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How You Can Have a Billion-Dollar Income in America and Pay No Taxes

Tax journalist David Cay Johnston explains what's so rotten about our taxation system and the distribution of wealth in this country.
 
 
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When I was growing up, people joked about how much they hated taxes, but they paid them, and we had a solid middle-class society. Real wages rose from WWII through 1973.

Today one of our two major political parties -- nationally and in state capitals -- is unwilling to consider raising taxes no matter the circumstances. Though most of Washington's officials and media are hysterical about the deficit, and willing to hurt anyone in an effort to reduce it, both parties voted in December to extend tax breaks for the wealthiest Americans for two more years.

Despite profits of $14.2 billion -- $5.1 billion from its operations in the United States -- General Electric, the nation's largest corporation, did not have to pay any U.S. taxes last year. Its CEO, Jeffrey Immelt, recently replaced Paul Volcker as leader of President Obama's Economic Recovery Advisory Board as its name was changed to the Council on Jobs and Competitiveness.

David Cay Johnston worked as an investigative reporter for several newspapers, including the Los Angeles Times from 1976 to 1988, and the  New York Times from 1995-2008 where he won a Pulitzer Prize for his innovative coverage of our tax system. He now teaches at Syracuse University College of Law and Whitman School of Management and writes a column at Tax.com. He is the author of two bestsellers, Perfectly Legal and Free Lunch. His next book, The Fine Print, will be published later this year.

Terrence McNally:When I last interviewed you on Inauguration Day 2009, I said, "Due to the scale of our multiple calamities, we may finally be ready to make meaningful changes to business as usual," and I read a quote from Rebecca Solnit: "Obama, who is merely impressive as an individual, is unstoppable as a phenomenon created out of the collective hopes and desires of the public, which must continue dreaming and prodding him forward to make the world we want to see." Your response?

David Cay Johnston: The last two years have demonstrated quite clearly that President Obama, like everybody else who gets a serious shot at being president, has to be acceptable to the establishment, and in particular, acceptable to Wall Street. While we continue to suffer from the serious problems left by the previous administration's policies, the responses have all been very focused on what Wall Street thinks are the solutions.

TM:Obama's first two years have made it clear that in the current system all presidential contenders ultimately represent their funders, and, given Citizens United, that will only get worse.

DCJ: Citizens United is an unbelievably important decision. I have research assistants gathering everything they can about the nature of corporations at the time of the Founders. Justices Scalia and Thomas in particular argue that their view of the Constitution is based on the original intent of the framers, not some amorphous modern idea, right?

TM: Exactly.

DCJ: Under Citizens United, we have granted political rights to corporations, which are not natural entities. In 1977, Justice Rehnquist -- not exactly a raging liberal -- in First National Bank of Boston v. Bellotti, wrote that it was one thing to grant property rights to corporations in order to protect their property. This is what the Supreme Court did without hearing in the Santa Clara case in 1886 that created personhood for corporations. But he warned, you don't want to do this for political rights, because those belong exclusively to natural persons, i.e. human beings.

At the beginning of the republic, corporations were very tightly controlled: they could exist for a limited period of time to fulfill a specific purpose; they operated often only in a single state and were tightly regulated in every way. Today they can do anything they want to do, anywhere in the world. Citizens United is to the expansion of corporate power what the Big Bang was to the creation of the universe -- it is the whole universe.

 
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