After Watergate, a norm of voluntary disclosure of presidential and presidential-candidate tax returns emerged. Presidents since Jimmy Carter have voluntarily released tax returns to the public on a year-by-year basis. And from 1980 until 2016, all major-party presidential nominees did the same, as did many major-party candidates seeking their parties’ nomination. Donald Trump refused to comply with this norm on the ostensible ground that his taxes were constantly under audit. His actions have revealed the continued relevance of the tax disclosure norm and the need to translate it into enforceable law.
Background
The tax disclosure norm originated in controversies over Richard Nixon’s compliance with the Tax Reform Act of 1969. That law had closed a loophole for certain charitable contributions of papers by public figures for any such contributions after July 25, 1969. Testimony during the Watergate hearings led the Washington Post in 1973 to look into the substantial tax deduction that Nixon had taken for the donation of his vice presidential papers to the National Archives. It turned out that lawyers for the president and the appraiser of the papers had backdated a deed of gift to support the deduction well after the July 25, 1969, cutoff date. It also emerged that the president’s advisers lobbied both Congress and the Treasury Department to preserve the deduction. They had planned to take it for the 1969 tax year and energetically sought to preserve it in the president’s personal interest.
A White House lawyer and the gift appraiser were eventually convicted for the fraud, and one of Nixon’s private lawyers was indicted but not convicted. To contain the controversy, the president voluntarily released his tax returns, requested a congressional investigative report on his compliance, and agreed to pay back taxes determined to be owed in the amount of $476,000, with interest. The furor over Nixon’s tax problems led to his famous (or infamous) declaration: “People have got to know whether or not their president is a crook.” He added, by way of reassurance, “Well, I am not a crook.” [111]
Events in the aftermath of Watergate showed how tax compliance transparency, as a protection against presidential and vice presidential conflict of interest, grew into an expectation. After Spiro Agnew resigned as vice president, Nixon nominated Gerald Ford to replace him pursuant to the Twenty-Fifth Amendment. When Ford became president, he nominated Nelson Rockefeller to be vice president. The confirmation processes specified by Section 2 of the Twenty-Fifth Amendment included a review of both Ford’s and Rockefeller’s tax returns. In both cases, Congress’s request for this information, together with the agreement by both nominees to provide it, indicated both branches’ understanding that such a review was appropriately part of the confirmation inquiry into qualification and fitness.
In Rockefeller’s case, the tax issues dominated the inquiry. Conflict-of-interest considerations, not those of tax compliance, were the reason. Rockefeller came from one of the most famous monied families in America, and his returns were complex. There had been questions in the past about his use of this wealth, such as his donation of significant gifts to public officials and members of his staff. When, after a protracted review, the Senate Judiciary Committee reported favorably on his nomination, the committee highlighted its conflict-of-interest concerns. These were, it stated, possibly unavoidable in the light of the volume and complexity of the family’s financial and business holdings. But it took comfort in the absence of any indication of major improprieties over the course of his public career—and, notably, in Rockefeller’s public disclosures of his holdings. [112]
In 1977, early in the Carter administration, the Internal Revenue Service (IRS) amended its Internal Revenue Manual, which sets out agency policy and procedures, to subject a president’s tax returns for special administrative treatment. It provided that “[t]he individual tax returns for the President and the Vice President are subject to mandatory review[.]” [113] This policy was intended in part to remove from any IRS official’s or employee’s judgment the sensitive issue of whether to recommend or undertake an audit of a president’s or vice president’s return. Because the audits are mandatory, there is no choice to be made. The policy remains in effect today.
The Carter administration set out an additional ground for supporting this procedure. It “helps to allay any concerns in the public about the President’s payment of taxes,” noted White House Press Secretary Jody Powell at the time. [114] The theory is simple and powerful: As head of the executive branch that oversees the enforcement of the tax laws, the president must be above any suspicion that he or she is not meeting the compliance obligations imposed on all other citizens. Moreover, as the Nixon controversy illustrated, presidents have the power to influence the administration of the tax laws in their own favor. The fullest possible understanding of the president’s financial position serves to limit the prospect of this form of abuse of power or to assist in exposing any abuse when it occurs.
From the Carter administration until Trump’s presidency, presidents released their returns. [115] With the exception of Gerald Ford, who released tax information for nine years but only in summary form, so did the major parties’ presidential nominees. In time, even those candidates bidding for their party’s nominations began to release their taxes, though the practice was not uniform. By 2016, when pressing her Democratic primary opponent Senator Bernie Sanders to release his returns, Hillary Clinton declared that “there is a long-standing expectation that everybody running release their tax returns.” [116] In the 2020 Democratic primary, a late entry into the nominations contest, Michael Bloomberg, drew intense questioning about when he would release his returns. He insisted that he had observed this norm when he was mayor of New York City (though he had made redacted versions available only for press inspection, with no copying allowed). He committed to adopt an expansive practice as a candidate for president. “We will put out [the returns], it tells everyone everything they need to know about every investment that I make and where the money goes,” he said. [117] Bloomberg acknowledged that this was information “everybody … need[s] to know.”
While the release of returns has depended on presidential and presidential-candidate compliance with the norm, Congress has legislated other transparency measures to provide the public with information about a presidential candidate’s or president’s income and assets. Under the Ethics in Government Act of 1978 (EIGA), presidential (and other federal) candidates must file a financial report within 30 days of becoming a candidate, or on May 15, whichever is later. The report must contain a statement of assets and liabilities, and must include other information such as positions held with any organization. The candidates report only within broad dollar ranges, but they must list specific assets by type and name. Presidential candidates file these reports with the Office of Government Ethics, which is charged with reviewing them for completeness and making them available to the public. Federal elected officials, including presidents and vice presidents, are required to file such reports annually.
When President Carter signed the legislation into law, he stated its purposes broadly: The “public [would have available] an assessment of whether or not [a]candidate or … public official is honest.” [118] The EIGA took its place alongside the Federal Election Campaign Act (FECA) amendments of 1974 as an additional post-Watergate transparency measure to better inform the electorate about the sources of potential conflicts of interest affecting official conduct. The FECA amendments had addressed that question of “actual corruption and avoid[ing] the appearance of corruption” as it was raised by political contributions. [119] The EIGA provided a check on those conflicts arising from personal finances. When a group of federal judges challenged the application to the judiciary of the act’s personal financial disclosure requirements, a unanimous appellate court in Duplantier v. United States upheld the law on this “accountability” rationale. [120]
The EIGA and tax disclosures are not, however, co-extensive: The report required by the EIGA is missing information relevant to a candidate’s personal finances that only tax returns supply. Tax returns reveal all sources of income, deductions taken, charitable contributions made (or not), and the existence of off-shore accounts. Tax returns may also reveal details about foreign business dealings through disclosures about the payment of foreign taxes, foreign partnerships and corporations, and foreign gifts. Additionally, tax returns are far more precise than required ethics disclosures: Under the EIGA, candidates need only report assets and income according to categories of value. Candidates with incomes between $5 and 25 million, for example, all check the same box. Tax returns, by contrast, include specific figures. Nixon’s legally suspect tax deductions based on the donation of his presidential papers—a controversy that eventually led to the voluntary disclosure of his tax returns—is a telling example of the type of information that only tax returns can reveal.
The disclosure of returns in all their detail also represents a substantial surrender of privacy, going well beyond the summary required by the EIGA. And yet candidates, including very wealthy ones, have for years complied with the norm of tax return disclosure, and the press and public have come to expect that they would. This history reshaped the expectation of privacy among candidates in favor of disclosure.
The Trump Era
Even Donald Trump did not assert a privacy interest when he made clear, as candidate and president, that he would not release his returns. Nor did he contend that the publication norm was misconceived or that he was abandoning the practice on principle. Instead he claimed that his returns were currently under audit and that “no lawyer would tell you to release your tax returns while you’re under audit.” [121]
There is no public information to confirm that Trump is in fact under audit, and so it has been natural for critics to dismiss his claim as an obvious ploy—especially because Trump has stated that his returns are always under audit. “I get audited every single year,” he said in February 2016. [122] Also unhelpful to his cause is the absence of any legal obligation to treat as confidential returns under audit. Trump could release his returns as he chooses. He could identify the specific issues that may have surfaced during the audit.
Trump’s claim is that his private rights as taxpayer transcend any obligations he may have as president. Most taxpayers, or their lawyers, would believe it imprudent to release returns under audit. One might, for example, fear that crowdsourced public commentary on taxes could move the IRS unfavorably on some audit issues. Experts reviewing the returns might spot issues that the IRS overlooked, or suggest in public commentary an argument on particular issues that move internal deliberations within the agency against the president. Irrespective of the merits, the agency decision-making process could be distorted by public pressures.
But, of course, the president is not a private citizen, and his appeal to the rights of ordinary taxpayers is of no avail. He is, while president, always under audit—because he is president. Both the IRS policy mandating the audit of presidential returns and the norm of voluntary disclosure underscore that a president’s tax returns are a matter of public concern. The interest in privacy afforded and expected by all other taxpayers is outweighed in the case of presidents and vice presidents by the public interest in both the content of the returns and the impartiality of the IRS procedures for review. Moreover, the appeal to the disadvantages of release when a president’s returns are under audit is disingenuous: Under the standing IRS policy, each year of every president’s returns is subject to audit. Yet all presidents since Carter have released returns without regard to the audit process, acknowledging the transcendent public interest reasons to reject a defense such as the one Trump has adopted.
Trump did, however, try to minimize the importance of his refusal to release his returns. He insisted that “you don’t learn much in a tax return,” and that EIGA reporting covers all the disclosures that may be necessary in the public interest. [123] It turned out, however, that there might be a great deal to learn. In May 2019, the New York Times reported that Trump had reported to the IRS more than a billion dollars in losses over a ten-year period, offsetting nearly all of his tax liability for that period. This was the result of massive deductions taken on real estate development projects. The losses and deductions were not reflected—and were not required to be disclosed— in Trump’s financial disclosures under the EIGA. While tax returns show both income and losses, financial disclosures include only the former. In his defense, Trump tweeted that “almost all real estate developers” reported these kinds of losses, and then negotiated or renegotiated loans with banks: “it was sport.” [124] While the practice of loss carry-forwards is legal, it is impossible to know without more information whether Trump’s claimed losses were legitimate. The New York Times ’s reporting, and Trump’s assertion that his real estate activities enabled him to avoid income tax, underscored the importance of the returns and the significance of the information they add to the data reflected in EIGA reports.
As a predictable result of Trump’s refusal to release his returns, he has faced questions about the motivations behind major tax law changes he actively and successfully advocated that contained provisions favorably affecting real estate development interests like his own. A provision repealing favorable tax treatment of “like-kind” asset exchanges exempted commercial real estate, and real estate developers also enjoyed special relief from a limit imposed on deductions of interest by large businesses.
Trump has stood his ground in the face of sustained press attention and criticism to reverse course, honor the norm, and release his returns. Congress then sought to employ legal remedies, and the arguments moved to the courtroom. The House Ways and Means Committee requested that the secretary of the Treasury provide the president’s returns. It did so in reliance on a statute that authorizes congressional access under specified confidentiality procedures to “any return or return information.” [125] The president’s lawyers objected that the committee had no legitimate legislative purpose, only a baldly political one, in making this demand. When the secretary declined on those same grounds, the committee issued a subpoena for the materials on May 10, 2019.
A month later, the administration also released an opinion from the Office of Legal Counsel that supported the secretary’s position on the absence of a legitimate legislative purpose. The opinion began with the proposition that “Congress could not constitutionally confer upon itself the right to compel a disclosure by the Executive Branch of confidential information that does not serve a legitimate legislative purpose.” [126] It then questioned the “real reason” for the committee’s interest in the president’s tax filings. After arguing that Congress’s oversight authority did not encompass “congressional power to expose for the sake of exposure,” [127] the Office of Legal Counsel noted the partisan context in which Democrats had been pressing for the public release that the president had refused to make voluntarily. It found that the committee’s formal assertion of a legislative interest in the oversight of the IRS’s presidential audit program was “pretextual” and concluded that the Treasury Department need not comply with the subpoena.
The Ways and Means Committee then sought to enforce its subpoena. [128] Other congressional committees also became locked in legal struggles for access to information about the president’s finances, including his tax returns. In the course of other investigations of the president’s financial affairs, the House Oversight and Reform Committee, Permanent Select Committee on Intelligence, and Financial Services Committee subpoenaed extensive information about the president, members of his family, and affiliated businesses from the president’s accounting firm and banks with which he has done business. The president sued to enjoin enforcement. These cases presented the question of whether Congress could obtain access to tax returns on the basis of its constitutional authority to investigate potential presidential wrongdoing and to consider potential legislation to counter money-laundering and foreign state influence over U.S. government policy and the political process.
The president dispatched lawyers to another legal proceeding to defend against the surrender of his tax returns. In New York, the district attorney of the County of New York, acting on behalf of a grand jury, subpoenaed Trump’s personal financial records, along with records of the Trump Organization and affiliated businesses, in connection with a criminal investigation of a variety of matters, mostly unknown to the public, but one of which involved alleged “hush money” payments by Trump to conceal extramarital affairs. The subpoenas were served on third-party custodians of these records: a financial institution and an accounting firm. The subpoena for the accounting firm records included “any tax returns and related schedules, in draft, as-filed, and amended form.” The president challenged the enforceability of the subpoena on the ground that he possessed “temporary absolute presidential immunity” from criminal investigation while in office. The solicitor general did not join Trump on this point but did argue for a heightened standard that state prosecutors would have to satisfy to obtain personal financial information.
The United States Supreme Court decided both the state criminal and congressional committee cases in July 2020. In the criminal case, the court ruled that the president had no immunity from the grand jury subpoena and that a heightened standard was unwarranted, but added that the president could rely on standard principles to challenge misuse of a subpoena and could also challenge prosecutions that threatened his capacity to discharge his constitutional duties. [129] With regard to the House of Representative subpoenas, the court noted that they raised “significant separation of powers issues” even for the president’s private information and remanded to the lower courts with guidance about how to accommodate both “the significant legislative interests of Congress and the unique position of the President.” [130] The bottom line was that the Supreme Court decisions invited more litigation and made it doubtful that Trump’s tax returns would be released before the election.
Two “blue states,” New York and California, devised additional potential avenues for acquiring access to the returns. California enacted a statute conditioning major-party candidate access to the primary election ballot on making available their last five years of tax returns. The state would then release the returns to the public. It presented the law as serving the purpose of better informing voter choice. The California Supreme Court struck down the ballot access requirement as inconsistent with a state constitutional provision that candidates qualify for the primary election ballot if “found by the Secretary of State to be recognized candidates throughout the nation or throughout California….” [131] New York took a different tack, enacting a law that authorized the state to release a president’s state tax returns upon request of one of the three congressional committees authorized to request returns under federal law. Trump filed suit in the U.S. District Court for the District of Columbia, but the court held that it lacked jurisdiction. [132] Trump did not carry this fight to New York, nor did Ways and Means or other authorized committees make the request of New York that most likely would have triggered a suit by the president to prevent release.
In summing up the experience with Trump and his tax returns, it is important to emphasize the ways in which the norm in favor of disclosure has continued to have force. Trump has suggested that he has met basic obligations with his financial reporting under the EIGA. And his stated reasons for not providing the returns have been personal to him—the “audit”—and imply that once the audit is behind him, he will make the returns publicly available. Once the battle with Congress and New York was joined, Trump added the claim that the investigative pursuit of his returns was motivated by partisanship and disruptive to the conduct of his office. Thus Trump has not challenged the norm but, rather, has pleaded extenuating circumstances. This is markedly different from many of Trump’s frontal attacks on norms, such as his persistent intervention in federal law enforcement decisions that affect his interests, or his attacks on the judiciary.
Reform
The Trump presidency has demonstrated that the norm of voluntary disclosure does not suffice to serve the important policy of presidential and presidential-candidate tax return disclosure. Trump is the first post-Watergate president to refuse any part of a voluntary release of tax return information, much less the full release that other presidential candidates and presidents have made. But he may not be the last, especially if his stonewalling goes unaddressed. The Trump experience shows that absent a legal disclosure requirement applicable to all presidents and presidential candidates, the public cannot easily or expeditiously get access to a president’s records even if, in the words of the Supreme Court, they are “of intense political interest for all involved.” [133]
The time has come to enact a federal requirement for the production of tax returns. The alternatives offered to date are unsatisfactory. The congressional demand for this particular president’s returns has required for its enforcement litigation with uncertain prospects, and this struggle is inevitably caught up in partisan acrimony over legislative motive. A turn to the states to condition ballot access on this disclosure has proved similarly flawed. The appropriate response to Trump’s norm evasion is federal legislation. Such legislation must address at least four issues, which we discuss in turn here.
Who Reports?
We propose that the federal tax disclosure law applies to major-party nominees and third-party and independent candidates who have qualified for the ballot in the general election in a sufficient number of states to secure an Electoral College majority.
Our proposal applies the reporting obligation to a narrower class than the one the EIGA established for purposes of the general personal financial disclosures. The EIGA reporting threshold is keyed to the level of campaign spending that triggers a presidential “candidacy” under the federal campaign finance laws. This spending threshold is set very low: $5,000 in contributions received or funds spent in a calendar year to establish and advance the candidacy. As a practical matter, presidential candidates who may never be regarded as “serious” are subject to this reporting requirement. But, as noted, this reporting is very general, organized into broad ranges of assets, income, and liabilities. It does not involve a surrender of privacy comparable to the compelled release of tax returns.
The more exacting and intrusive tax-reporting requirement seems most appropriate for candidates within the class of major-party nominees and independent and third-party candidates possessing a realistic chance of becoming president. The leading congressional proposal, the For the People Act of 2019, as passed by the House, limits candidate reporting to major-party presidential and vice presidential nominees in the general election, but it does not apply to independent and third-party general election candidates. [134]
In our view, the significance of tax information militates strongly in favor of mandated disclosure by all those candidates in a general election within potential reach of the White House. A serious independent or third-party candidacy is not purely hypothetical. Ross Perot mounted one in 1992, qualifying for the ballot in all fifty states and possessing the personal financial resources to run a competitive national campaign. Yet while Perot’s campaign suggested he might release his returns, he never did. He did not win any state’s electoral votes but received just shy of 20 percent of the popular vote.
We would subject one more category of tax filers to this mandatory requirement: any of the president’s or vice president’s family members who have senior executive branch positions within the executive offices of the president or vice president, or at the departments or agencies. Independent adult family members would typically be off-limits and able to pursue independent private lives and order their financial affairs as they see fit. However, once again, the Trump experience revealed how a president may choose immediate family members to take on major public responsibilities. In those cases, the same conflict-of-interest concerns that shape the disclosure requirements for the president would seem appropriate for immediate family members in senior government positions whose financial affairs could influence, or appear to influence, the president’s official conduct. This requirement should apply without regard to whether the family members serving in these official roles are compensated or receive only nominal compensation.
A president might challenge in court such financial disclosure requirements on the ground that, unlike the requirements of the EIGA, the new requirements apply to the president but not Congress. Nixon unsuccessfully brought a claim of this kind in a suit to protect his privacy interests after Congress enacted the Presidential Recordings and Materials Preservation Act of 1974, which asserted public control over, and access to, presidential recordings and a broad range of other records from his administration. [135] Nixon alleged violations of separation of powers principles and personal privacy rights. In rejecting these claims, the Supreme Court found that the separation of powers claim lacked force where the law in no way “prevents the Executive Branch from accomplishing its constitutionally assigned functions.” It similarly found no merit in the alleged infringement of the privacy right where the public has a clear interest in the information and the president could not show that it was “unrelated to any acts done by [presidents] in their public capacity.” [136]
This conclusion is consistent with presidential practice. Presidents for years have released their returns without any evidence that the disclosure adversely affected the performance of their duties. None resisted on the grounds that it would, and even Trump has not suggested any such impediment, resting his opposition to disclosure on its effects on an ongoing audit and, after the struggle with Congress and New York commenced, on the illicit motives behind the legislative and criminal subpoenas. All presidents in the post-Watergate period appeared to acknowledge the public’s legitimate interest in the disclosure. Again, Trump, while broadly and incorrectly asserting that there is little to be learned in a return, has never denied the public interest in this information or argued that his privacy interests outweighed whatever value it might have.
Vehicle for Reform: Amendment to the Ethics in Government Act
Congress can amend the EIGA to require the annual release of a president’s (and vice president’s) tax returns, and thereby strengthen the provisions that address presidential accountability for conflicts of interest. The reformed statute would specify the date of release on the date that all citizens must file their tax returns: April 15. And the president would not be entitled to an extension because, given the clarity and importance of the law, he or she has adequate notice to do what is necessary to get the returns in publishable shape on time. The proposed law is simply a codification of generally consistent presidential practice pursuant to norms since Watergate and until Trump. During this period, presidents always voluntarily released their forms on April 15 and never required extensions.
The amended law would provide for the president to file returns with the Office of Government Ethics, which also receives and reviews for compliance with statutory requirements the annual personal financial disclosure reports required under the EIGA from the president, vice president, and other senior executive branch officials. The Office of Government Ethics would ensure that the returns are complete, and it would be authorized for this purpose to consult as required with the IRS. It would then make the returns public.
Finally, the law should provide for the public release of the mandatory IRS audit of the president’s and vice president’s returns. The audit could be subject to release when completed without regard to the results: The law could provide for the disclosure of even a “clean” audit. Alternatively, the audit results could be released in the event that the IRS determined that the president owed additional taxes, interest, and penalties and the president either accepted and paid the amounts owed or successfully contested the finding in whole or in part.
Role for Congress
In the event the president failed to file the return with the Office of Government Ethics, or did not do so by the statutory deadline, Congress, through the Joint Committee on Taxation, could require the secretary of the Treasury to produce it and could file suit as necessary to ensure the secretary’s compliance. The committee’s involvement also serves as a check on the performance of the Office of Government Ethics.
An alternative approach to ours would dispense with a requirement that the president and vice president (and candidates for the offices) disclose their returns and instead impose the obligation on the IRS to release them. However, the reform we propose aims to uphold one norm—that high officials and candidates disclose their taxes—without undermining another norm, namely, that the IRS should hold taxpayer tax filings confidential. Until Donald Trump declined to provide his returns, the norm of voluntary release operated successfully over many decades. The aim of putting enforcement teeth into a voluntary disclosure regime that failed can and should be achieved without creating an exception to the norm against IRS publication of returns. This latter norm is consistent with our proposed requirement that the mandatory IRS audit of the president’s filings be released. The audit is the IRS’s own work product, and by the time the audit is made public, the personal tax information it reflects will have been disclosed.
Presidential and Vice Presidential Candidates
The House reform bill would assign enforcement responsibility to the Federal Election Commission for presidential and vice presidential candidates as well as incumbents, all of whom would file their returns with the FEC. The agency would then make them publicly available. In the event that a candidate or incumbent does not meet the filing requirement, the FEC would be authorized to require the production of returns from the secretary of the Treasury.
This enforcement structure may seem suitable for candidates because the FEC administers the campaign finance laws and the associated disclosure requirements. But the FEC is also an agency whose membership appointments are subject to a partisan selection process, and it has developed, perhaps inevitably, a reputation for political conflicts that impede its ability to perform its statutory responsibilities. The FEC is not well positioned to perform the role here of ensuring that incumbents and candidates provide this information—which is personal financial, not campaign finance information—for public review. We would propose, then, that the enforcement responsibility for both incumbents and candidates reside with the Office of Government Ethics, subject to the same congressional enforcement authority in the event of noncompliance.