Why I don’t care about Trump’s tax return

Last updated on: May 7, 2019 at 11:06 am by Jane the Actuary

Why I don’t care about Trump’s tax return 2019-05-07T11:06:41-06:00 Jane the Actuary

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The Democrats are going after Trump’s tax returns.

In the first place, the House Ways and Means Committee, based on power granted it by a 1924 law to examine the return of any taxpayer it chooses, has demanded Trump’s returns. (A May 4 Politico article provides some of the historical context to that law, and states — how accurately I don’t know — that Congress is able to view any tax returns it wishes, unconditionally.)

In the second place, California and miscellaneous other assorted states are in the process of enacting legislation demanding that any prospective presidential candidate release their tax returns in order to qualify for the ballot (though no such state has actually signed such a requirement into law).

Supporters of these actions consider them as eminently reasonable because, after all, releasing tax returns is an established tradition. Therefore, it is presumed, for Trump to decline to do so means he has something to hide.

Now, I do not claim to have a tax return as complex as Trump’s is. But, the last I checked, there simply was no line item for “bribes paid” on the 1040. Heck, for what it’s worth, here’s what the IRS has to say:

Bribes and kickbacks.

Engaging in the payment of bribes or kickbacks is a serious criminal matter. Such activity could result in criminal prosecution. Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government aren’t deductible for tax purposes and are in violation of the law.

Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business aren’t allowed as a deduction for tax purposes.

Meaning of “generally enforced.”

A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances.

Kickbacks.

A kickback is a payment for referring a client, patient, or customer. The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback isn’t aware of the payment.

For example, the Yard Corporation is in the business of repairing ships. It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. These expenditures aren’t deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted.

Which is, admittedly, a lengthy bit of detail to quote but my point is that I don’t see what anyone thinks they’re going to find in these returns. There is nothing in the tax forms that means that seeing these will open the eyes of the American people to some sort of nefarious wrongdoing that IRS knows about and keeps from the rest of us.

What about illegal income — would the returns show that Trump himself is the recipient of bribes? To be sure, it is the case that people engaged in illegal enterprises such as prostitution are, in principle, able to file taxes by reporting their income as vaguely generic undefined self-employment income (see this 2009 Slate explainer, though I can’t find anything that explains the prevalence with which they actually do so). The IRS even helpfully says, “If you receive a bribe, include it in your income.” But that does not mean that there’s some sort of schedule or line item in which the taxpayer is obliged to specifically identify bribes as such, rather than including them in a general category of “other income.” And the Slate explainer helpfully says that requirements around identifying sources of income are written so as to ensure that filing taxes doesn’t demand self-incrimination.

So what’s it really about? Do the tax-return demanders want to use the returns to claim that his income is outrageously high, or lower than he claims? Do they believe that they can find ways that Trump cheated, that the IRS missed (and in that case, will they demand any and all supporting documentation that auditors may possess)? Is their objective to pounce on Trump for ethical violations, by claiming that whatever “loopholes” he exploited are a sign of his indecency (not to mention lack of charitable donations)? None of this rises to the level of the federal/state government making his tax returns public.

Some tax-return demanders think this will be the missing link that connects all the dots and shows that Trump had illegal business dealings with Russia; I think this is as likely as it is that Illinois’ JB Pritzker will actually be found guilty of cheating on his property taxes rather than having had a lawyer aid him in finding a loophole.

And if the state has the ability to make any demands of candidates seeking to be on the ballot, what limits to potential arbitrary and capricious demands would there be? After all, you could make a much firmer case, in the form of protection of the citizenry, for a candidate to submit to a medical exam, provide the results of bloodwork, take a screening test for cognitive impairment, and the like. “We’re not treating everyone unfairly because we require that all candidates follow the same process.” Or, since some candidates release there college transcripts, why not mandate this, to ensure that they are all as smart as they claim to be. Perhaps they should take an IQ test? Appear on Jeopardy?

And I don’t particularly care about Trump as a person. But I do object to the government acting in ways that appear to be an abuse of power, even with a noble aim.

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