A hard-hitting, dismaying investigation of how the wealthiest individuals and largest corporations in the US use legal and illegal means to reduce or eliminate their taxes—and thereby stiff everyone else.
As of 1998, taxpayer noncompliance cost the federal government an estimated $195 billion annually. This account of how this massive tax chiseling came to be perpetrated was painstakingly researched by Lewis (The Buying of the President 2000, not reviewed), former Philadelphia Inquirer researcher Allison, and several of their associates from the nonprofit Center for Public Integrity. While admitting that Americans so distrust the IRS that they are unwilling to provide it with manpower adequate for conducting investigations, the authors make the compelling point that, without fair tax administration, the gap between rich and poor will only widen. The numbers alone tell a staggering story: Taxes paid by corporations on profits reported to the IRS declined from 26 percent to 20 percent between 1990 and 1997. At the same time, IRS officials admit that the agency targets the poor and middle-class disproportionately for audits because, unlike the rich, they are unlikely to engage in protracted, expensive legal sieges. Running to more than 17,000 pages in some editions, the Internal Revenue Code offers a labyrinth of net operating losses, offshore trusts, and real-estate shelters. Lewis and his associates use case studies to highlight these and other ingenious dodges crafted by accountants and tax attorneys. For instance, Joe Conforte, owner of a notorious Nevada bordello, insisted that his prostitutes were not employees but independent contractors—a claim later employed successfully by Microsoft, Xerox, and other corporations in shaving costs for Social Security, health insurance, and pensions. Assiduous tax schemers have even forsaken American citizenship or control of their companies to avoid paying the piper.
Short on policy recommendations for stopping these outrages, but long on details sure to stoke the debate about American tax equity.