Free Lunch Quotes

“Out of their average incomes of nearly $174 million, under the Bush tax cuts the top 400 taxpayers would have paid the government 17.5 percent in income, Social Security, and Medicare taxes. For people who make $100,000 to $200,000, the tax burden is much higher at 20.6 percent.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Government rules permit and encourage a vicious cycle. To the extent that pensions are not fully funded, that their true costs are not paid each year, it means that corporate profits are inflated. Inflated profits mean that share prices for company stock are inflated, because they should represent the profitability of companies. And inflated stock prices mean, in turn, that executives cash in their options for more than they should get.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Quality and investment return are antithetical,” Gumbiner concluded, “because in order to generate short-term profits, the company cannot put money into research and development, new long-range concepts, management training, and all the things that will build a long-term successful organization. People who strictly have investors’ return as their motive are not interested in long-term corporate guarantees.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Our expensive, inefficient health care system is also making us less competitive in an increasingly competitive world. Toyota rejected offers from Alabama and other states for extremely generous subsidies and tax breaks in 2005 that basically amounted to giving the company a free factory if it would locate there. A nearly free factory, Toyota concluded, was worth less than avoiding the continuing cost of health care for the factory workers. Health care costs the Detroit automakers more than the steel in cars.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Americans are less healthy even though we spend far more, according to the 2007 McKinsey Global Institute report cited earlier. McKinsey compared 124 countries. It found that our system’s inefficiencies and waste costs us an extra half trillion dollars a year. This excess cost works out to $1.3 billion every day. The study concluded that $75 billion of this was due solely to the fact that these other countries had public health systems.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Buffett is a master at delaying the payment of taxes not for a little while, but for a generation. His MidAmerican Energy Company owns electric and natural gas utilities, with operations from Oregon and Utah through Iowa and east to Britain. It paid just 4 percent of its American profits in federal corporate income taxes in 2006, far less than most Americans paid on their incomes. On its overseas profits, MidAmerican paid a 21 percent tax.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“This unstated coordination gave the producers of electricity what economists call market power, which means the ability to set prices higher than a competitive market would allow. Within less than a hundred rounds of bidding, Talukdar’s experimental auctions resembled not so much a competitive market as a cartel, in which many sellers obtain monopoly power by coordinating their actions to artifically inflate prices. That is what OPEC, the Organization of Petroleum Exporting Countries, does openly when members collude on setting the price of oil by limiting production.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Sam Walton practiced corporate socialism. As much as he could, he put the public’s money to work for his benefit. Free land, long-term leases at below-market rates, pocketing sales taxes, even getting workers trained at government expense were among the ways Wal-Mart took every dollar of welfare it could get. Walton had a particular fondness for government-sponsored industrial revenue bonds, which cost him lessin interest charges than the corporate bonds the market economy uses to raise money.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“The issue of whether Chrysler’s tax breaks were unfair to competing businesses and individuals is how the Articles of Confederation come into play. Under the first American government, from 1781 to 1788, the states regulated commerce. They used this power to enact tariffs to protect their own businesses. Anyone trying to import, say, furniture into New York from Connecticut faced a heavy tariff by New York, and Connecticut retaliated with its own tariffs. This economic warfare was destroying the whole experiment in self-governance. Efforts to find a solution transformed into the Constitutional Convention. The Constitution grants Congress the power to regulate commerce “among the several states.” Implied, but not explicitly stated, is the power of the federal government to block protectionist tariffs and similar devices that discriminate.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“The proliferation of state and local tax incentives designed to attract or retain business investment…has proven troublingly resistant to reform. Despite a growing recognition…that the competition over business incentives is at best a zero-sum game…the size of the incentive packages offered for large corporate facilities reaches ever-new heights…. The only consistent winners are the large businesses that can pit one jurisdiction against another for reduced tax burdens, while other taxpayers and citizens pay the costs in constrained government services and higher taxes.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Under government rules, tax returns are accepted as filed unless the IRS audits and then challenges a return. The two years that Bush’s return would have been most likely to be selected for audit, 2000 and 2001, were the record low years for audits of high-income Americans. The richest taxpayers benefited mightily those years because, at the insistence of the most right-wing Republicans in Congress, the IRS focused on tax returns filed by the working poor. In 1999, for the first time, those who made less than $25,000 were more likely to be audited than those who made more than $100,000.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“The Bill of Rights sets the standard for payment of seized property as “just compensation.” Invoking eminent domain inherently lowers market values. It does this by putting a cloud over continued ownership, making just a synonym for discounted. Eminent domain also creates an incentive for governments to offer the lowest price they can get away with. Landowners who do not like the price offered by government can go to court. Such a challenge requires deep pockets to finance litigation, itself a risky enterprise. Most people, faced with a government determined to seize their property, just take what they can and get out.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“In 1986, Senator Daniel Patrick Moynihan sponsored a law banning the use of tax-free bonds to finance stadiums, exactly the financing being used by the Yankees and the Mets. So how did Steinbrenner and the Mets owners get around that law? How did they manage to benefit from triple tax-free municipal bonds that add to the burdens of federal, state, and city taxpayers? First, the Yankees and the Mets will not pay rent on their new stadiums, which the city will own. If they paid rent, the Moynihan law would prohibit the sale of tax-exempt bonds to finance the stadiums. But since the stadium bonds must be paid for, where will the money come from?”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“The crucial issue when a subsidy is proposed is the impact on the finances of the local government, known as fiscal impact. Unless the annual flows of tax revenues more than pay for the bonds being issued, then some other part of the municipal budget will suffer. Even then it will probably suffer because people’s budgets for recreation are limited. A dollar spent at the ballpark is a dollar not spent at a restaurant, bar, or other place of leisure time activity, thus transferring the jobs and economic effects from many businesses to a single sports team.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“the Supreme Court in 1922 and again in 1953 exempted Major League Baseball from the laws of competition. The other three leagues—basketball, football, and hockey—are effectively exempted from most of the laws of business competition, as well. This exemption from the laws of competition is crucial to their power to extract subsidies.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Threatening to move a team unless the public pays up has become a finely developed enterprise. Arranging to collect this legal loot employs lobbyists, economists, and marketing firms, all charging hefty fees for their help in digging into the pockets of taxpayers. When Modell was playing Cleveland off against Baltimore, Betty Montgomery, then the Ohio attorney general, came up with a one-word description of this tactic: blackmail.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Art Modell, who pitted Cleveland and Baltimore against each other in a bidding war for his football team, was asked in 1996 about tax money going into his pocket at a time when libraries were being closed. It was a well-framed question. His Baltimore Ravens is the only major sports team whose name is a literary allusion, to the haunting poem by Edgar Allan Poe for his lost love Lenore. “The pride and the presence of a professional football team is far more important than 30 libraries,” Modell said. He spoke without a hint of irony or any indication that he had ever upon a midnight dreary, pondered weak and weary the effect of his greed on the human condition.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Many people born into modest circumstances have risen to great heights because they could educate themselves for free, and stay out of trouble, at the public library. To cite one example, Tom Bradley, the son of a sharecropper, learned enough at the local library as a boy to join the Los Angeles Police Department. He rose to become its highest ranking black officer in 1958 when he made lieutenant. Bradley went on to be mayor for two decades. But today library hours, as well as budgets to buy books, have been slashed in Los Angeles, Detroit, Baltimore, and other cities, yet there is plenty of money to give away to sports-team owners.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“The huge gifts of money that wealthy owners of sports teams wheedle out of taxpayers are a free lunch that someone must fund. Often that burden falls on poor children and the ambitious among the poor. Sports-team subsidies undermine a century of effort to build up the nation’s intellectual capacity and, thus, its wealth. Andrew Carnegie poured money from his nineteenth-century steel fortune into local libraries across America because he was certain it would build a better and more prosperous nation, which indeed it did. These libraries imposed costs on taxpayers, but they also returned benefits as the nation’s store of knowledge grew. That is, library spending is a prime example of a subsidy adding value.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Although baseball, basketball, football, and hockey teams are all privately held, they disclose limited information about their finances. From that data, one crucial fact can be distilled: while some teams are profitable, overall the sports-team industry does not earn any profit from the market. Industry profits all come from the taxpayers. In a market economy, the team owners would have to adjust or cover the losses out of their own deep pockets. Instead they rely on the kindness of taxpayers to enrich themselves at the expense of the vast majority who never attend these sporting events.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Subsidy economics tends to drive prices up, not down, as recipients chase subsidies more than customers. Adam Smith figured this out in 1776. He examined the subsidies in his day for commercial fishing. In his era the word bounty referred to gifts the government bestowed on the owners of herring ships. He concluded that to collect subsidies, people will appear to engage in a commercial activity. Smith wrote: The bounty [subsidy] to the white-herring fishery is a tonnage bounty; and is proportioned to the burden [size] of the ship, not to her diligence or success in the fishery; and it has, I am afraid, been too common for vessels to fit out for the sole purpose of catching, not the fish, but the bounty.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“William Blackstone’s famous observation that it is better that some who are guilty go free than even one person who is innocent be wrongly imprisoned—so that people have reason to obey the law because it is just.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“At the end of 2006, the United States was spending more for what it bought overseas than it sold, resulting in a record trade deficit of $902 billion. That meant that for every dollar generated by the American economy about seven cents was leaving the country, worsening America’s status as the world’s most indebted nation. Just a generation ago we were the world’s leading creditor nation. As Warren Buffett calculates it, America is selling close to 2 percent of its wealth each year to sustain our appetite for imported oil and cheap manufactured goods, many of them mere trinkets.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“The first two jobs revolutions had in common one trait—people of average or even below-average intelligence could do many of the jobs with no more than a high school education. Will that be true in the digital, high tech third wave? And if it is not, what will be the consequences of living in a society where the brightest and hardest working are rewarded and almost everyone else is reduced to servant-level jobs and wages? Among leading economists, the belief is nearly universal that this third revolutionary wave rolling across the globe is so powerful that nothing can stop it or even alter its course. There are, Blinder says, no cures, just palliatives. He suggests spending more on job retraining, changing the education system for the future, making health care available to all whether they have a job or not, and improved protections for pensions.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Minimally skilled labor is far more common in China than it is in the United States. This means that until the vast supply of Chinese labor is fully employed, the forces of supply and demand, combined with our government’s current rules, will relentlessly force more and more jobs to move to China, depressing wages in the United States. The process will continue in other countries with vast labor pools and enough stability to attract capital. By the time a global equilibrium is reached and the downward pressure on American wages eases we will all be dead—and so may our great grandchildren’s great grandchildren.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Minimally skilled labor is far more common in China than it is in the United States. This means that until the vast supply of Chinese labor is fully employed, the forces of supply and demand, combined with our government’s current rules, will relentlessly force more and more jobs to move to China, depressing wages in the United States.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“After President Nixon’s visit to China in 1972, American oil companies sought to explore there. Right off, they asked the Chinese to enact a corporate income tax. The Chinese were bewildered. To a Communist Party official, taught that the state should own the means of production, a corporate income tax was a bizarre idea. Besides, who ever asks to be taxed? All became clear when the Americans explained their intent. The American oil companies did not want to actually pay taxes, but to reduce their obligations to the United States government. The American businessmen and their tax lawyers explained that Congress taxes corporations (and individuals) on their worldwide income. With a Chinese corporate income tax, however, the taxes they owed to the United States would go down for two reasons. The first reason is that American business profits earned overseas are not taxed so long as the money stays offshore. The second reason is that the United States allows American companies to reduce taxes on their profits by the amount they pay to foreign governments. This is not the usual deduction worth 35 cents on the dollar, but a dollar-for-dollar credit. Thus a dollar of tax paid by Exxon Mobil to Beijing is a dollar not paid to Washington.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

“Complaints about the sale of Magnequench were made to the U.S. government because of the military applications for the magnets. Still, the Clinton administration, an ardent proponent of globalization, approved the sale. It did impose one condition: that the new owners keep magnet production and technology in the United States. Soon the new owners of Magnequench were busy buying up other magnet factories in the United States, including GA Powders, an Idaho firm that had used taxpayer money to develop the powerful new magnets. Once the new owners had a monopoly on production of these powerful magnets in the United States, they began shutting down facilities and moving manufacturing to China.”
― David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense