Donald Trump's Tax Returns

We are now a few months from election day, when Americans across the country will go to the polls to vote for the person they think should be placed in the highest elective office in the land as president of these United States.

There are many reasons to hope that Trump is not the person selected.

His supporters seem to come especially from that group of white males who have experienced so much anger as their privileged position as the dominant group in society has given way to a more inclusive society in which women, the LGBT community, people of color and people of various religions are both more visible and more able to achieve positions of greater influence and power.  Those Trump supporters are so eager to re-affirm their own self-worth that they apparently see in his rudeness, bigotry, narcissism, and bullying only his willingness to be confrontational to “powers that be”, which somehow translates into their view that he will be a good leader.  They cannot seem to see that, like most bullies, he uses confrontation, rudeness, impoliteness, bigotry and bullying as his defense against his inability to respond in substance to issues that are raised, that he grabs a wordbat and hits out against anybody, no matter how decent they may be, if they do not stroke his huge ego.  As with all bullies, that is not a sign of strength but a sign of weakness.  Worse, it is a weakness that provides a vulnerable target for shrewd autocrats like Putin in Russia who can use Trump’s narcissism to manipulate him, as we’ve already seen in Trump’s willingness to abandon NATO to cuddle up to Putin and to appease Putin for his aggressive annexation of Crimea.  In all of this, we are left to worry how such an ill-tempered, poorly matured, unwise narcissistic and bigoted character could possibly make the difficult, nuanced decisions necessary of a powerful leader, especially when lacking in rudimentary knowledge about geopolitical, scientific, and economic affairs.

Trump seems to be claiming that we should think him suited for president because he inherited millions and maybe (he claims) amassed “many billions” more through a long-term pattern of stiffing and suing his suppliers, contractors, and workers–mostly ordinary working guys like the white men that have been bamboozled into supporting him– in order to grab more money for himself.  Along the way, he and his businesses went through six bankruptcies.  Maybe one bankruptcy could be forgiven in a presidential candidate, and one big business failure could be seen as a life lesson that has the possibility of enriching experience and creating a more mature mindset.  But six bankruptcies by a person prone to use litigation as a tool to avoid paying for work done appear to be just another way of stiffing the “little people” to whom Trump owes money.

It is in this context that Trump’s refusal to release even one year of his back tax returns suggests that he knows they would look bad to ordinary Americans.  So let’s consider 1) whether Trump’s excuses are worth giving any weight and 2) what kinds of information can be revealed by tax returns that would help us judge Trump’s credibility as a candidate.

1. WHAT REASONS MIGHT TRUMP HAVE FOR NOT RELEASING TAX RETURNS?

a. There is no law that requires a candidate to release tax returns.

There is no law, but there is strong precedent supporting release.  Many presidential candidates and presidents, including Republicans Richard Nixon, Ronald Reagan, George W. Bush, George H.W. Bush, George Romney, and John McCain, have released multiple years of returns.  Trump’s opponent, Hillary Clinton, has released many years of tax returns that are readily available online (see, e.g., Hillary Releases 8 years of Tax Returns, Politico, July 31, 2015; Hillary Clinton’s 2007 through 2014 Tax Returns) and the Clinton Foundation’s Form 990 is of course available.

b. Trump’s most recent tax returns are under audit. 

It is apparently true that Trump’s most recent few years of tax returns are under audit (though of course we have nothing other than Trump’s say so even on this), and this is the current excuse Trump relies upon for not releasing any of his tax returns. His campaign manager, Paul Manafort, told CBS This Morning on July 27 that “Mr. Trump has said that his taxes are under audit and he will not be releasing them.” See here.  He has suggested that when the audits are done, he will release but even that isn’t certain. 

Note, however, that there is no law that says returns under audit cannot be released:  a taxpayer may release his own tax returns whenever he pleases.  Commissioner Koskinen of the IRS has made clear that it is very rare for people to be audited every year (even for billionaires), and returns can be released by taxpayers while under audit.See here.

Moreover, Trump has many years of tax returns that are clearly no longer under audit, and the excuse doesn’t apply to those returns.  Even if he withheld (for personal reasons and not because of the audit) the last 3 years’ returns, he should be able to release the 10 years before then.  

Furthermore, there is no precedent for refusing to release returns because of an audit: Richard Nixon released his returns while they were under audit.

c. Trump’s tax returns might provide some useful “trade secret” or other private, proprietary business information to competitors. 

The concern about competitor’s acquiring proprietary information is, of course, an argument made by businesses for maintaining the current rules regarding confidentiality of returns–ie, the rules that do not allow publication of filed returns or release to government officials other than as authorized by the Code.  These confidentiality rules were put in place by the 1974 Privacy Act and the 1976 Tax Reform Act.  They were in large part a reaction to Republican President Richard Nixon’s Watergate mess and the discovery that the Nixon Administration had been using tax information as a tool against its “enemies”. 

Of course, these concerns about protecting taxpayers that gave rise to the confidentiality rules have little bearing on a taxpayer-candidate’s release of his own returns for the voting public’s benefit.  Any truly important “trade secret” information could simply be redacted by the taxpayer for the release. 

Furthermore, Trump has a habit of bragging about all his business ventures and how much money he claims to have made or contributed and even how well he has avoided paying taxes.  He has continued to use the campaign context to promote his ‘brand’, so  privacy on exactly these issues does not seem to be an important issue for him.

d. Trump’s tax returns might reveal information about Trump himself. 

It is undoubtedly true that release of tax returns does reveal information about the taxpayers, which is the main reason that the decades-long precedent of return release by candidates was established in the first place.  That information is helpful to voters in understanding who the candidate is, how the candidate has operated, and what kind of stake the candidate has in this country (and other countries). 

Trump’s tax returns, while not all-revealing, would disclose information that is directly relevant to claims that Trump has been making on the campaign trail since the start of the primaries.  The returns might provide further information about Trump’s purported charitable contributions, income, extraordinary business success and other matters. They might even show that Trump “is deeply involv[ed] in dealing with Russia[n] oligarchs”, according to George Will.

Odds are the real potential for the real information, whatever it is, to be seen as problematic by voters is the real reason Trump has not released his returns:  he knows what is in them, and he knows how those facts match (or don’t match) the many and varied claims he has made.

2. WHY IS IT IN THE PUBLIC INTEREST FOR THE PUBLIC TO BE ABLE TO REVIEW TRUMP’S TAX RETURNS?

a. Tax returns reveal the categories and amounts of income and losses that a candidate has reported.

Tax returns generally provide considerable information about how much income a taxpayer receives from various sources, or what activities have led a taxpayer to claim losses.  Those categories and amounts of income and loss paint a picture of the taxpayer-candidate that can substantiate the image the candidate is trying to project or undermine it, depending on how honest and trustworthy that candidate has been in his or her self-description.  If a candidate, like Trump, claims that he is qualified for the presidency because he is an enormously successful businessperson which has resulted in enormous wealth, then to the extent that tax returns reveal low income (even though there could be significant assets) that implies mediocrity or failure or much less wealth and business acumen than claimed, the candidate is revealed as untrustworthy, something that really matters to voters on the left and on the right, as evidenced by the growing distrust of “career” politicians.

Further, if a candidate’s income is almost entirely from capital assets at the very low rate at which our tax rules currently tax income on capital, taxpayers can assess whether this person is actually capable of understanding the situations of ordinary taxpayers who work for a living rather than living off inherited wealth plus the kind of capital that builds on that inherited wealth, status, and connections.  Remember that Mitt Romney’s returns showed a very low effective tax rate (less than 15%) , which resulted in part from his gaining much of his income from tax-favored work in a private equity firm for which compensation is not taxed at ordinary income rates as it is for most ordinary workers.

Moreover, if a candidate’s income is primarily from being paid for essentially licensing the use of his name without any real work attached (as apparently was the case with the profits to Trump from the so-called “Trump University” that sold itself as representing his chosen experts and his business wisdom when he apparently did not select any of the experts and the “wisdom” was a ten-year-old publicly available real estate investment manual, see, e.g., Trump University Lawsuit Advances as Judge Curiel Deals Blow to Donald, Huffington Post, Aug. 2, 2016 ), that fact reveals something about a candidate’s character and ability to carry out the arduous job of president.

Finally, Trump has represented himself as having “huge” amounts of income annually and said that his “sacrifice” matching a Muslim couple’s loss of their son in service in the U.S. military is earning millions through having a hugely successful business.  (I’ll leave readers to imagine what I think about Trump’s ridiculously self-centered response to the Khan family’s sacrifice).  If in fact Trump’s returns show relatively smaller amounts of income and project less success than the “yuuge” success he claims, the public could rightly conclude that the candidate has misrepresented himself to them. If a candidate lies about his wealth and sources of income, what else might he lie about?

b. Tax returns reveal the candidate’s charitable contribution record.

Trump has claimed often that he gives away a lot of money for good causes, yet most investigative journalism has produced very little evidence that the claim is true.  Trump had promised huge contributions from a January 2016 event he sponsored for veterans in place of participating in one of the primary debates, but didn’t make his own promised $1 million contribution until late May after considerable pressure from the national press. See, e.g., At Least $1.9 MIllion in Donations Trump Collected For Vets Was Sent Last Week, NPR (May 31, 2016).  Some investigative reporting on Trump’s foundation suggests that Trump and the foundation have a “pitiful” record when compared to other billionaires like Gates, Buffett, and Bloomberg.  See, e.g., Trump: The Least Charitable Billionaire, The Smoking Gun.com (Apr.12, 2011); Missing from Trump’s list of charitable giving: His own personal cash, Washington Post (Apr. 10, 2016).  Such behavior raises legitimate doubts about his claims of generosity.

Tax returns include the taxpayer’s claimed deductions for charitable contributions.    Does Trump give very little or 1% or 10% or more of his “yuuge” income to charity?  Tax returns will tell.

c.Tax returns show (if reported as required) if a taxpayer has income from overseas accounts.

Robert Willens mentioned this  in a Washington Post article as a potentially worrying thing for Trump: if he has “money parked overseas” he is supposed to disclose those accounts to the IRS.  For someone who has claimed that he wants to see money invested in America, it would be a clear indication that his actions speak louder than his words if in fact he has moved money overseas.

d. Tax returns reveal something about the taxpayer’s willingness to push the boundaries of reasonable tax positions.

Most ordinary taxpayers have little room to engage in transactions designed to lower their taxes.  Most of us work at jobs where tax is withheld out of each paycheck, with a little more due or a little bit due back as a refund on filing.  We may have more or less in charitable contributions one year or have large medical expense deductions in another.  But we have neither the vast sums of money nor the expensive legal assistance to engage in transactions designed primarily to reduce our taxes.

Wealthy people routinely use sophisticated legal tax advice to get the lowest tax rates possible, to “milk the system to their advantage.” Trump has bragged about doing so, of course, and that is not necessarily bad in itself.  But tax returns can reveal (though depending on the detail released, it may be hard to see) whether a candidate goes beyond reasonably prudent tax planning to participation in shelters. If a candidate who says we should be investing in the United States moves his wealth out of this country to avoid paying taxes to the country that made that wealth creation possible, voters should care.  If a candidate uses questionable tax dodges in his business or personal life, voters should care even more.  If a candidate has engaged in some of the bogus tax shelters pushed by aggressive shelter promoters, voters should be outraged.  If there is evidence that a candidate has submitted false information on a return (see new evidence that Trump Didn’t Pay Taxes, Drudge Report (June 15, 2016) (reporting on two tax appeals lost by Trump in the 1990s in which (i) he claimed expenses but not related income and (ii) apparently filed a return signed by someone who stated he had not prepared the return), voters should care deeply about what that  would mean in the office of the President.

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In conclusion:

It’s worth remembering that Trump’s position during the 2012 campaign was that Romney should release his tax returns and that he, Trump, would have no problem doing so because “it’s a great thing when you can show that you’ve been successful, and that you’ve made a lot of money, that you’ve employed a lot of people.  I actually think that it’s a positive.” (See the video at this link for this January 30, 2012 Fox & Friends statement by Trump.)

 Back in the 2012 campaign, he also said he would (maybe) release his tax returns when Obama released his birth certificate. (See the video below for this interview with Stephanopoulos.)  Beyond the fact that such a condition (a sitting President’s release of a second, full-form birth certificate) is irrelevant to the release of tax returns, of course, Obama did release his full long-form birth certificate to quell the stupid controversy Trump manufactured out of thin air, so that excuse is just as flimsy as every other one.  Trump hasn’t released his tax returns.

  When push comes to shove and it is Trump’s turn to release his returns, he has come up with only flimsy excuses and bombast.  He’s clearly depending on his campaign methodology of attacking all those who press him on issues and defying common rules of courtesy to carry him through.  Voters shouldn’t buy it.  We can learn a lot about a candidate from reviewing his tax returns, and what we learn is very relevant to that person’s qualifications for the presidency.  If Trump doesn’t release those returns soon, it leaves us to assume that there is something really negative in them in respect of the picture he has tried to project of himself as a successful, wealthy, and generous businessman who can get things done.