Via Kevin Drum, a very interesting article in Mother Jones by David Cay Johnston. It begins:

For years now, whenever I’ve been invited to lecture students on how our tax system works, I have asked a simple question: What is the purpose of the United States of America? The most common answer, be it at prestigious universities, elite prep schools, rural community colleges, or crowded urban high schools, is this: To make people rich.

This should come as no great surprise. For anyone born after, say, 1970, the world has been shaped by Ronald Reagan’s remaking of government’s relationship with private interests—a vision of lower taxes, less regulation, and maximum economic leeway for those at the top. In this view, the pursuit of wealth is the warp and weft of America; everything else will follow.

By contrast, the preamble to the Constitution tells us the nation’s reason for being in 52 words that can be reduced to six principles: society, justice, peace, security, commonwealth, and freedom. Individual riches don’t make the list. They are a product of American society, not its guiding purpose. Progress, then, must begin with a return to the best of the values that created this Second American Republic—one born, it’s worth remembering, from the failure of the Articles of Confederation, whose principles (weak government, unfettered capitalism) found their resurrection in the economic policies of the past three decades.

Even judged by its own yardstick, the trickle-down approach has failed to deliver:

Rather than getting richer, we have been slowly impoverishing ourselves. While incomes at the very top have soared to levels beyond imagining even a generation ago, the average inflation-adjusted income of the bottom 90 percent of earners was lower in 2006 than it was back in 1973. And since 2000, the median income of all Americans has actually slipped, proof that tax cuts for the rich do not create general prosperity. Today, more and more of us do not have enough money to live on without going into debt. For each dollar of equity people gained in their homes from 1980 to 2006, they borrowed two—and while a portion of that is accounted for by poor decision making, much has to do with the sheer impossibility of making ends meet.

Debt payments—individual and governmental—now consume so much income that they are suffocating economic growth. Interest on the federal government’s debt this year will eat up the equivalent of all the income taxes we pay from January until at least sometime in May. (Already, the financial system bailout has added more than $3 trillion to the national debt—see “$3.4 Trillion & Counting“—for an extra $170 billion in annual interest payments.) This keeps us from making productive use of our tax dollars—launching universal health care, rebuilding our crumbling infrastructure, or funding the research we need to transform our energy system. We’ve been sold on tax cuts as the best way to spur growth, but what we really got was weak job growth, a sinking economy, and a slew of tax deferrals that cause increasing revenue shortfalls and force the government to borrow even more—with all of us paying the interest.

For the past 14 years, on my former beat as the tax reporter for the New York Times, and now as a columnist for the trade journal Tax Notes, I have been documenting the myriad ways in which our economy has been recalibrated to take from the poor, the middle class, and even the affluent and give to large corporations and the very richest of the rich. I discovered, for example, that in 2000, people making between $50,000 and $75,000 paid the same share of their income to the federal government as those making more than $87 million, and that those making between $100,000 and $200,000 were taxed more heavily than those making $10 million—a state of affairs the Bush administration called “progressive” when I first reported it in 2005. Thanks to Reaganite economic policies, we have encouraged once-competitive industries such as oil, car manufacturing, accounting, and news media to congeal into unchecked (and now struggling) oligopolies. We have slashed the ranks of white-collar cops—the auditors and investigators whose beats are taxes, securities, food and drugs, pollution, etc.—and hamstrung those who are left. And we have transformed the idea that bankers would self-regulate from a crackpot notion into the essence of government policy, with results as predictable as if we removed all traffic lights and stop signs on the theory that most drivers are responsible.

Over and over for the past decade, our leaders argued that the fundamentals holding up our economy were strong. Now we know that this floor of shiny statistics merely concealed the rot below. But there is an upside to this realization: The economic crisis can help us clear away the rot and build a more solid foundation—one that elevates people over capital, kick-starts commerce, and removes some of the costliest barriers to individual success and national progress.

Change will not be easy, and the cost of cleaning up the current mess will be a huge drag on the economy in the near term. But we are, at last, at a turning point; we have a chance to end the socialism for the rich that put us into this hole. How? By, in effect, reverse engineering the debacle. Rewriting tax laws and financial regulations has been the principal vehicle for turning government into a subsidy system for the deep-pocketed and well motivated. It can work in reverse as well. President-elect Obama has offered some interesting ideas to make the tax code more fair—but by and large, his proposals amount to tinkering around the edges, not the kind of serious restructuring previous presidents, most notably Reagan, undertook.

Here’s another way to go. We can start by eliminating some of the most spectacular tax giveaways and move on to doable, efficient steps toward shoring up our biggest asset—not stocks, bonds, or houses, but people. Best of all, much of this won’t cost a penny; in fact, it will raise billions for the big tasks ahead.

By law, companies must keep two sets of books, one for shareholders, the other for the irs. As a result, many corporations routinely tell investors they incur millions in corporate income taxes, while the financial records they give the irs show they owe nothing or are due refunds. They do this by using tax shelters, offsetting income with losses from years ago, and employing countless other devices that make them look like paupers to the irs but money machines to investors.

It’s time to …

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