The one-sentence summary

Lies, loopholes and lobbyists make the American rich even richer.

Can’t be bothered to read it? Listen to the 5-minute summary in two parts.

Want to buy the book? CLICK HERE

WHAT THE BOOK SAYS

  • This is an unusual book written by two American millionaires. They are part of a group called the Patriotic Millionaires who are dissatisfied with the USA taxation system and actively want to pay more tax. They explain how lies, loopholes and lobbyists make the rich even richer.
  • The vast majority of Americans believe that the economy is rigged in favour of the rich, and they are right. The way this is done is predominantly through the tax code, which virtually guarantees destabilizing levels of inequality and consequent social unrest.
  • Rich means different things to different people. Many rich people think they are poor. The wealthiest three Americans now have more wealth than the bottom half of the whole country combined.
  • People believe that if the stock market is doing well, then so is the economy, and therefore so is their personal economy. But it doesn’t mean that at all. It just means that people who own those stocks are richer.
  • The economy should really be called the political economy, or how a nation’s politics control the nation’s economy. There are a number of tax tricks that make rich people richer:
    1. The billionaire’s loophole: you pay lower tax on capital you invest than money you have to work for.
    2. The estate tax: 35-45% of American wealth is inherited, and they pay little or no tax on it or the income from it.
    3. Sidestepping taxes: most rich people have huge assets that never have been and never will be taxed.
    4. Annuity trusts: the estate tax is supposed to tax the transfer of intergenerational wealth, but by cycling it through a GRAT (Grantor-retained annuity trust) most avoid any tax at all.
    5. Switch and swap: real estate owners don’t pay any tax on assets so long as they reinvest it on another building.
    6. Pretend to help the poor: an investor can avoid paying taxes on their profits from any past investment for up to 7 years, so long as they invest an equal amount in an Opportunity Zone.
    7. Pass-through deduction: pass-throughs are a category of legal entities such as limited liability companies that qualify for a 20% reduction in tax. 85% of pass-through income goes to the top 20% and 50% of it goes to the top 1%.
  • Corporate tricks include moving money around different parts of the world to reduce or eliminate tax, relocating assets or employees, giving staff stock options, and claiming accelerated depreciation on assets. It is somewhat easier to defend any one specific loophole, but it is the combined effect when they are all used together that really makes the difference.

WHAT’S GOOD ABOUT IT

  • Marginal utility is the incremental additional use someone gets out of a dollar compared to the one before it. For example, $100 might mean a lot to a student and nothing to a rich person.
  • Rich people either believe or simply tell a range of lies, which include:
  1. Corporate tax creates jobs – it doesn’t.
  2. Private equity investors are job creators and so deserve a special tax break. They aren’t and they don’t.
  3. People who invest in the stock market are job creators and deserve a special tax break. They aren’t and they don’t.
  4. Business owners are job creators. They aren’t.
  5. Taxing capital gains discourages investment. It doesn’t.
  6. Rich people’s charity does so much good in the world that if we tax them, they won’t have enough money to help poor people. This is nonsense.
  7. It’s their money. Not true – 35-45% of them never earned it in the first place.
  8. Politicians care just as much about their constituents as they do about their donors. This is not true.
  • A 2018 study found that, of the 379 Fortune 500 companies that were profitable, 91 paid income tax of 0%. Amazon, Chevron and Netflix were among those who paid no tax at all. Rich people account for a disproportionate amount of underreported income. The top 10% account for 61% of all underreporting.
  • The twenty richest Americans donated $8.7 billion to charity in 2018. This sounds like a lot but in fact it is less than 1% of their net worth. By being seen to donate to charitable causes, these rich people are reputation laundering.
  • A society this unequal cannot last. A play set in Paris in the 1830s said that people with pitchforks will be coming for the plutocrats. The authors point out that in a modern context, they will be bearing guns instead, and there are 393 million in the US, which is 120 guns for every 100 residents.
  • And finally, a Greek proverb: “A society grows great when old men plant trees whose shade they know they will never sit in.” …but the US is planting none.

WHAT YOU HAVE TO WATCH

  • This is all about the USA system, but many of the principles apply all over the world.