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Another Pulitzer Honors Faulty Reporting On Taxes

When David Cay Johnston, then a journalist at The New York Times, won a Pulitzer Prize in 2001 for beat reporting, I feared that the win would encourage other reporters to engage in lopsided reporting on tax matters. It seems my fear was well-founded.

Among the other winners announced recently, The New York Times’ David Kocieniewski received a Pulitzer for explanatory reporting. Kocieniewski’s series, “But Nobody Pays That,” explored what The Times describes as “the obscure provisions that businesses and the wealthiest Americans exploit to drive their tax bills down to rock bottom.” The Pulitzer committee called it a “lucid series that penetrated a legal thicket to explain how the nation’s wealthiest citizens and corporations often exploited loopholes and avoided taxes.”

Back in January, I wrote about one of the articles in Kocieniewski’s series. While I critiqued his grasp of a well-established form of corporate compensation, I noted that the series seemed primed to serve as a Times Pulitzer entry. After all, similarly skewed reporting worked in Johnston’s case - why not Kocieniewski’s?

What worried me, then as now, was the possibility that honoring slanted news would reinforce the pattern at The Times, and at other outlets, of confusing the front page and the editorial page. The Pulitzer is the most prestigious award an American journalist can get - and, as the jury showed this year in the fiction category, it is possible for a year to pass when no one meets the high bar the prize is designed to represent.

The prize in explanatory reporting should reward reporting “that illuminates a significant and complex subject, demonstrating mastery of the subject, lucid writing and clear presentation, using any available journalistic tool,” according to the Pulitzer website. Kocieniewski’s article about stock options fell far from representing mastery of the subject; to the contrary, it necessitated a follow-up blog post, which only clouded the matter further.

Kocieniewski’s article described stock options, which have been a standard component of executive compensation for decades, as being based on an “obscure” provision “buried in the tax code” that “will deprive the federal government of tens of billions of dollars” while delivering a “windfall” for corporations. In fact, as I and many other readers pointed out, deductions for corporations granting the options are offset by taxable income that is reported by the executives. For the Treasury, the transaction is basically a wash; in real life, options serve to transfer sometimes large amounts of wealth from corporate shareholders to executives. But this would not have made much of a peg for a news story.

Just a few weeks after the story on options, I found myself taking Kocieniewski and The Times to task again, for an article about Mitt Romney’s taxes that was, as I described it, a train wreck of error and misinformation.

Paul O’Donnell at CNBC wrote of Kocieniewski’s award: “The Pulitzer committee loves this kind of document-diving in any year, but in an election season in which income inequality and tax fairness has been on every commentator’s lips, they deservedly but topically gave Kocieniewski his medal.” Kocieniewski may have gone through a great number of documents, but the award should not reflect volume of research. It should reflect the quality of the final product.

After leaving The Times, Johnston eventually became an opinion columnist, sharing his personal views in a venue where they were clearly labeled as such. We can’t know where Kocieniewski’s career will lead in the future.

As for the Times’ path, it would have been nice if its slant had leveled out in the 11 years following Johnston’s win. This second award for reporting in the same vein suggests otherwise, but there may yet be hope for the newspaper’s coverage of taxes. A recent article headlined “How Apple Sidesteps Billions in Taxes” was a straightforward presentation of how the company, based in high-tax California, structures its operations in low-tax states and countries to minimize its worldwide tax bill. The piece, co-bylined by Kocieniewski and Charles Duhigg, avoided pejorative characterizations and treated readers like adults who are capable of drawing their own conclusions. Critics of Apple’s strategies were given voice, but so was the company’s response - that it is operating entirely within the law and that does what thousands of other companies do, which is to legally minimize the tax burden on their shareholders.

It’s too bad that a fair and accurate news story about taxes in The New York Times is so exceptional as to be newsworthy itself. But until journalists and the people who critique their work re-calibrate their standards, readers will have to decide for themselves which work is really honorable.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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