Over this past weekend I read the timely article, “INSIGHT: My Taxes Are None of Your Business,” published by Bloomberg Tax on Aug. 10, 2019. The article was written by Alan Morrison, who is the Lerner Family Associate Dean at George Washington University Law School. Dean Morrison’s article discusses the risks to taxpayers under present law (involving the provisions of tax code Section 6103 that protect the privacy and confidentiality of tax return information) if the federal courts in pending litigation were to permit the chairman of the House Ways & Means Committee to obtain copies of the president’s federal income tax returns and return information that might later be made public or publicly discussed.
I agree with Dean Morrison that the president’s failure to disclose his returns publicly “is not a reason for making his returns public, and all of us have a stake in seeing that his privacy is protected.” I also agree with Dean Morrison that, as an alternative, “Congress could, of course, change the law and direct the IRS to make public the tax returns of future U.S. presidents, or even candidates for president or Congress, if they do not do so in a timely manner.”
As a former Internal Revenue Service commissioner, I believe taxpayers assume the IRS will protect the privacy and confidentiality of whatever information they put in their tax returns or otherwise provide to the IRS. I also believe that if politicians are able to obtain and make public the president’s tax returns and tax information, they are likely to do the same thing to anyone else they choose to target in the future, including but likely not limited to political donors or other supporters of any public figure in any political party.
I was at the IRS during the Nixon administration when President Nixon attempted to cause the IRS to provide him with confidential taxpayer information to facilitate IRS audits of his enemies, which is a matter of public record embodied in the Article II(1) count of the Watergate House indictment of President Nixon in 1974.
To prevent similar abuses in the future, I subsequently helped draft the revisions to Section 6103 that were enacted in 1976. In drafting these revisions, we were determined that no politician or anyone else should be able to circumvent the protections provided by Section 6103 to cause the IRS to release the content of or information about individuals’ tax returns for an improper purpose. One of the reasons we did so was because prior presidents—both Republican and Democrat—had used a pre-1976 presumption in Section 6103 to occasionally request individual taxpayer returns and information from the IRS by alleging they had the power to do so because such was not prevented by executive order. Therefore, in the 1976 legislation, the pre-1976 presumption in Section 6103 was reversed, so that thereafter all tax returns and tax information were made private and confidential unless expressly made public by executive order.
I do not recall whether or not there was any focus at that time on potential problems if Congress at the other end of Pennsylvania Avenue made similar requests, but I personally do not recall doing so. However, the principle should be the same. No politician or other government personnel should ever be able to request from the IRS and publicly discuss or disclose anything in or about an individual taxpayer’s return or other tax information unless such request and disclosure have an unequivocally proper purpose and otherwise are clearly authorized by law.
The potential damage to our tax system of upholding any request and disclosure that do not meet the foregoing tests is significant. The public generally does not trust either politicians or bureaucrats. Taxpayers are likely to decide that if the IRS cannot protect the privacy and confidentiality of even the president’s returns and tax information, no one else’s returns and tax information can be protected. In turn, taxpayers predictably are likely to be less willing than they previously have been to provide information requested by the IRS in tax returns.
As a result, I believe it will be more difficult for the IRS to identify the best returns to audit, and the audit process itself is likely to become less efficient and effective as taxpayers are less willing to be forthcoming in tax information they provide in response to IRS audit requests. If that were to happen, our tax system likely would collect less revenue at a time when our national debt (presently in excess of $22 trillion) and our annual federal operating deficits (soon to exceed $1 trillion each year) are escalating rapidly and in huge amounts. As often has been said, our tax system depends upon the confidence of the public in order to function properly. Today we can ill afford for any further lack of public confidence in our federal government, including our tax system.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Lawrence Gibbs is senior counsel at Miller & Chevalier Chartered.