The Cheating of America: How Tax Avoidance and Evasion by the Super Rich Are Costing the Country Billions--and What You Can Do About It

Charles Lewis, Bill Allison, and a team of researchers from the Center for Public Integrity -- an organization that the National Journal called "a watchdog in the corridors of power" -- investigated how millions of high-income adults and some major corporations cheat the government of billions through tax avoidance (legal), tax evasion (illegal), or tax "avoision" (catch me if you can).

Now Lewis and his team provide explosive revelations about who cheats and how they do it, from offshore banks to foreign "tax havens." Case studies of the most brazen dodgers will have taxpayers seeing red in this eye-opening report that puts the IRS on notice. Sure to enlighten and outrage, The Cheating of America is a must -- read for every citizen.

What makes the book succeed, however, is not its careful number crunching, but all the little stories that detail "the phenomenon of tax avoidance (that's legal), tax evasion (that's illegal), and tax 'avoision' (catch us if you can)." There are the wealthy film producers who use offshore trusts and tax shelters to hide their income, the millionaire tax evaders who renounce their U.S. citizenship in order to escape making tax payments, and the accountants who help it all happen. At times, the book feels like a long Reader's Digest article, all told in the service of an outrageous conclusion: "Many of the nation's wealthiest individuals and its largest corporations are not paying their fair share of taxes today." The Cheating of America will appeal to readers who appreciated the Center for Public Integrity's previous efforts, as well as admirers of Donald L. Barlett and James B. Steele. --John J. Miller

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All Customer Reviews
Average Customer Review:
0 of 0 people found the following review helpful:

Good research, but disparages capitalism, 2007-10-11
I profited from this book because the authors and their research staff related interesting stories of companies and their battles with the IRS using sources such as newspapers and Tax Court transcripts, and I bought a cheap used copy. The research was thorough and I skipped some of the tedious details. But, I fear that many other readers will buy into the denunciation of capitalism espoused by the authors. If you haven't already read books explaining why capitalism in Hong Kong, Singapore, and Ireland creates many more happy and prosperous people than U.S. and European socialism, then you would profit more from reading books such as "The Capitalist Manifesto" or "Capitalism: The Unknown Ideal" or "The Sovereign Individual."

The authors believe that because "taxes are the price we pay for a civilized society," the U.S. should continue taxing 35% of the economy and regulating another 10-15%. Unfortunately for the U.S., Hong Kong will be as rich as the U.S. in 10 years if current trends continue, and Singapore will be as rich in 20 years. Benevolent government is a delicate balance between anarchy and despotism, and the U.S. has long since descended into an anarchic despotic state where most government activities involve gathering everyone into numerous groups who steal from everyone else; or protecting people from their own foolishness; or operating military bases in 130 countries or acting as a referee in their civil wars. The authors fail to recognize that only a minor portion of U.S. federal government activity benefits the general welfare such as protecting property ownership and other individual rights; and that a special interest group can have millions of members who benefit from government spending at others' expense.

The authors assume that since rich people own a disproportionate share of corporations, and corporations have been paying a smaller share of total taxes during the last 30 years, that the IRS should pursue corporations more energetically; and that doing so will alleviate the crushing tax burden of individuals that are not rich. They fail to recognize that not only rich people, but also many ordinary people own shares in their pension plans; and to a large extent corporations are tax collectors that transfers taxes to their customers, most of whom are ordinary people. Even corporations selling luxury items to the rich still employ workers who suffer when the IRS drives corporations to manufacture elsewhere.

The authors lament the emigration of rich Americans to countries with lower taxes and advocate enforcement of a law that would prevent emigrants from visiting the United States after they renounce citizenship. They falsely believe that rich people cannot happily live luxuriously permanently outside the U.S. and enforcement of the law barring their return would discourage many from emigrating; and refuse to recognize that rich people can enjoy many other countries. The few that would be successfully discouraged would be offset by the many who would spend their tourist money elsewhere. London has successfully attracted the spending and capital of foreign billionaires using a favorable tax structure, and the U.S. could compete by emulating the practice (and making the airport experience more enjoyable). Millions of Mexicans emigrate to the U.S., rich and poor alike, and Mexico welcomes their return not only for the tourism industry, but as a humanitarian gesture. Building a Berlin Wall around the U.S. would be as counterproductive as it was in Germany.


1 of 2 people found the following review helpful:

Duh, 2005-10-07
Of course these taxes arent being paid! We've set up a system that allows it. The more complex a tax code is, the more exemptions that are allowed the more loopholes that are available to exploit. I seriously don't know why anyone would be shocked this happens.

The ironic solution to this mess, if you truely want to solve it, is to advocate a flat tax with no exemptions (maybe one) or a national sales tax and do away with national income tax.

If your concern is about the billions being wasted by the government over 50% of our budget is non-discretionary. That means congress can't touch it through yearly appropriation. That means it grows and grows and grows uncontrollably. This spending includes wealth transfers through welfare, corporate subsidies (WEalth transfer from poor to rich), and social security (poor to rich wealth transfer) to name a few. Ironically we spend billions to protect farmers the result of which is higher price for food and then billions more on food stamps so the poor can afford the higher priced food. Society as a result is hurt.

Well over 1 trillion is wasted in this manner...


0 of 6 people found the following review helpful:

Just Kevin Phillips dribble in another book., 2005-09-23
My best defense to the 5 star reviewers is that a congressman no less once said that "Taxes are a levy on ignorance." I also want to make very clear that I am against tax evasion, but wholeheartily endorse taking legal, above board tax deductions. I am sure that most legitimate business people would agree.

For the record, I have been in a zero tax bracket since 1991 and when I was an employee, was getting refunds on ssi.

By the way, how does it make you tax happy animals feel to know that your ssi contributions will never come back to you. Why do you suppose that congressmen and senators don't participate in ssi?






3 of 4 people found the following review helpful:

A Study of Tax Evasion By The Super Affluent, 2005-07-24

"The Cheating Of America: How Tax Avoidance And Evasion by the Super Rich Are Costing the Country Billions-And What You Can Do About It" by Charles Lewis, Bill Allison, et. al., is a well-researched overview of how some of America's wealthiest citizens and corporations avoid and evade taxation.

"The Cheating Of America" tells us that at least $195 billion a year in taxes isn't collected from the ultra-wealthy.

This means the amounts collected from honest affluent people, middle-class earners, and low-income people are invariably higher. If all the rich paid their taxes, it's estimated the average taxpayer wouldn't have to pay thousands of dollars per year in extra taxes to make up the tax shortfall.

While $1.5 billion in new wealth is created every day in the U.S., we learn the number of full-time workers living in poverty has increased from 459,000 in 1998 to over 2.8 million in 2001.

A few of the issues:

--American companies legally open non-U.S. corporations to hold non-U.S. profits. But, these companies often engage in illegal pricing schemes to inflate their foreign profits at the expense of U.S. profits, effectively transferring taxable income to the foreign corporation.

In the 1950's, corporate taxes comprised 27% of the tax revenue. By the 1990's, corporate taxes only made up about 10% of the federal tax revenue. That's about a 2/3 decrease in corporate taxes. Individual taxpayers must make up the difference.

--Nonprofit Organizations operating businesses. The book estimates that non-profits control $1.3 trillion in wealth. While many nonprofits are legitimate, many aren't.

The authors write: "...the precedent for using the cover of benefiting mankind to avoid taxes has a long, rich tradition. ... Howard Hughes, for example, set up the Howard Hughes Medical Institute, which owned the stock of his aircraft manufacturing corporation. The nonprofit medical institute gave hardly any money to charity during his lifetime, unless one considers bankrolling the reclusive lifestyle of Hughes a charitable purpose."

Some of these nonprofits are lobbying organizations and industry promotional groups (For example, lobbying for deregulation and tax cuts).

--Corporate use of "phantom losses" from transactions that lack economic substance. The Cheating Of America does a good job of discussing the problems with international banking and how some companies create many entities to try to confuse the IRS. The secretive nature of some foreign country banks makes it nearly impossible for the IRS to obtain the records it needs to properly evaluate a business's tax situation. It's estimated that $10 billion a year in tax revenue is lost to this type of tax shelter.

For example, sometimes, some foreign bank will "loan" a wealthy individual money. That money is really taxable income in disguise. And, interest payments on the "loan" are sometimes reported as tax-deductible, if the "loan" is disguised as a mortgage or business loan.

--Wealthy individuals, renouncing American citizenship to avoid taxes, but continuing to spend hundreds of days per year in the United States. (In fairness to some of the tax ex-patriots, many also faced serious legal problems because they engaged in fraudulent activity. So, avoiding criminal prosecution or civil lawsuits could also be a motive for fleeing the U.S.)

So, what can the average American do about this? Not much. The Cheating Of America devotes a short five-page chapter to discussing what you can do. First, it points out you can't benefit from these tax-evasion schemes yourself, unless you have a lot of money.

Why can't the middle-class benefit from these methods? Because they were never designed to benefit the middle class. For example, the major source of income for most people is labor. If you work for somebody else, your wages are usually reported to the government. It's almost impossible to avoid paying taxes on money earned from work. The book does point out that many sole proprietors who deal in cash underreport their income, and the book recommends paying with a check to prevent these people from under reporting income. However, this doesn't affect most of the exceptionally wealthy.

What about depositing a small amount in a foreign bank? Your money might well disappear. These banks aren't regulated by U.S. law, and many are fronts for organized crime, terrorism, and other bad behavior.

Further, it's pointed out that the wealthiest individuals can afford the best attorneys in the world to defend them in tax court. They can tie the tax court up for 20 years with tens of thousands of documents. A few million in legal fees is chump change. And, they often purchase political influence. (A few million dollars contributed to the local community of a small country--and its officials--can do wonders for helping to avoid extradition.)

Trying to put pressure on politicians to enforce existing laws and enact laws that enforce tax fairness is one possibility. The authors say asking our politicians questions and demanding answers is a good start.

Overall, I highly recommend "The Cheating Of America: How Tax Avoidance And Evasion by the Super Rich Are Costing the Country Billions--And What You Can Do About It" to all people interested in learning about tax evasion by the rich.



0 of 1 people found the following review helpful:

Muckracking Expose, 2005-03-13
Calling this "left-wing propaganda" and other editorial commentary in some reviews really just proves the premise that as America slips into decline, the only 'wealth' being created is tax cheating schemes, along with 'no-down-payment' real estate speculating courses, and "privatization" of public property such as utilities, or government research. This book has the scoop on all the famous tax cheat schemes, and consumer warnings against get involved in them. But precious little recommendations on how to solve the problem. But the main message of the book is that making money in America is no longer about producing a product, or providing a service, but about cheating on your income tax. Pretty much the USA is on the road toward becoming a corrupt third world bananna republic, like Mexico.

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