It is well-known that Donald Trump refuses to release his taxes. He said they won’t reveal much. We should examine why tax returns are so important.
Richard Nixon kicked off the tradition of releasing tax returns. Essentially, Nixon placed his foot in his mouth by asking his Democratic opponents, Adlai Stevenson and John Sparkman, to reveal their financial histories. Nixon was running for vice president at the time. Stevenson and Sparkman released their tax returns for the previous 10 years; Nixon didn’t release any of his taxes.
In 1967 Nixon ran for president against Michigan Governor George Romney. The governor released 12 years of tax information, but Nixon only revealed three years of information. Naturally suspicions were raised.
We would later learn what Nixon was hiding. In 1969 Nixon took a peculiar tax break. Here is how Bloomberg describes the anomaly:
The Washington Post determined that he had deeded his vice-presidential papers to the National Archives and taken a charitable deduction of around $500,000. Amazingly, such practices had been legal until 1969: Presidents and vice presidents donated their public papers and took a write-off. But that year, Congress closed the loophole.
Nonetheless, Nixon was eager to take every deduction imaginable. In a memo written that year, the presidential aide John Ehrlichman wrote his deputy, Edward Morgan, telling him that Nixon believed “a public man does very little of a personal nature. Virtually all of his entertainment and activity is related to his ‘business.’” That meant that virtually any expense — “wedding gifts to congressmen’s daughters, flowers at funerals, etc.” — could be written off.
This attitude apparently carried over to charitable contributions, too. In 1970, Nixon proceeded to donate his papers, but ordered Morgan to backdate the deed of gift to March 27, 1969, before the law made it illegal for him to take the deduction.
But this wasn’t known at the time. In 1973, however, as the Watergate scandal put a spotlight on the secretive president, tax experts called for the IRS to audit Nixon. The agency refused. Then in early October, an employee at an IRS service center in West Virginia leaked information about Nixon’s tax returns showing that the president had only paid $792.81 in federal income taxes in 1970 and $878.03 in 1971, but reported income in excess of $200,000. The explanation, of course, was the fishy charitable donation.
Nixon donated his vice-presidential papers to the National Archives and wrote it off as a charitable deduction of about $500,000 in 1969. Not only this, he backdated a donation to a time before the write-off was legal. This shows he knew the law and committed fraud. These are substantive revelations about Nixon we learned through his tax returns.
What can we learn from Trump’s tax returns?
1. There is a pending lawsuit against Trump alleging that he violated the Emoluments Clause of the Constitution. The lawyers in that case want to know if he is receiving money from foreign powers that could lead to presidential corruption.
2. We would learn Trump’s debt expenses if he released his taxes. We can see if Trump is acting in self-interest if we see him advocate policies and write executive orders that benefit him, but hurt the American people or have little to no relevance to the greater citizenry.
3. We can see if his words match his actual business dealings. Many people voted for him because of his stated business record. His tax returns will reveal his financial acumen. CNN/Money puts it this way:
But one of the biggest windows into Trump as a businessman would be in his many Schedule Cs, which detail the profits, losses and expenses from his hundreds of businesses. On those forms he must declare whether he “materially participated” in a given business. In cases where he did, he could really reduce his tax bill because he’d be allowed to use losses from that business to offset taxable profits from other businesses or investments, said tax lawyer Steven Rosenthal, a senior fellow at the Tax Policy Center.
4. How much he paid in taxes to foreign governments
5. How much he gave to charity