Tax Analysts Blog

No, Trump Should Not Release His Tax Returns.

Posted on Jun 20, 2016

[Editors Note: Readers interested in exploring an opposing point of view can check out a post by Joseph Thorndike here.] 

Establishment Republican leaders, having consulted their textbooks for the definition of racism and concluded that it encompasses their improbable standard-bearer Donald Trump’s cringe-worthy attacks on the Mexican-American federal judge presiding over the Trump University trial, have moved on to try to further mainstream their presumptive nominee’s candidacy by pressuring him to release his tax returns. Senate Majority Leader Mitch McConnell, who a month ago said Trump would “have to make that decision himself,” now feels emboldened enough to declare, “For the last 30 or 40 years, every candidate for president has released their tax returns, and I think Donald Trump should as well.”

Trump thus far has resisted all such pressure, citing an IRS audit. Turns out that unlike most Trumpian excuses, this one is neither trumped-up nor inapt. His tax lawyers have confirmed an ongoing audit covering tax years 2009 and onward. Nonetheless, critics have demanded that Trump disregard that audit and release his returns, in effect inviting the worldwide community of tax lawyers and accountants to dissect those returns and broadcast gratuitous suggestions for adjustments to the IRS. Unlike Microsoft’s transfer-pricing audit, for which the IRS engaged a private law firm at a hefty price, this help wouldn’t cost the Service a dime.

Ever since President Nixon was shamed into disclosing his tax returns in late 1973, every presidential candidate of both major parties, successful and otherwise, has followed suit, some more reluctantly than others. In Nixon’s case and that of any sitting president, the purported rationale behind this coercion to make a voluntary disclosure is to ensure that the tax laws are applied fairly to all, including those occupying the highest offices in the land. Curiously, that logic stops at the gates of the White House and leaves untouched those whose offices directly administer these laws.

To be sure, the Senate Finance Committee routinely asks for tax returns as part of its process of confirming nominees who come before it, including secretaries of the Treasury and the Department of Health and Human Services, and the United States Trade Representative. Indeed, it was this confirmation process that led to Treasury Secretary Timothy Geithner owning up to over $48,000 in back taxes and interest, Sen. Tom Daschle withdrawing his nomination for Health and Human Services secretary on account of arrears almost three times as large, and his replacement, Kathleen Sebelius, paying back over $7,000 in these charges. Access to all nominees’ returns, however, is strictly controlled within Senate Finance, which does not ordinarily make them public. More important, post-confirmation, there is no requirement or convention of continuing disclosure. Presumably, after he was confirmed, Geithner stopped relying on the TurboTax that allegedly short changed the department he ended up heading.

But fair and even-handed application of the revenue laws seems beside the point in forcing waiver of the guaranteed privacy of tax returns by candidates who have not recently, or in Trump’s case never, wielded official power. The real motivation, of course, is to gain a voyeuristic glimpse into their financial and fiscal souls and compare those with their public personas—what was their effective tax rate, what deductions they claimed, what charitable contributions they made, and so on.

But if obtaining otherwise protected data for testing the validity of a candidate’s utterances and his supporters’ claims is the reason, why stop at tax returns? Where is the ardor for the transcripts of Hillary Clinton’s paid speeches to Wall Street banks—transcripts that could put the lie to the accusatory tone she now adopts in publicly discussing these banks’ role in the global financial meltdown of 2008?

When tax return data is in fact disclosed, the nature and level of scrutiny can be dramatically different depending on the ideological affiliation of the candidate. Hillary Clinton is rightly lauded for releasing her returns going back to 1977. Her 2013 return, for example, reveals 41 paid speeches garnering her $9.7 million. But their family foundation, for which the Clintons have raised over $2 billion since they left the White House in 2001, acknowledged last year that it had omitted disclosure of fees for speeches made by both Bill and Hillary Clinton that it booked as revenue rather than donations. Apparently, Bill had delivered 73 and Hillary 15 such speeches as “agents” of the foundation, which received over $26 million for them. Other than stray blog posts, there has been precious little mainstream commentary on how this convenient after-the-fact arrangement can overcome the venerable tax law principle barring assignment of income under which “fruits cannot be attributed to a different tree from that on which they grew.” In sharp contrast, Mitt Romney faced near universal contempt when his tax returns revealed an IRA’s use of a Cayman Islands “blocker corporation,” a technique used by most large non-profits, including universities, to get around the unrelated business taxable income’s debt financing rules, and one blessed by the IRS.

Unable to challenge the media’s narrative, fed by his tax return disclosure, of a rapacious corporate raider, Romney cut a pathetic figure, giving up legitimate deductions in a bid to boost his effective tax to a “respectable” level. Trump on the other hand brazenly flouts all media-imposed customs and practices. Whereas Romney stood mute as CNN’s Candy Crowley interjected herself into the second presidential debate of the 2012 cycle, Trump taunts the media to its face, calling reporters “sleazy” and “real beauties.”

Trump is a carnival mirror that the electorate is holding up to our political establishment—elected representatives and self-appointed media elites. The distorting images show caricatures of each. Instead of carefully focus testing positions, Trump simply changes them even as he is rolling them out. That this real estate developer with no prior elective office experience and neither the aptitude nor an inclination for policy details is polling competitively with “the most qualified candidate ever” to seek the presidency tells us what the voting public thinks of the punditocracy and the rules that they have set by which the game ought to be played, including the ritualistic disclosure of tax returns.

Read Comments (2)

Edmund DantesJun 20, 2016

Excellent article. You've easily outscored Mr. Thorndike on this topic.

Trump needs to obey the financial disclosure law, nothing more and nothing less. Tax returns are not required to be disclosed under the law. Those who are demanding Trump's returns should instead get the law changed, rather than appeal to this bizarre tradition.

What's more, those who are screaming loudest for his returns are the ones who will never vote for him under any circumstances. Trump has nothing to gain, and everything to lose, from releasing his tax returns.

Mike55Jun 22, 2016

Awesome article. The return disclosure issue is a truly outstanding microcosm of Trump's political success to date.

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