Pulitzer Prize-winning author David Cay Johnston talks about his new book, "The Fine Print," in which he details how the U.S. tax system distorts competition and favors corporations and the wealthy.
On how companies increase bills using the tax system:
“Well, what the companies have done is gotten a set of rules that allow them to charge you for multiple items, in some cases there are as many as 26 moving parts on your bill. And so if you had one line on the bill that went up, you would notice. But if one goes up a nickel this month and another one goes up a quarter next month, you tend not to notice. And that’s why cable bills have been rising at more than twice the rate of inflation since 1995. Local telephone costs have been rising at about the same rate since the late 80s.”
On why companies are still able to use this type of policy:
“Well, you’ve heard of this unicorn called ‘de-regulation.’ There is no such thing as ‘deregulation.’ What there is is ‘new regulation’ that does what the companies want, is generally written by the companies and that takes away your rights and protections as a consumer.”
On how tax laws favor corporate interests over those of the consumer:
“The biggest single trend in tax is taxes you pay that are kept by the corporations that you pay them over to and never get to the government. And there’s a whole host of policies that I explain in the book. One of them is there have been big rate increases for the electric utilities in California that are corporate owned. That would be San Diego, Gas and Electric, now Sempra, Southern California Edison, and Pacific Gas and Electric in central and northern California. PG&E got rate increases to replace its power poles on a fifty year cycle. They had been replacing them on a cycle that’s between 350 and 775 years, which obviously is not sustainable but it does pump up their profits and reduces the reliability of your electric service.”
On how gas pipelines make their money:
“Pipelines are exempt from the corporate income tax but they get to collect the corporate income tax in their rates. And I estimate that it takes three pennies a day from every person in America. Now, you’re not going to go to war with anybody over three cents a day being siphoned out of your pocket. But three cents a day from everybody in America at the end of the year is $3.3 billion dollars. And its just one example of these many devices I show where the rules are being rewritten to empty your pocket and make a narrow group of people in various different industries very wealthy.”
On why America is falling behind in the world market:
“Because we have gotten the rules all wrong. We are getting rid of universal service. So if your aunt or uncle or your grandmother lives on a farm in the middle of nowhere, she or he may end up with no telephone service before long. In California, AT&T employed 120 lobbyists in Sacramento, that’s one for every member of the legislature. And they basically tied up every single lobbying firm and they got a law passed; SB 1161, that basically takes away your rights as a telephone customer on the theory that there’s a competitive market.
"The problem is AT&T is the only provider in many locations and your only other option is a cable company, which provides virtually the same service at the same prices. And I show that these companies are now becoming a cartel. AT&T cross markets with DIRECTV, which competes with the cable companies. And Verizon cross markets its cell phone services with Time Warner, Cox, Comcast, and Brighthouse cable companies.”
On what should be done so our tax policies stop favoring the wealthy:
“We need to have a truly progressive tax system. If you’re a billionaire you can legally stop paying taxes. And I’ve shown repeatedly in articles and in my books and named people who do not pay federal income tax. And the reason is very simple, you just borrow against your assets. Most Americans are not allowed to save more than $17,000 or if they’re over 50, about $23,000 in their retirement accounts. But if you are a hedge fund manager or like Mitt Romney, a private equity manager, you are allowed to defer all of your income. And I have held in my hand, documents from people with multi-billion dollar untaxed fortunes who are in their thirties.
"If they keep their fund open until their 80s, they won’t pay taxes for fifty years. That’s simply not a fair system. You should have to pay taxes when you earn your money. And those at the very top who benefit from living in this country, with its freedoms, its military, its courts, its infrastructure, its highways, all the things that make it possible to make a fortune, should bear the heaviest burden. Because that’s the principle 2500 years ago that gave birth to democracy. The greater the benefit you get from living in a society, the greater the burden you should bear so that society will endure and the liberties of the people will endure.”
Excerpted from THE FINE PRINT: How Big Companies use “Plain English” to rob you Blind. Published by Portfolio/Penguin. Copyright (c) David Cay Johnston, 2012.