Broker Check

The Trump Tax Return Precedent

January 13, 2023
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House Democrats released Donald Trump’s tax returns to the public on Friday, four days before they lose their majority, and in the process did more harm to their reputation than to the former President’s. The dump is a violation of taxpayer privacy with no legislative purpose, and it could open an ugly new battlefield in American politics.

The Ways and Means Committee released Mr. Trump’s individual and business filings from 2015 to 2020. The release caps Chairman Richard Neal’s yearslong campaign, which he claims is meant to expose the Internal Revenue Service for slow-footing mandatory audits of the President. “Our review found that under the prior Administration the program was dormant,” Mr. Neal said in defense of the document dump.

The details of the returns will take some time to analyze, but the initial reviews are neither flattering nor particularly damning to Mr. Trump. His individual filings show negative taxable income in four of the six years and a total liability of about $4.4 million. That reflects a bumpy record in real estate and other ventures, though Mr. Trump chalked up his small tax bill to “depreciation and various other tax deductions” in a statement after the release.

Critics are making hay of Mr. Trump’s loans to his children and deductions for items like “helicopter expenses.” Yet these are the sort of issues that arise in most wealthy taxpayers’ returns, and they’ll be vetted, and perhaps argued about, in audits out of public view.

Mr. Trump appears to have hired legions of lawyers to exploit every possible loophole in the tax code. If Congress doesn’t like that, it can rewrite and simplify the code. But that would strip the Members of their power to do favors for, well, real-estate investors and other campaign contributors.

The actual point of the release is to embarrass Mr. Trump for refusing to release his returns. We criticized him for this, but it isn’t a legal requirement. Democrats needed a legislative purpose to pry private records from the IRS, and the best excuse they could manage was a desire to strengthen the agency’s presidential-audit policy. The weakness of that rationale was laid bare at the Dec. 20 meeting when Ways and Means approved the release.

Karen McAfee, Democrats’ top oversight staffer, couldn’t explain how releasing the returns would affect legislation. Pressed by GOP Rep. Kevin Brady, she sputtered that Democrats want a bill “to make sure that the audits start on time.” No word on how speeding up audits requires broadcasting Mr. Trump’s finances to the world.

Rep. Neal has repeatedly claimed that the IRS didn’t begin its probe of Mr. Trump’s 2015 taxes until Ways and Means pressured it in April 2019, and he’s suggested that other reviews were also late. The agency disputed his complaint in a letter to the committee this month, saying it started the first audit in January 2018 and that its review of Mr. Trump’s 2020 return is still pending. Yet at the Ways and Means hearing, Mr. Neal maintained his original claim.

Thomas Barthold, chief of staff at the Joint Committee on Taxation (JCT) who reviewed Mr. Trump’s taxes at Ways and Means’ request, told the committee that he’d never heard the IRS’s side of the story. Democrats rushed JCT to produce a summary in less than four days, and it echoed the Democrats’ claim of a late 2020 audit. If Mr. Barthold had seen the IRS letter, the JCT summary might have undercut Democrats’ “legislative” excuse.

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The release sets a terrible precedent for the treatment of private information by Congress. The Supreme Court last month declined to block the Ways and Means seizure of Mr. Trump’s returns, holding that Congress can define for itself what legislative purposes are suitable to snoop on personal records. But until Mr. Trump, lawmakers maintained a high bar for doing so—and Congress has never before released a private citizen’s tax information.

If all it takes is an airy notion about reforming this or that policy, it won’t be hard for partisans to justify seizing and releasing anyone’s returns. House Republicans may cite this precedent next year in an effort to publish Hunter Biden’s tax returns, or those of any disfavored individual or group.

“This is a regrettable stain on the Ways and Means Committee and Congress, and will make American politics even more divisive and disheartening,” said Mr. Brady, who leaves office next week. “In the long run, Democrats will come to regret it.” And maybe not all that long.

Published Dec. 30, 2022 at 6:43 PM by The Editorial Board of The Wall Street Journal

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Whether you agree or not, when it comes to partisan policy and the public's interest, be wary of what you wish for.