Crusading NYT Tax Reporter Strikes Again


David Cay Johnston covers taxes for the New York Times in the tradition of the very best muckraking journalists. Here’s what I wrote about Johnston in an introduction to a long interview I did with him a year ago:

David Cay Johnston is one of the few people in the United States who’s exposing the American tax code for what it is: backwards socialism. As a Pulitzer Prize-winning tax reporter for the New York Times, Johnston has, over the past nine years, uncovered the inner workings of a system that coddles, aids, and abets the rich in their various attempts to get out of paying taxes, forcing the upper-middle, middle, and working classes to pay for government on their own.

As Johnston showed in his book, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—And Cheat Everybody Else, few people have really closely examined the intricate loopholes, devices, dodges, and shelters that allow corporations and superrich individuals to pay shockingly little in taxes.

Johnston exposed $262 billion in tax fraud from his post at the Times and broke the story that Enron had used various offshore devices to avoid paying any taxes at all. If you’ve ever hated paying your taxes and had a creeping feeling that corporations and those in higher tax brackets aren’t feeling the burden they way you are, take a look at what Johnston has to say.

Today, Johnston reports that the Bush Administration’s push to privatize government has reached the tax code, compromising it in critical ways.

The Internal Revenue Service is asking tax lawyers and accountants who create tax shelters and exploit loopholes to take the lead in writing some of its new tax rules.

Hey, if you let energy executives write energy policy, why not let dirty tax lawyers write the tax code? But while some are critical of the move — “Why don’t we just privatize Congress and outsource the development of our laws?” asked the director of a research and advocacy non-profit, who noted that the outsourcing of regulation was reaching the point of absurdity — others see this as a formalization of a problem that already secretly plagues the system:

Kenneth J. Kies, one of the most sought-after tax lobbyists in Washington, said the proposal “merely formalizes” the practice of lawyers sending the I.R.S. letters “saying, ‘We think you need to issue some guidance in an area and here is our suggestion.'” He said a formal process would be more transparent.

Further reason to believed that all-consuming cynicism is warranted when thinking about the federal government. It’s not enough that all of Bush’s agencies and departments are in the pocket of big business — the IRS needs to be in the pocket of the folks who do big business’ taxes. So that way, rich CEOs can both play the game on an uneven playing field and not have to pay any taxes on the winnings.

(Hat Tip, Kevin Drum)

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