Another book which confirms my own. This book in general shows that the super-rich are (in general of course) evil, but it also shows that the U.S. Government is also very evil.

He points out something interesting which is that it was found by a scholar, that the laws of the former Soveit Union were better than those of the U.S.'s, and mainly because of our tax laws, which he found to be worse than those of all the socialist countries of Europe.

Blattmair devised a scheme where he would use a charitable trust for MS Bill Gates as a way to avoid paying $56 million in capital gains taxes for $200 million in stock profits. Charitable Trust provided a shelter from taxes for stocks or buildings that appreciated in asset. The asset is transferred to the charitable trust and the charitable trust sells the asset tax-free and invests the proceedings. The trust gives the donating individual a lifetime income typically 6% a year. However, Blattmair plan was to take back 80% per year for two years and Gates would pocket $192 million without paying taxes and the charity would fold, but not before 92% of the funds had been converted into cash. The government would collect nothing. Instead, Bill Gates could claim a tax deduction of $2 million. It became questionable whether the IRS reviewed or challenged the tax shelter devise or even if the device was used. The only fact known is that at one time it existed and provided a shelter against the capital gains tax. The capital gain is the source of ý of all the income of the super rich. Capital gains tax fell from 28% rate in 1987 to 15% in 2003.

The rich are getting richer. Money is moving from the middle class too the super rich. Both the middle class and the poor are increasingly burdened with tax while the super rich repeat all the social benefits of the tax. The Reagan "Trickle down Wealth effect" is mythical: 1. Working class wages increases have not increased in three decades 2. Food and consumer products have become cheaper offsetting the cost of living for the middle class. Cost reductions made possible because of government subsidies and manufacturing efficiency 3. Government debt in the form of government bonds has absorbed cheap money supply making market growth slow and become more competitive for available money. Business profit margins have slimmed jeopardizing survival long term. Interest rate thresholds have lifted increasing bankruptcies and reaching levels of about 1 million claims a year. 4. Stocks returns averaging a 7 percent real return less inflation have barely broke even. The Stock market is transferring wealth from the middle class to the super rich. The super rich are realizing profits of about 25 to 40 percent a year on their money. 5. Property taxes, fuel taxes, and income taxes have placed a heavier burden on the working class reducing the percent diverted to savings and retirement. The US has the highest percentage separation between rich and poor (1 dollar saved in the lower percentile equates to 7,500 dollars saved in the top 5 percentile). The middle class is in trouble as interest rates rise, the dollar weakens, the stock market routes, the housing market deflates, and the commodity market switches back into bear territory.

The weakness discovered in Title 26 of the US code are the law is based on politics and not principles; the tax system in America is being rigged to benefit the super rich; the tax system is a vehicle designed to finance social change; the rules that government sets for their tax system and the degree they enforce them, affects and determines who will prosper. "Congress lets business owners, investors, and land lords play by one set of rules, which are filled with opportunities to hide income, fabricate deductions and reduce taxes," and on the other hand, "Congress requires wage earners to operate under another, much harsher set of rules in which every dollar of income from a job, a saving account or stock dividend is reported to the government, and taxes are withheld from each pay check to make sure wage earners pay in full."

The richests 1 percent, whose adjusted gross income of more than $313,000 in 2000, earned almost 21 percent of all reported income and pay more than 37% of individual federal income taxes. For three decades profits have been growing 1/3 faster than corporate income taxes; in 1993, 26 cents went to taxes for every dollar and in 1998, 22 cents per dollar earned while corporate income tax remained 35%. Many of the rich owned businesses, creating opportunities to charge a portion of their lifestyle to the company and managed to keep profits near zero while the owners built up wealth in the company; wealth that would not be taxed until they died.

The share of income going to taxes for the top 400 in 2000 was about the same ratio as that paid by a single person making $123,000 or a married couple making $226,000. The average amount been paid was about $38.6 million dollars each.

The super rich are finding the tax shelter opportunities in the law and is perfectly legal. Law-makers are haphazardly allowing these opportunities to be put into the law because from lack or scrutiny or from pressure both politically and economically to allow these opportunities into the law. Lawyers and tax consultants study the law and discover these opportunities and advise the super rich on the tax shelter mechanisms. The super rich are able to increase their accumulation velocity. The accumulation of money is invested into bonds, commercial paper, bank notes, and stocks that pay the super rich a dividend. The capital gains are sheltered and increase the velocity of accumulation favoring the super rich. The middle class and the poor divert more of their money away from savings and retirement into taxes used for social change. Big government threatens to slow-down the availability of money causing rising interest rates for companies and business seeking to borrow money for capital projects. A business growth slows down employee wages are fired, unemployment increases, and retirement funds are jeopardized in survival tactics to save the company. The super rich do not have an economic incentive to risk their money on growth companies that generate almost all of the new jobs, innovations, and consumption trends. Instead, the super rich invest in large cap companies that are cash rich and promise a fat dividend payment and capable of withstanding short term distress in the business cycle. Financial devises like hedge funds become popular as the super rich dump billions of dollars into these funds. Insurance devises are also a popular tool for shelter vast amounts of money from taxes. The super rich are accumulating rather than creating jobs and that is the wealth illusion. Taxes do not create wealth. Capital creates wealth by creating jobs.

This book was incredibly interesting and probably the most useful piece of investigative journalism I have seen on this topic. The tax code is rediculously complex and this book shows how that complexity is exploited by the rich and their friends.

The only problem I had with the book is the built in asumption that the rich should be taxed more that the poor. The point of his analysis is that the code is too complex, exploited, etc. The logical conclusion is to SIMPLIFY or CLOSE LOOPHOLES. However, the author repeatedly claims that as the taxes fall on the rich they must go up on the poor and middle class which is not always true and certainly need not be true. Taxes can go down on everyone. Or we could just as easily easily lower taxes on the middle and poorer citizens as raise them on the rich. There are more than one option.

The author seems to set up a case for a major reform of the tax code but his bias for an old fashioned 1930's style progressive tax policy is clear. Advocating for a retro tax code is fine and I might even agree to an extent but it seems to be a failing of many financial journalists to not understand the economics ramifications of their proposals. The economy is to different to go backward and we need a tax code for a global, serviced based economy. Robert Reich has good ideas as do many conservative advocates for a consumption tax. Which is best is still open for debate.

In conclusion the book is a vaild analysis of the problems with our current tax code but combines this analysis with advocating an old fashioned progressive system that I am afraid would be economically hurtful.

Simply put, this book uses statistics and uncited claims to wow the reader whenever possible. This book had tremendous potential to show how broken the US tax system is and how much in need of reform it is. Instead of doing this it appears that the author took more or less substantial research and well developed hypotheses and ran it through the NY Times Krugmanizer, making everything seem like a grand right-wing conspiracy that with a wink and a nod politicians and multi-billionaires are bilking "American families" (the political buzzword du jour) from their hard earned cash.

Furthermore, as the Supreme Court has ruled explicitly, it is not an American's citizens duty to pay anything but the minimum amount of taxes required by law by using whatever lawful deductions or tax shelters he/she chooses.

So the thesis of the book is that the super-rich have taken advantage of and, the horror of it all, used their money to influence lawmakers to make tax laws even more favorable for them. I'm aghast!! The thought that lawmakers could sacrifice the principals of fairness and their constitutional duty for monetary gain?!? Thank goodness we have such paragons of virtue (Randy Cunningham, Tom Delay and his good friends Jack Abramoff and Mike Scanlon, and my new personal favorite W. VA congressman Allan B. Mollohan) protecting we plebians.

I'm giving this book three stars because on the surface, it appears to be well-researched and it is certainly well-written. What's more, if Johnson is correct, then he has done a great service in exposing the inequities of the current tax system.

However, the author's viewpoint often comes close to a conspiracy theory; i.e., sweeping claims supported only by anecdotal evidence or by selected facts. He is never clear about his research methods or whom he interviewed.

If, like myself, you're convinced that both political parties are dominated by corporations, then it stands to reason that manipulation of the tax system would be on the corporate agenda. However, Johnson doesn't stop with just big business. Shareholders, landlords, investors and business owners of any kind are his targets as well, and that's where I begin to have problems with this book.

Johnson calls tax shelters an "underground economy" that protect only "the minority"; i.e., the 2% of the population that he says control 40% of the nation's wealth. But what about an average investor who puts $1000 into a tax-exempt municipal bond? Is he or she part of the problem, too? I don't think so.

In 2003, the capital gains tax was dropped from 28% to 15%. Johnson - like many politicians - claims that this benefits only the richest people in the country. Returning to our average investor: doesn't he benefit as well?

Johnson goes on to claim that:

"Income tax is collected only against reported income and there is the problem. The rich have many ways of avoiding recognition of income for tax purposes."

"Today's tax system does not promote prosperity based on individual enterprise and thriftiness."

"The tax system is a socialist redistribution scheme to give wealth to those who have access to the corridors of power - the political donor class"

These are the sweeping generalizations that Johnson never really proves. Had he stuck to the obvious flaws in the tax system, like the looming Alternative Minimum Tax, I would be more sympathetic to his approach. "The super-rich invest in multi-layered, complicated partnerships which are rarely audited by the IRS," he declares But so do a lot of middle-class investors - ETFs, tax-exempt bond funds, etc..

He likes to tear into globalization, and makes erroneous predictions: "We are headed toward a global services, asset economy, in which capital flows freely across borders, where workers cannot." This is now 2006, and there are plenty of illegal workers flowing across America's borders, few of whom pay taxes. As of this writing, most representatives in both Congress and Senate have no visible objection to their not paying taxes - and these workers are hardly the super-rich. This is one of several tax-related issues that Johnson fails to address.

Johnson makes other errors: "If an investor overstates what he paid for a stock, he can't be prosecuted." Obviously Johnson has never heard of the numerous 1099 forms which investment firms must submit to the IRS regarding your annual investment activity. Through these forms, and other methods, the IRS can easily track your investment record, and if you have been defaulting on your tax payments, you can certainly be prosecuted. In fact, investments can often be tracked by the government as easily as it tracks wages. Corporations' 1099 forms (for their own investments) are supposed to be tracked by the IRS as well. The only way a corporation could "hide" these from the IRS would be to pay off the brokerage, maybe? The brokerage, not the corporation, would be submitting the 1099s to the IRS. I'm not a tax lawyer, but I don't see why some brokerage would want to get in trouble with the IRS just so XYZ corporation could skip taxes.

Johnson's solution to the great tax conspiracy is just to simplify the tax. Hardly an original solution, no matter where you stand.

"Current tax laws," he explains, "are embedded into other laws...If you remove a certain portion of a tax law, this will have an effect on other laws...The taxes on income, gifts and estates are not discrete levies. Rather, these taxes intersect and interact in subtle ways. Line up seemingly unrelated sections of different tax laws in a certain way, and vast sums of cash can flow with only a widow's mite going to taxes." OK, but which laws and which clauses are we discussing here? Could we have some examples? If Johnson would tell us, then we could write to our representatives about them.

Johnson obvoiusly doesn't like things like living trusts or anything that does away with probate payments, because that's how evil plutocrats pass their money from generation to generation. On the other hand, I'm sure millions of middle-class taxpayers have set these up with their parents and grandparents - or they should.

Yes, it does tick me off that tax deals are being cut on a daily basis in Congress. Along with the lobbying scandals, the evidence all points to a bought government. By all means, read this book, but be aware of its shortcomings as well.