Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat E verybody Else

As others have said, this book has good information: I finally have a concrete grasp on what tax loopholes are, and why corporations and the ultra-rich are paying a decreasing share of the total tax burden, even as their ability to pay has gone up astronomically. The book's thesis is that the rich have two tricks to cheat the system:1. "Perfectly Legal" tricks: tax laws written in such a way as to explicitly sanction tax cheating (marketed as "tax relief" by the Machiavellian Frank Luntz, p45) via the selective allowance of tax deferral (Ch4, pp.49-52), or the repeal of things like the estate and gift tax (Ch6, especially pp.87-8), and implicitly sanction tax cheating via loopholes: e.g. spinning off shell insurance companies as tax shelters (ch13, pp.189-195), buying and then immediately selling a stock in order to exploit a foreign tax credit risk-free (ch16, a loophole that's eventually closed on p229), and multinational corporations (MNCs) using shady accounting to write-off expenses in higher tax countries like the US, while taking profits in low tax countries abroad (ch18, p255).2. "Effectively Legal" tricks: technically illegal, but unlikely to be enforced, thanks to decades of cuts to the IRS workforce, outdated IRS technology and tools, and laws that discourage going after the very wealthy, who conveniently are major donors to politicians' election campaigns (ch10, p152; ch14, p199).With less tax revenue, the government must either cut spending to offset lost income, makeup the taxes somewhere else, or run a deficit. Our government does all 3, with several effects:1. Thanks to lobbying and wealthy campaign contributions, programs that the rich don't need are the first to feel the squeeze: Social Security, Food Stamps, public education, housing assistance, and especially the IRS, while funding for programs favored by the rich keep going up, especially the military, corporate subsidies in agriculture, oil, transport, pharmaceuticals, and bank bailouts when things go bust, as we saw in 2008. (This is discussed more in depth in Johnston's _Free Lunch_.)2. The IRS is much more likely to audit ordinary people, both in order to recover lost revenue, and to justify its funding (which is apparently measured in arbitrary & superficial ways by Congress) -- this is discussed in Ch9 and Ch17. Ordinary people are easier to go after, as they have fewer and less sophisticated tricks than the rich, and they're much less likely to have the means to fight back. Thus ordinary people become more likely to fear and hate the IRS and either vote for politicians who promise tax cuts (i.e. Republicans), or become cynical and don't vote at all when they see that both parties effectively govern the same regardless of rhetoric (Democrat Joe Biden was as much a pal of Delaware's corporate elite as Republican William Roth). The ultra-rich fund both parties to hedge their bets and win no matter what happens.3. Inequality spirals out of control: the rich have more power to buy influence and stand above the law, while everyone else is left to fend for themselves while infrastructure decays, pollution destroys clean air and water, monopolies and cartels engage in usury and price fixing in credit cards, housing, healthcare, jobs are shipped overseas or automated away, and life expectancy declines -- all while our major institutions and media outlets tell us that things have never been better!My only serious complaint is that the book is not well documented: it reads like an informal newspaper article instead of a scholar's peer-reviewed piece. Johnston will typically say that some outrageous violation of decency and common sense is caused by "some law", but he rarely says what the specific law was called, or what section of the law is responsible. For example, on p51 of Ch4, he talks about a "1974 federal law" available only to "executives, highly paid salespeople, movie stars, and athletes" allowing them to defer all of their income into investment accounts, which grow tax free until they actually withdraw from it. In effect, this means they have 401(k) accounts with no contribution limit (whereas normal people are capped at $19500 in 2019), meaning their investments can be seeded with higher rates and thus grow faster (thanks to the magic of compound interest) than ours ever could. Pretty outrageous if true. But I can't find any evidence of major legislation from the 1970s that corroborates this claim: https://www.taxpolicycenter.org/laws-proposals/major-enacted-tax-legislation-1970-1979 -- On p152, Ch10, he writes about how the IRS Reform and Restructuring Act of 1998 effectively "handcuffed the tax police" citing provisions in the law about the "Ten Deadly Sins", but doesn't give specific sections related to these summaries so we could see how this language actually works in practice. Thankfully he actually named the law here, but the lack of specific sections makes it harder for a curious non-tax-lawyer citizen to become more informed. As a third example, on p44, Ch3, he writes: "And yet lawmakers encouraged these corporate scandals [at Enron, Global Crossing, Adelphia, Tyco, Waste Management] by ending a single legal principle -- the policy that each partner in an accounting or law firm was liable for the acts of every other partner." He refers to this again on pp261-2 when discussing the proliferation of LLPs (limited liability partnerships), but again, no specific law or act is ever named. A cursory glance through the Notes section at the end of the book will confirm the informal way in which references were gathered.In sum, I suspect he's *probably* correct, but because the citations are handled in such a sloppy way, anyone who's skeptical or curious will have very little to double-check with. Assuming he had actually done the work of verifying this information - since, if he didn't, the information would be just so much speculation- why did he not give specifics? It's quite frustrating.This lack of thoroughness ties into the other major criticism you see, that the book, having been published in 2003, is dated. Had Johnston been more meticulous with his footnotes and sources, ordinary readers could have used his notes and methodology to carry on the research themselves. As is, we generally have to take his (and other experts') word for it, which goes against the spirit of the book.

Perfectly Legal: The Secret Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else by David Cay Johnston"Perfectly Legal" is a depressing, infuriating, eye-opening book that reveals how the super rich take advantage of the political system and the rest of us by rigging the tax code and other laws in their favor. Pulitzer Prize-winning author David Cay Johnston brings us this mind-boggling account of the America of the rich and powerful. This 352-page book is composed of the following twenty-one chapters: 1. Taxes - They're Not for Everyone, 2. A Nickel an Hour More, 3. The Rich Get Fabulously Richer, 4. Big Payday, 5. Plane Perks, 6. When the Old Man is Dead and Buried, 7. The Stealth Tax, 8. How Social Security Taxes Subsidize the Rich, 9. Preying on the Working Poor, 10. Handcuffing the Tax Police, 11. Mr. Rossotti's Customers, 12. For Want of a Keystroke, 13. Mr. Kellogg's Favorite Loophole, 14. Mass Market Tax Evasion, 15. Getting off the Hook, 16. Profiting off Taxes, 17. Profits Trump Patriotism, 18. Letters to Switzerland, 19. Gimme Shelter, 20. Only the Rich Deserve a Comfortable Retirement, and 21. Is Reform Possible?Positives:1. Well-written, well researched, and surprisingly even-handed book.2. This is an infuriating book. I'm surprised at the lack of outrage...3. This book focuses on the complex tax system in an accessible manner. Many terms well explained for the laymen.4. The author does a wonderful job of laying the blame where it needs to be. His criticism is fair and even-handed.5. Taxes in a whole new light. A historical look at how the tax code has evolved.6. A true expose if there ever was one.7. Example after example of how the rich abuse the tax system to their advantage.8. The lack of comprehensive understanding of the tax laws by members of Congress and why that matters.9. The various methods in which the super rich understate their true income and overstate their tax deductions.10. Deferred compensation as a legal stealth tax cut.11. How our tax system forces Americans to subsidize the lifestyles of the very rich.12. Mind-blowing facts throughout this book. "The 13,400 top households had slightly more income than the 96 million poorest Americans."13. The lowering of the tax rate on capital gains over the years.14. Tax shelter specialists and how they benefit the rich.15. Power means access, access buys influence, and influence buys favors.16. A thorough look at the IRS.17. How CEO compensations hurt us all.18. Offshore shelters. The abuse in detail.19. Abuses of corporate jets.20. The truth about estate taxes.21. The marketing of terms to deceive the public...death taxes as an example.22. The alternative minimum tax and its implication.23. Social security taxes in proper context.24. Why the working poor get audited more.25. Great quotes..."If we can't make sure that everyone pays their fair share, then honest taxpayers get stuck making up the difference".26. Partnerships as vehicles for the rich and why that is so. Very interesting and of course upsetting.27. The story behind Enron.28. Tax-exempt insurance companies.29. How the Cayman Islands has become a paradise for tax fraud.30. How Visa gold cards were used for tax dodging purposes.31. The unbelievable tax revenue losses due to tax fraud perpetuated by the rich.32. Abusive tax shelters of all colors.33. Foreign tax credit abuses...it never stops, now does it?34. The manipulation of the media.35. The interesting tale of Bermuda mailboxes, no tale however.36. The fabrication of profits?37. Creative uses of insurance to avoid paying taxes...38. Tax avoidance techniques...for the super rich.39. The most important measure of tax burden is how much money goes out to taxes.40. Great recommendations on how to address the problems stated in the book.Negatives:1. No links to talk about on the Kindle.2. It's a little dated but still a great book.In summary, this is one of the best exposes of the super rich that I have ever read. It's informative, educational and yes infuriating. In a nutshell, this book is about how the super rich have rigged the tax system to their exclusive benefit at the expense of the rest of us. A great book that hurts. Highly recommended.