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The President’s Tax Returns

After Democrats gained control of the House in the midterm elections, President Donald Trump repeated his long-running statement that he wouldn’t release his tax returns because they were under audit, making false claims in the process:

  • Trump said he had filed financial disclosure forms and “you get far more from that than you could ever get from a tax return.” But such forms don’t reveal effective tax rates, charitable giving and how the president complies with, or benefits from, tax laws.
  • He said, “Nobody turns over a return when it’s under audit.” Richard Nixon did just that during his presidency. Plus, most sitting presidents since Jimmy Carter have released their tax returns, despite the fact that presidents are automatically subject to an annual IRS audit.

During the 2016 presidential campaign, Trump refused to release his tax returns, bucking a decades-long tradition. Every major party candidate for president since 1980 has released tax returns during the campaign. Even in the 1976 campaign, Jimmy Carter publicly released tax returns, while Gerald Ford revealed a summary of his returns. 

“Every other major party nominee since then has released complete tax returns: not just summaries, not just a Form 1040, but the whole thing,” Joseph J. Thorndike, director of the Tax Analysts’ Tax History Project, told us when we wrote about this issue in 2016. “That’s been standard practice and that’s what voters have come to expect.”

Some candidates have released returns for considerably more years than others: Republicans Mitt Romney and John McCain released two years of returns, while other nominees have released at least five. Democratic nominee Hillary Clinton released returns for eight years.

But Trump has released none, even after he was inaugurated.

Now that Democrats have won control of the House in the midterm elections, they could use subpoena power to demand the president’s tax returns. Trump was asked in a press conference the day after the midterms whether he would release those coveted returns.

Trump, Nov. 7: Well, look, as I have told you, they’re under audit. They have been for a long time. They’re extremely complex. People wouldn’t understand them. …

Now, I did do a filing of over 100 pages, I believe, which is in the offices. And when people went and saw that filing and they saw the magnitude of it, they were very disappointed. And they saw the — you know, the detail. You’d get far more from that. And I guess we filed that now three times. But you get far more from that than you could ever get from a tax return.

But when you’re under audit — and I’m on under very continuous audit because there are so many companies, and it is a very big company. … But I don’t want to do it during the audit. And, really, no lawyer — even from the other side, they say often — not always — but when you’re under audit, you don’t have — you don’t subject it to that. You get it done, and then you release it. So when that happens, if that happens, I would certainly have an open mind to it. …

Nobody turns over a return when it’s under audit, okay?

The president claimed that “you get far more” from his legally required financial disclosure forms “than you could ever get from a tax return.” But much of the information one could get from a tax return isn’t in a financial disclosure form, which is designed to reveal financial interests.

We checked in with Thorndike, at Tax Analysts, again on this point. The question, he said, is “more of what?”

“You’re not going to get a statement of net worth or asset value on a tax return,” he said. The financial disclosure form does a much better job of telling you how rich someone is.

But the disclosure form has “no information about the president’s tax behavior,” Thorndike said. The tax returns tell us if and how the president complies with tax laws. With the financial disclosure form, “you’re not getting any sense of how he structured his businesses to minimize his taxes.”

Trump has filed financial disclosure forms, as the law requires of senior government officials; his form for 2017 was 92 pages long. The form asks for positions held outside the government, employment assets and income, and other assets and liabilities, often expressed as a range of value.

It wouldn’t reveal Trump’s effective tax rate, charitable donations or other deductions he takes, exactly the kind of information experts cited when Trump claimed during the campaign that “there’s nothing to learn” from his returns. A return would give exact figures for income and business losses, and what taxes were paid, and it could expose conflicts of interest. 

And, as we said during the debate on the Republican tax legislation, Trump’s tax returns would show how the tax policies the president supports would affect him personally. Trump claimed in November 2017, a month before he signed that tax legislation into law, that the Republican tax plan would “cost me a fortune.” He has offered no proof, and we found the claim was highly unlikely.

The president stood to potentially benefit from a change in the estate tax and pass-through taxes, and the repeal of the alternative minimum tax. His tax returns would show exactly how he did or didn’t benefit from the tax law. 

In the Nov. 7 press conference, Trump also wrongly claimed, “Nobody turns over a return when it’s under audit, okay?” In fact, Richard Nixon did so when he was president.

In 1973 and early 1974, Nixon was embroiled in a tax scandal, sparked by an IRS leak that questioned a charitable deduction of $500,000 for giving his vice presidential papers to the National Archives. Thorndike wrote a detailed paper on the issue for the U.S. Capitol Historical Society.

In the midst of that scandal, the IRS reopened an audit of Nixon’s returns. On Dec. 7, the IRS delivered letters to the White House notifying the president of the audit, and the very next day, the White House released tax returns for years 1968 to 1972, according to Thorndike’s paper.

The White House had also previously told Congress that Nixon was going to ask the Joint Committee on Taxation to review his tax returns. So, Nixon was both under audit from the IRS and essentially requesting an audit by the JCT when he released his returns.

It’s also worth noting that most presidents since the 1970s have released their tax returns publicly despite the fact that presidents and vice presidents are automatically subject to annual IRS audits, according to the Internal Revenue Manual.

Thorndike told us that most have released the returns on or near tax day — April 15 — knowing full well that the return would be subject to an audit.

Then-President Barack Obama and Vice President Joe Biden, for instance, released their 2015 returns on April 15, 2016. They released their 2014 and 2013 returns a few days before the tax filing days.

For Trump, we do have the first two pages of his 2005 return, which were leaked and then released by MSNBC’s Rachel Maddow in March 2017. Those summary pages show Trump paid $38 million in federal income taxes on $150 million of reported income. But the full return would show more information, including deductions and how the president’s businesses are structured for tax purposes.

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“You get far more from [a financial disclosure form] than you could ever get from a tax return.”
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Wednesday, November 7, 2018