Today, a federal judge allowed the Manhattan DA’s office to subpoena President Trump’s tax returns, but the Second Circuit Court of Appeals put a hold on the subpoena.
As a result, I was interviewed today by a reporter to comment on the Trump Tax Return Saga (coming soon to a theater near you), and what one might learn from them. This interview provided incentive for me to reflect on the issue for a moment (and provided an opportunity for me to disappoint grammarians). The issue of what can be learned from these returns has already been widely covered in the press. However, here are my own thoughts.
In my mind, there are four primary goals of the people looking for these tax returns: 1. Uncover some illegal tax evasion, or distasteful (but legal!) tax planning, by President Trump, 2. Find evidence that suggests that President Trump is not the successful businessman he purports to be, included his claimed to have been a self-made man, 3. Find evidence of a financial tie between President Trump and some unsavory country, or, 4. Even if the returns never come out, to try to keep the tax returns issue alive to highlight a perceived lack of transparency between President Trump and his rivals (see an Amy Klobuchar tweet that is an example of this). Even with the returns, issues 1-3 may be unsuccessful because there may well be no substance to these possibilities.
First, it is not clear to me how much the people who elected, and may again elect, Donald Trump care about any of these issues. I am neither a marketing or political science professor, so I will (mostly) leave that aside. I will note, however, a huge difference between when Mitt Romney was asked for his tax returns, and he humbly and ashamedly released them, and President Trump was asked for them, and he brashly and emphatically said, “No!” I will also note the difference in election outcomes between the two. It may well be that just as democrats may score points with their base for trying to obtain the returns, President Trump scores points from his base for doggedly resisting.
Second, President Trump claims the returns have been, and are still being, audited by the IRS. IRS audits include the ability to request a lot more information of the taxpayer, a power that those receiving the tax returns may not have (and to which President Trump is unlikely to easily accede). So, how likely is it that any tax misgiving could be found? In my view, somewhat unlikely. The one glimmer of hope for those after the returns is that the IRS has added several new tax disclosures recently. My understanding, based on talking with tax practitioners, is that there is a perception that new information required to be disclosed by the IRS may take a few years to get fully vetted and so there is some chance some of the newer filings (FATCA related filings, for example) might have information not fully vetted or processed by the IRS.
Third, successful illegal tax evasion makes a business look much less profitable than it really is. (For example, when the IRS visits Mr. Drysdale’s bank on Season 1, Episode 28 of the Beverly Hillbillies, Drysdale says, “Its a pleasure to have you visit my struggling little bank,” after which he hands him a cigar and lights it for him.) You pay taxes on profits, so that is kind of the point of tax evasion. As a result, it would be difficult to tell the difference between President Trump being good at tax evasion and President Trump being bad at business, if either is indeed the case. It will be especially difficult with a limited ability to collect substantiating documents.
Point #4, that the issue has political feet, is an important piece to this saga. There is a lot of uncertainty whether the returns could show some tax misgivings, or ties to countries we don’t like, or bad business judgement. However, in my view, there is no uncertainty that the issue excites some democratic voters.
All that said, at least as indicated by their Google searches, people are generally still more interested in Donald Trump’s hair than his tax returns.
