The Fine Print: How Big Companies Use ‘Plain English’ To Rob You Blind

David Cay Johnston “The Fine Print: How Big Companies Use ‘Plain English’ To Rob You Blind,   Portfolio Penguin, 2012, 276 pp.

This current book is the third in a triology; I have read them all: Perfectly Legal (about tax scams) which I posted a 2/12/09 review, and Free Lunch (about government subsidies) posted on 2/6/09.  This third book explores how businesses, with the consent of government agencies, rip off consumers in plain sight.

David Cay, in this current book, details how the ‘fine print’  in a variety of bills, such as telephone, electric, water, insurance, credit card, and hospital bills as well as other documents, technically intended to disclose costs to the bill payers, are, in fact, intended to obscure as many hidden costs as possible.  This book is Investigative Journalism at its best, even though it is tedious to read case after case involving business as your enemy.

Some interesting tidbits:

 Laws in nineteen states let companies like Goldman Sachs, General Electric, and Procter and Gamble pocket the state income taxes withheld from their workers’ paychecks for up to twenty-five years.

A little-known government rule gives safety waivers to deadly industrial facilities secretly located underneath schools and playgrounds.

The “FCC Charge” on your phone bill, which appears to be a government fee, actually goes straight to the phone company.

My Notes:

Pg. 16:  In a 1970 article in the New York Times Magazine, Milton Friedman argued that the sole duty of a company is to its shareholders, not to the interests of workers and surrounding communities, so long at it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.  This is a bottom line with lots of implications.  Workers may toil their entire lives, communities may tax themselves to create infrastructure a corporation needs, and vendors may invest their entire fortune to supply the corporation—but none of these parties, Friedman says, has significant legal rights or moral claims.  The idea was radical.  It was not supported by the development of the law, the regulation of business and the advancement of civilization over thousands of years.  But in a surprisingly short time, Friedman’s ahistorical thinking has come to dominate our society.  The corporate elite, the majority of billionaire investors and the officeholders in the legislative, executive and judicial branches of government now subscribe to the deceptively simple philosophy that owners (shareholders) matter most, that all other interests (stakeholders) are subordinate to the interests of the corporation.

Pg. 23:  American schoolchildren are taught that the American Revolution was a protest against taxation without representation.  But the concern wasn’t so much high taxes as a break for a monopoly.  The Boston Tea Party was not a protest against high taxes, what they were protesting was a tax exemption intended to bail out investors in the British East India Company.  With tons of tea that it couldn’t sell, the threat of bankruptcy loomed.  In fact, the immediate effect would be to lower the price of tea, crush the Dutch competition, and then leave the colonists at the mercy of a British monopoly.

Pg. 24:  Not until well into the nineteenth century did the evolution of corporations into ‘people’ begin.  That story begins with a property tax dispute, one that hinged on the issue of whether the Fourteenth Amendment could be applied to companies.  The Southern Pacific Railroad was fighting a property tax imposed by California counties.  The decision rendered in the case, Santa Clara County v. Southern Pacific Railroad (1886), came not from the justices, but amazingly from the pen of the official court clerk, J.C. Bancroft Davis.  Davis’s statement asserted that the court did not need to hear the case to conclude that corporations were persons under the Fourteenth Amendment and thus were entitled to dispute the tax with the county authorities.  Even though the Supreme Court never heard the case, corporations as of that moment granted personhood in matters of property.

Note: in a 1978 case, Associate Justice Rehnquist warned that it was one thing to treat corporations as persons when it came to property rights, but altogether different, and dangerous, to give corporations political rights.  However, in 2010, Rehnquist’s warning was summarily rejected under his successor Chief Justice Roberts who proclaimed corporations the equal of people in politics (Citizens United v. Federal Election Commission).  The court in this case went far beyond the narrow issues before it, holding that no law may constrain the spending by corporations, unions, nonprofits or others to influence elections and further, that the names of those spending money can be kept secret.  Citizens United is to the expansion of corporate power what the big bang was to the beginning of existence—it is the whole universe.

Pg. 137:  Few taxpayer investments have paid a greater return than the G.I. Bill, which made it possible for one in seven WWII soldiers and sailors to go to college.  Taxpayers spent about $59 billion in 2012 dollars from the end of WWII until 1952 to provide more than 2.2 million soldiers and sailors with a college education.  The G.I. Bill paid for the educations of 450,000 engineers, 240,000 accountants, 238,000 teachers, 91,000 scientists, 67,000 doctors and 22,000 dentists, among others.  In today’s dollars that was about $26,000 per student.  The higher incomes those college graduates earned, and the advances their education made possible in every field from astrophysics to zoology, laid the foundation for today’s advances in medicine, biology, software, materials and every other field in which increased human knowledge has made people better off.

Taxes also lengthen lives.  American life expectancy at birth in 1900 was just 47.3 years.  One century later it has been extended to 77.2 years, a 63 percent gain.  The biggest single reason for that change: public health measures financed by taxes.  Publicly funded projects provide clean water and sanitary sewer lines.  In 1906 the Pure Food and Drug Act and the Meat Inspection Act launched a food safety revolution.    

Pg. 143:  Before the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, retailers paid an average of forty-four cents in bank fees each time a customer swiped a debit card.  So on a $10 debit-card swipe, the bank fee was significantly larger than the profit margin of perhaps thirty cents.  After the act the charge can be no more than twenty-four cents (once, that is, the rules implementing the new law were put into effect nearly two years later).

Pg. 146:  Overdraft fees nationwide totaled about $20 billion in 2011.  Nearly half of banks imposed overdraft fees larger than their net profits in 2010 (apparently, without the fees these banks would have lost money).

Pg. 200:  The 1954 overhaul of the tax code included a provision long sought by big business—writing off new plant and equipment faster for tax purposes than for book accounting purposes.  Known as accelerated depreciation, it was sold on the basis that it would spur economic growth and create jobs.  Two years later future Nobel Prize winner Robert Solow showed that accelerated depreciation deductions do not increase economic growth.  Even so, there has never been a serious attempt to repeal it.  Regan and Bush both increased it, as did Obama.

Pg. 228:  Most modern countries have eliminated tax return filing for the vast majority of their people. Taxpayer savings result because ReadyReturns are prepared automatically using the same data that government collects from employers (as well as payers of pensions, interest and dividends).  The use of such returns would be optional.  If the government makes a mistake or the taxpayer disagrees with the record sent, the taxpayer is free to file their own tax return. 

Pg. 229:  Most of the 58 million tax returns completed by taxpayers were prepared using tax software like Intuit’s TurboTax, the overwhelming favorite with more than 70 percent of the market. 

Pg. 242:  To assume that bad behavior does not exist or is anomalous is sheer folly.  But that assumption underlies neoclassical economics and the push for ‘deregulation,’ or so-called deregulation, since the changes tend toward new rules that wipe out protections for the powerless.

Pg. 254:  Median wage has been stuck at just about $500 a week since 1998.  But from 1990 to 2009 the number of Americans making more than $1 million in salary, in 2009 dollars, increased at seventy times the size of the overall workforce. 

Pg. 273:  Just as those who opposed official racism had to live with the 1857 Dred Scott decision that slaves were not persons protected by the Constitution, and with the 1896 Plessey v. Ferguson decision that legalized forced segregation, we must live with Citizens United.  Bad decisions eventually get overturned (Dred Scott by the Fourteenth Amendment in 1868 and Plessey by the unanimous 1954 Brown v. Board of Education decision ending legal segregation).  But to date, the 1886 Santa Clara decision, a ruling by a court clerk rather than justices that affirmed that corporations were persons, still stands.