! Go Democrats Go or perhaps it's go Independents go, and get the future you want for yourself and your family. I have a person I want as a democrat but like most I only want someone who wins against GWB.

With great concern for the future of America and great hope for the future of the democratic party whom ever win tonight in NH and on super Tuesday. One last time thanks again for your comments and suggestions. We have to get a new future for America.
we can, we will!!!

Jerry Fisher

[GOPBasher]

2. That sounds like an awesome book.

I'll have to buy it, so I'll more ammo to use against my right wing friends. :)

[catzies]

3. Welcome to DU, jerryfisher!

I'm going to print and peruse your great post! You gave a lot of information to digest, thanks!

[GreenPartyVoter]

Welcome, and thanks!

Will look for that book. :)

[liberalhistorian]

4. WOW, a

LIBERAL economist and MBA, will wonders never cease, lol! I've bookmarked this thread so I can read it in detail and give it full attention later on tonight (I'm at work right now), thanks for all the info!

And I have no doubt that all of what the author's saying is true, and it's frustrating beyond belief that so many people, the very people who are going to get royally screwed, don't seem to understand this or are apathetic and resigned to it if they do understand. It makes me very afraid for my 12-year-old son's future.

BTW, are most economists and MBA holders conservative, as it seems, or are there indeed more than ten or so liberal ones in the country? One of the main things that's kept me from getting an MBA is the fact that I don't think I could deal with the overwhelmingly conservative bent of most business schools and professors. I get enough of that in my daily life!

[unblock]

13. most economists are liberal

and most mba holders are conservative.

the liberal economists wind up in colleges, or in government, when not so many people hear from them. the conservative economists wind up in republican "think"tanks and get their reputations trumped up by republican politicos so that their opinion has more clout.

despite what mba holders think, mba's are not so much for an actual education (you can learn far more from a master's in finance, e.g.) than they are for making connections to launch a business career.

conservatives don't mind this at all, whereas liberals tend to prefer actual education, and so liberals probably aren't as attracted to the mba degree.

[SharonAnn]

14. I received my MBA at Xavier University in Cincinnati

It's a Jesuit University though no Jesuits taught any of my MBA classes. The students were more conservative than the professors. It was interesting to watch the professors try to illustrate that certain commonly believed concepts didn't work in practice. They were, of course, commonly held "conservative" concepts.

Anyway, the professors were certainly not "liberal". I found them pretty balanced and comfortable with explaining the theories behind a variety of views and being open to a great deal of opinion-type discussion.

The tools that are taught in MBA programs can be used for good or for ill. I happen to think that radical conservatives use them for ill.

[indepat]

6. Thanks for the post Jerry. I have tried to articulate some of these

major points here and in other forums for more than two decades, point largely falling on deaf ears, for example, I've pointed out that when ERTA passed in 1981, the 28% tax bracket for a single tax filer commenced at some $19,000 of taxable income, that that smhoe then paid Uncle Sam more than 35% of eace marginal dollar, that the payroll taxes were also subject to income tax, that countless millions of Americans/American families who had not yet reached a really comfortable standard of living were sending Uncle Sam more than 35% of each marginal dollar earned, but that multimillion dollar professional athletes, for example were sending Uncle Sam only 28% of that million dollar raise. Now with the latest rounds of tax cuts, the mythical lock box will be raided of several trillion dollars over time for return to the most affluent among us and large corporations and the baby boomers will be left with a bankrupt/near bankrupt trust fund and will almost surely never receive their promised/anticipated benefits because those monies will have already been sprinkled out to a chosen few. Never once has anyone ever said words to the effect that you might have a valid point there. One wears down eventually, so it is refreshing to know these points have been articulated in Dave Cay Johnston's "Perfectly Legal." Thanks again. The whol tax cut gambit has solely been to make a regressive tax scheme, when considering all taxes paid at all levels of government, even far more regressive.

[Hell Hath No Fury]

8. I have been trying to track down...

some informaiton on this topic, but I must be looking in the places.

Does anyone have the numbers on just what percentage of the recent Bush tax cuts (including estate/capital gains) went to the wealthy vs. the average citizen?

I want the info to put on my website -- just one more bullshit thing to add to the l-o-n-g list.

Thanks!

[Cleita]

7. Thanks.

I was always aware of the SS inequities, and those dipping into the fund who shouldn't, but need to read about the rest in detail. Legal doesn't make it ethical. This is true, isn't it. Everything Adolph did was legal.

[myrna minx]

9. I have bookmarked this thread...

for further study, for rhis is quite a bit to digest in one sitting. Thank you for your thoughtful analysis on this subject. This has answered some of my questions, but I now have more. I shall pick up the book. Welcome to DU. :hi:

[Malva Zebrina]

10. Thanks Jerry

You have made me very tired. :-(

[sweetheart]

11. brilliant. Thank you Jerry

As you mention economics, i have a question. You know ricardo's
comparative advantage. Has that ever been proven true in the case of comparative services?

Example. Country A sells country B a security guarantee contract. Nothing moves across borders. Country B who has poorer security industry sells back to country A 5,000,000 call center operators. Nothing moves across borders.
Was there a comparative advantage?

I remember studying this in terms of tangibles, but when we get to services and intangibles, i think this root theory behind the free trade mantra is rather poorly considered. Am i dead wrong in this... have you an opinion? Ricardo did not have the internet and credit derivatives as virtual contracts to use as examples in his formulation... Thanks if you respond.

welcome to DU (though you've been here a while, i have not welcomed you)

[jerryfisher]

12. Thanks for the comments

I appreciate the wide range of comments in this thread. I just found a way cool review of Perfectly Legal in of all places, "Business Week" even BW knows that the current tax code and the GBW tax cuts put the ordinary person at risk. :-) Wow wonders nevers cease.

Here it is and yes it is from the Business Week! We can win in 04!
Perhaps BW editors will cheer us on??? :-)
At the end of the review it even say, to consider this before voting. Let the games begin!!!


JANUARY 13, 2004 • Editions: N. America | Europe | Asia | Edition Preference








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MOVEABLE FEAST
By Thane Peterson

Tax Fairness? Forget About It
A new book insists that U.S. tax policy will punish more and more Americans -- except for the rich, as usual

If you have any doubt that the U.S. is being run by louts and hypocrites, I suggest you page through the new book Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich -- and Cheat Everyone Else (Portfolio, $25.95). In it, David Cay Johnston, a Pulitzer Prize-winning reporter for The New York Times, makes a powerful case that since 1980, Congress and successive Presidents -- politicians of every stripe -- have deliberately undermined the fairness of the tax system. It is biased to favor big companies and a few superrich individuals, Johnston claims.

The book also offers a warning that should alarm just about every BusinessWeek Online reader: Unless the tax system is rejiggered, any American who makes $50,000 to $500,000 a year is going to get hurt. Remember those huge tax cuts rammed through by the Bush Administration over the last three years? Most -- and in some cases all -- of the benefits are likely to be eaten up by new taxes, Johnston asserts, even if the official tax rate isn't raised.

People making less than $50,000 won't be spared, either. Besides, most of them are already being pinched -- especially if they're a member of the working poor or head of a family with heavy medical expenses or many children, he adds.

PARALLEL CODE. At the same time, the tax burden on the wealthy has plunged. People in the top fifth of the income scale now pay only 19% in taxes -- and that figure takes into account state, federal, sales, property, and all other levies. The poorest fifth of Americans pay 18%. The people in the middle -- the other three-fifths -- presumably pay considerably more (I certainly do), though Johnston doesn't give a specific number. He points out that the only ones who pay less are scofflaws, whose numbers are soaring.

How did America come to this pass? Much of Johnston's tale is familiar. Big cuts in dividend and capital-gains taxes have mainly benefited the wealthy, and powerful corporations have slashed their tax burdens (illegally, in cases like Enron and Tyco). Meanwhile, 90% of the population saw earnings drop 25% from 1970 to 2000.

Far more surprising is the pattern Johnston documents in largely overlooked changes in income tax and Social Security rules. Politicians of both parties have consistently stuck it to average taxpayers, usually while loudly proclaiming that they're cutting taxes.

SOCIAL INSECURITY. The big bogeyman for middle- and upper-middle-class Americans is going to be the alternative minimum tax (AMT). Added to the tax code in 1969, this is a sort of parallel code with its own rates and tough rules limiting what can be deducted. The AMT was originally intended to make sure the very wealthy didn't avoid paying taxes entirely. The AMT never achieved that goal -- the superrich have clever advisers who are always two or three steps ahead of the IRS -- but it has gradually ensnared more and more average Americans, ratcheting their taxes upward.

It's a prime example of how government rarely ever really cuts taxes for anyone but the rich and powerful. Because the Bush tax cuts didn't include any provisions to rein in the AMT, the U.S. Treasury Dept. predicts that the number of households paying it will soar from 1.3 million in 2000 to 35.6 million by 2010. By then, 30.4% of all taxpayers will be paying the alternative tax, estimates the Tax Policy Center, and it will add an average of $3,751 annually to their tax bill.

Typically, the wealthy will get the best break: Only 24.3% of people making over $1 million will pay the tax by 2010, the Tax Policy Center estimates.

BIGGEST HIT. Politicians -- mainly Democrats in this case -- have similarly gamed the Social Security system. Its taxes have soared because of changes made in the early 1980s that were supposed to keep the system solvent. Johnston calculates that from 1984 to 2002, the government collected $1.7 trillion more in Social Security taxes than it paid out. The extra money was supposed to go into a fund to help pay for baby boomers' retirements but instead was simply dumped into general revenue -- another way of saying it was used to fund tax cuts for the wealthy.

As a result, Social Security is now the main tax paid by most average Americans. The maximum tax has soared, from $327 in 1970 to $5,400 in 2003 -- and you have to make only $87,000 to get hit by the maximum. Three-quarters of all households now pay more in Social Security taxes than in income taxes.

Worse, the original purpose of the tax -- to protect the poor from destitution in old age -- has been lost. Shamefully, the Democrat-controlled Congress dropped the minimum benefit for the poor in the early 1980s as a cost-saving measure.

RAMPANT CHEATING. Equally shameful is the way conservative Republicans have gutted the IRS. No one much likes the IRS, but it's a necessary evil because tax cheats basically just take money out of the pockets of honest people who pay. Unfortunately, the Republican Congress doesn't see it that way. It has repeatedly scored political points by hammering the IRS and slashing its budget. As a result, while the number of tax returns filed increased by nearly 50% from 1988 to 2002, the number of IRS auditors plunged 30%, to 11,500.

Little wonder that cheating is rampant. Partly because of mismanagement and partly because of budget cuts, the IRS doesn't have the computers and knowhow to go after the complicated offshore trusts, partnerships, and other scams the wealthy use to avoid taxes. And new rules passed by Congress in the late 1990s require that any IRS employee accused of certain infractions go through an administrative hearing and face mandatory firing if found guilty. This is a good reform in theory, but in practice it has allowed tax cheats to tie auditors up in red tape or intimidate them with threats of a complaint.

More and more people are simply refusing to pay income taxes -- and few, if any of them, are being punished. An IRS internal report found that in 2002 "at least 152,000 Americans filed bogus tax returns stating they owed no taxes or even seeking money back from the government under a variety of tax evasions marketed by promoters," Johnston writes. That's 1 in 900 U.S. returns. The General Accounting office estimates that 7,500 U.S. companies now simply don't bother to withhold taxes from employees, probably as a form of tax protest.

PERUSE BEFORE VOTING.

[InkAddict]

16. This thread is worth a kick

:kick:

[porkrind]

17. Kick !!!

Great Post! Thanks! Everyone should read this.
:kick:

[Solomon]

18. Thanks and welcome to Du Jerry.

We need people like you. :thumbsup: