Last week Senator Elizabeth Warren introduced a bill that would require President-elect Trump and future presidential nominees to release their last 3 years of federal tax returns. This bill is a partisan ploy — the only co-sponsors are Democrats – and it is clearly meant to shame President-elect Trump, who did not release his. And there are demands for Trump Cabinet nominees to disclose their tax returns, which will inevitably be leaked. But it is worth pointing out that the idea that releasing tax returns somehow promotes rational discourse in election campaigns or confirmation hearings is nonsense.
To begin with, the oft-repeated claim that presidential candidates have released their tax returns since Watergate is absolutely untrue.
For example, John Kerry, the Democratic presidential nominee in 2004, released his tax returns in April of 2004, but no returns for his wife, a billionaire. Under increasing pressure, in late October of 2004, Kerry released the first two summary pages of his wife’s 2003 return – nothing else. Kerry would have been the richest president in history (until Trump), but he felt the details of the wealth that fuels his lavish lifestyle weren’t anyone’s business. No one noticed.
John McCain married up, too. For the 2008 presidential campaign, he released his tax returns but not those of his wife, a beer distributorship heiress. When he relented in May of 2008, he only released the first two summary pages of her returns. For 2006 he made $300,000 and she made over $6 million, but he maintained that the details of her finances were not relevant. No one noticed.
In August of 1984, yielding to increasing criticism of her family’s questionable real estate dealings (you may remember the slogan “Come Clean Geraldine”), democratic Vice Presidential nominee Geraldine Ferraro released 6 years of tax returns. As nearly every tax lawyer understood (and a few of them tried valiantly to explain) Ferraro’s failure to release the partnership tax filings that were the source of her family’s income meant that her return disclosure was meaningless. The journalists naturally reported that she had demonstrated her finances to be above reproach. Her husband later pleaded guilty to fraudulently obtaining bank financing in a real estate transaction.
But even when the full tax returns are released, it doesn’t matter. After Harry Reid falsely accused Mitt Romney of not paying taxes for a decade, Romney released his entire returns for two years for himself, his wife, and his charitable foundations. Nobody bothered to read the hundreds of pages of returns detailing the state of the art complex investments of a successful financier (and extremely generous charitable contributions). Even after the release of the returns, the Obama campaign continued to make dark accusations of hidden details of his wealth, and the charges stuck even though proof to the contrary was in plain sight on the returns.
The best example of the meaninglessness of releasing tax returns is provided by the Clintons in 1992. For a limited period of time, he made available to the press 10 years of his tax returns. Everything we needed to know about Bill and Hillary’s character is in those returns – the desperate get rich quick schemes, the omission of government-provided largesse from income, and the failure to pay withholding taxes on Chelsea’s nanny the few years she wasn’t parked on Arkansas’ payroll are all revealing.
Most telling of all was Hillary’s handwritten itemization of their charitable donations – the aggressively inflated estimates of the values of Bill’s used underwear and sneakers tells you everything you need to know about her values. A clearer picture of the Clinton approach to the rule of law and ethics could not possibly be presented in a tax return. It was entirely ignored by the slothful and innumerate media (except for a prescient, widely ignored, analysis by Lisa Schiffren in the American Spectator).
And that brings us to Donald Trump. What about all of the “conflicts of interest,” tax avoidance and business failures putatively hidden in his unrevealed returns?
The sad fact is most journalists are clueless about taxes or finance. They are incapable of reading tax returns in any way that would yield information. They have little or no grasp of the relative importance or common usage of various tax strategies employed by those with money and good advisors. All they have are pre-ordained “narratives.”
In the case of a real estate fortune this ignorance is more problematic than usual. Real estate investors and builders tend to pay minimal taxes because real estate is highly tax advantaged and depreciation and interest expense typically shelters income from taxes. Were President-elect Trump to release his returns, there is no chance that they would be properly understood or fairly interpreted.
The practice of releasing presidential nominee tax returns has been inconsistent. When complex returns were made available partisans, abetted by a complicit press, willfully misconstrued them. And when disclosure actually worked, it was ignored. President-elect Trump has no reason to disclose his tax. In the alternative, perhaps we should start with requiring federal tax return disclosure for Senators and Congressmen and see how that experiment works.
James Mann, a tax lawyer and former banker, is a former Deputy Assistant Attorney General for the Tax Division of the Department of Justice.