Put all tax returns on public view
Sunday, August 28, 2016
By Thomas Hylton
All year, Donald Trump has resisted calls to voluntarily release his income tax returns, which for decades has been standard practice for presidential candidates. But why does he even have a choice? For that matter, why does anyone have a choice?
Shouldn’t everyone’s income tax return, or at least a summary of it, be a public document?
Government at all levels requires money to operate, and every citizen is expected to pay his fair share. Income taxes are a major revenue source for both states and the federal government, so why shouldn’t individual payments be made public? After all, unjust taxation was a prime cause of the American Revolution. What better way to promote justice than publishing everyone’s tax payments for all to see?
This isn’t as radical as it sounds.
Tax returns were public documents when Congress first created the federal income tax in 1861. They remained public until the income tax was allowed to expire 10 years later.
In 1924, the new federal Revenue Act required public disclosure of both individual and corporate income tax payments. A staunch proponent of the act, Republican Senator Robert Howell of Nebraska, argued that “… the power of great wealth and its encroachments upon our institutions is the chief menace that confronts us today.” Secrecy, he said, was “the greatest aid to corruption.”
Newspapers such as the New York Times promptly published the names and tax payments of prominent citizens and corporations, including some who paid no taxes at all. President Calvin Coolidge and Treasury Secretary Andrew Mellon were not amused and helped persuade Congress to change the law in 1926 to limit disclosure to the names and addresses of taxpayers only.
Although the vast majority of countries keep tax returns secret, three perennial champions of equality and good government – Norway, Sweden, and Finland -- have a long tradition of making individual income tax information public.
Here in the United States, federal and state governments implement a hodgepodge of practices that make some earnings and tax payments public, but not others.
Pennsylvania’s Right-to-Know law, for example, makes the earnings of all public employees, from the governor to your local elementary school janitor, public information.
In Pottstown, where I live, our superintendent of schools earned $175,000 last year. This was bested by the director of our local health and wellness foundation, who earned $198,000, and the headmaster of Pottstown’s prestigious boarding school, The Hill School, whose compensation topped $230,000. I know the latter two figures because the federal tax returns of non-profits and private foundations are required by law to be public, and they are readily available on the Internet.
The compensation of high ranking officers of public companies is required by federal securities laws to be public information. That’s how we know the highest paid CEO in America last year was Dara Khosrowshahi, CEO of Expedia, Inc., who earned $94.6 million.
Recently, the Inquirer published an eye-popping study showing that numerous major commercial property owners use legal loopholes to avoid paying their full real estate transfer taxes, costing Philadelphia government millions of dollars. This study was made possible only because real estate transfer taxes are public records.
In fact, real estate ownership, assessments and tax records are all public documents, and easily searchable on many county websites.
Today, the need for transparency is greater than ever. Trust in government is at a historic low, according to the Pew Research Center. In 1958, when the first national survey was conducted, 73 percent of Americans said they could trust the federal government “just about always” or “most of the time.” Subsequent surveys show trust has been mostly falling ever since, reaching a low of 19 percent in 2015.
Earlier this year, Bernie Sanders, who spent most of his Senate career as an unknown, ignited a national movement to address the huge and growing inequality in wealth and income between the affluent and everyone else. Polls showed he was by far the most popular presidential candidate among young people, and his call for higher taxes on the rich has been taken up by Hillary Clinton.
That’s one way to address income inequality. Transparency is another. The more information people have, the better choices they will make. Publishing individual income data may pressure employers to treat workers more fairly and help historically underpaid groups, such as women and minorities, achieve equal compensation. It may spur legislation to simplify the tax code and win support for other measures to raise the incomes of the many instead of the few.
Moreover, it’s likely that publishing tax returns would motivate taxpayers to report their income and deductions more scrupulously, raising revenues as well as increasing fairness.
Privacy is important. But when it comes to paying the government’s bills, we all need to show how much we’re contributing, and the income on which our payment is based.
Candidate Trump, who says he’s a billionaire many times over, brags that “I fight hard to pay as little tax as possible.” A lot of other people feel the same way. Making everything open reminds us we have a civic responsibility to others as well.