About our money
All of us should read David Cay Johnston’s new book before we vote. Not nearly enough of us will.
Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else, Johnston’s last book, based on his tax reporting for The New York Times, explained how the U.S. tax system is skewed in favor of the wealthy at the expense of the wage-earner. Now, Free Lunch, full of clear narrative, plain language and plenty of sources, addresses the use of subsidies, tax abatements and incentives to transfer money from the taxpayers to private individuals and businesses.
For example, any accident on privately maintained rails that injures or kills an Amtrak rider, even if it’s the result of negligence on the part of the railroad company, is paid for by taxpayers. Johnston details how the rail companies responsible for maintaining the rail system insulated themselves from the responsibility for their own cost-cutting and negligence.
Sacramento residents ought to pay close attention to what Johnston says on two topics in particular: eminent domain and publicly funded professional-sports arenas. This is our money he’s talking about.
Johnston is a devotee of the free-market policies of Adam Smith. He’s got no problem with business or profit; he just asks whether we want the entire profit of a business deal to come from the public coffers, as it did in the Texas Rangers deal that made our current president a rich man.
Professional-sports teams, even with the national monopoly of the leagues, aren’t very profitable. That’s why only wealthy people own teams. Investors make money by inducing desperation so great to keep or gain a sports franchise that a city will condemn private property through eminent domain and give it to the team, then tax themselves silly to pay for the new arena. The team, now valuable, is sold—as the Rangers were—at an outrageous profit.
Investors walk off with cash; taxpayers pay for years. It’s called “incentive capture.” In the case of the Rangers, George W. Bush and his co-investors “captured” $164 million in profit from the Texas taxpayers.
This scheming—what we call subsidies, tax incentives and tax abatements, and what Smith called “bounties”—is repeated ad nauseum. Whether it’s to encourage a company to open shop or to keep a company from leaving, cities and states fight each other to see who can give away the most taxpayer money, while propagating the illusion that there’s financial benefit for locals. The net result? A handful of investors get richer, politicians who push the deals through get campaign contributions, and taxpayers get screwed.
Johnston’s examples start with sports (the Steinbrenner-Giuliani maneuvering for a new stadium in New York, the Supersonics’ attempted blackmail in Seattle and the Rangers deal), then cover subsidies to companies like Daimler-Chrysler, Cabela’s and a world-class golf course in Oregon. His tales of student-loan usury, Conrad Hilton’s dealings and Warren Buffett’s tax profiteering are rage-inducing.
If taxpayers were only taxed for public services, we’d all be a lot better off. Instead, we’re taxed to support business propositions that could never make it in a truly free market economy. The people sucking wage-earners dry are not welfare mothers, illegal immigrants, the disabled, elderly, sick or needy. That giant sucking sound that comes from wage-earners’ wallets is made by rich folks with pumps at the end of their straws.
In addition to expecting businesses to support themselves, Johnston makes a strong case for ending the cushy relationship between big business and politicians. He’s got some very intriguing propositions for how this might work, but it will take a lot of voters to make it happen.
One way to make sure it does is to read this book before you vote.