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3 Reasons We Care About Politicians' Taxes

If it's Friday in politics, there's the potential for a news dump.

This Friday, that means tax returns. The Clinton campaign, in an effort to pressure Donald Trump into releasing his taxes, released the Clintons' 2015 numbers. The Clintons made $10.6 million combined, mostly from speeches, and paid an effective federal tax rate of 34.2 percent. Clinton's vice presidential candidate, Tim Kaine, also released 10 years' returns. In 2015, Kaine made about $313,000 and paid a 16.1 percent tax rate. (Here are all the tax returns released by the Clinton campaign.)

Clinton and her husband, former President Bill Clinton, have already released tax returns dating to the 1970s given their long history in public life. The Clintons, in June of last year, released the previous eight years of returns. Here's some of what we found out from those, as reported by NPR's Scott Horsley:

  • Income: The Clintons "earned $139 million since 2007. They paid nearly $44 million in federal taxes during that period." Much of that income came from paid speeches.
  • Tax rate: The couple's effective federal tax rate ranged from 25 percent in 2007 to 36 percent last year. (The average American pays about 10 percent in tax. The wealthiest pay about 25 percent.)
  • Charity: "The Clintons ... gave between 8 and 15 percent to charity" (mostly through the Clinton Family Foundation).
  • It has become tradition in U.S. presidential politics that the party standard-bearers release their tax returns. In fact, every major-party nominee in recent history has done so. Trump, though, has declined to follow suit. Why? Trump says he is being audited by the IRS and won't release his taxes until that audit is done. But there's nothing preventing Trump from releasing his taxes while under audit, a point the Clinton campaign and its supporters have pressed, arguing that Trump must be hiding something.

    It's possible Trump pays $0 in taxes, or close to it, the New York Times reported, because of deductions for real estate developers. There's some history of that for Trump, who "reported losses and paid no federal income tax in 1978 and 1979 and paid only modest sums — a total of less than $75,000 — for the prior three years," the Times wrote.

    Trump himself fueled that speculation when he told ABC's George Stephanopoulos in May, "I fight very hard to pay as little tax as possible."

    That Americans demand that the people who run for president serve up what amounts to a financial colonoscopy is something of an odd, voyeuristic tradition. (You can read all of the released tax returns from past presidents and vice presidents and the current 2016 field here at the Tax History Project's archive. Candidates are also required under federal law to release financial disclosures that show ranges of the worth of assets and debts.)

    Below are three reasons we care about what's in those tax returns — and a little history of where this tradition came from.


    First, A Little History

    It's a political cliche to say that if you want a friend in Washington get a dog.

    And the origin of politicians releasing their tax returns goes back to Richard Nixon — and his cocker spaniel.

    Nixon, running as Eisenhower's vice president in 1952, was accused of financial wrongdoing "related to a fund established by political backers to pay for campaign expenses," Joseph J. Thorndike of the Tax History Project wrote in 2012.

    Nixon admitted to taking one gift — Checkers, the family dog — from a donor. "[T]he kids, like all kids, love the dog," Nixon said, "and I just want to say this, right now, that regardless of what they say about it, we're gonna keep it."

    What's become known as Nixon's "Checkers speech" was all an attempt to clear his name. He challenged the Democratic Party ticket, headed by Adlai Stevenson, to "make a complete financial statement as to their financial history," as he believed he had.

    If they didn't, Nixon alleged, it would be proof "they have something to hide." So Stevenson and his running mate, Alabama Sen. John Sparkman, released a decade of their tax returns. Eisenhower, the guy at the top of the ticket with Nixon, even released a summary of his own taxes.

    Nixon, though, did not.

    The practice of releasing taxes didn't become tradition until 21 years later — again involving Nixon. PolitiFact wrote:

    "The IRS audited Nixon in 1973, when questions bubbled up about a fishy charitable donation and speculation that Nixon had tried to game the tax system, according to a paper prepared for the United States Capitol Historical Society. (This happened around the same time as the Watergate investigation but was a separate issue.) Nixon said one of his most well-known lines amid this scandal: 'People have got to know whether or not their president is a crook. Well, I am not a crook'.

    "Nixon eventually released a slew of financial information to the public in December 1973, including the previous four years of tax returns, to try to quell the criticism. He asked a congressional committee to examine them, too. However, the congressional investigation ultimately found that Nixon owed $476,431 (approximately $2.3 million in today's dollars) in unpaid taxes and accrued interest. Oops."

    From that point on, tax-return disclosure became the norm for people wanting to be president.


    Reasons We Care

    1. Conflicts of interest: Almost every candidate who runs for public office is fairly wealthy. (Even the candidates who have the government pay their salary, like Bernie Sanders and Joe Biden, make far more money than the average American.) Because of that wealth, how they made their money (we'll get to heart in a second) can tell you whether they have potential conflicts of interest — who they made that money from.

    Donald Trump holds up a copy of what he says his net worth is in June 2015. It claims his net worth at almost $9 billion, though others have estimated it to be far lower.
    Richard Drew / AP
    /
    AP
    Donald Trump holds up a copy of what he says his net worth is in June 2015. It claims his net worth at almost $9 billion, though others have estimated it to be far lower.

    Trump's business interests all over the world could become entangled with presidential politics. Just look at his response to Brexit — that the dropping euro could be good for tourism to places like his Scottish golf course. For the Clintons, the Clinton foundation could also raise the issue of conflicts of interest as it raises gobs of money from foreign entities. Would some of those governments expect special treatment from a second President Clinton? A look at recently released emails from her time at the State Department — and what aides did for big Clinton foundation donors — gives people reason to question.

    2. Do they have heart? Tax returns tell us how much candidates give to charity. The Clintons, as noted above, gave between 8 and 15 percent — or about $15 million total — during that eight-year period. Most of that went through the Clinton Family Foundation, as The Atlantic reported. They also contributed to the Nelson Mandela Foundation, First United Methodist Church and the Humana Challenge golf tournament.

    People could have questions about why so much of their money went to their own foundation — and whether that's really in the spirit of giving. For Trump, on the other hand, it took a Washington Post investigation to unearth that he hadn't given $1 million to veterans' charities, as he had promised after a fundraiser he held earlier this year (an event he held in competition with a debate he decided not to attend because he was upset that Fox News' Megyn Kelly was moderating). Trump eventually laid out how much was raised and allocated in a testy news conference. So is criticism of Trump unfair? Is he really quietly a very charitable person — or not? Tax returns would reveal that.

    3. Are they like us? Again, these candidates are much wealthier than the average American. Median household income in this country is $53,482, according to the census. The Clintons made $28 million in 2014 (mostly from speeches). They also live in a posh New York suburb, Chappaqua, where they bought their home for $1.7 million in 1999 just before leaving the White House. (In 2016 money, that appreciates to about $2.5 million.) The average home price in the U.S. in June 2016 was $358,000 (median home price was $307,000).

    Trump, of course, makes it a point to say he's "really rich," claiming he's worth $9 billion. Trump's net worth is something of a mystery. He says it fluctuates even based on his own "feelings." The Washington Post reported this week on a 2007 deposition that caught Trump in repeated lies and exaggerations when it came to his wealth and earnings. His tax returns would certainly clarify whether he is as rich as he says.

    There's also the business of tax rates. The Clintons have paid a fairly high tax rate over the years. Trump, on the other hand, has boasted that, "I fight very hard to pay as little tax as possible" and called his tax rate "none of your business." But when a candidate fights hard to pay less in taxes than most people, especially when he is uber-rich, that can be a political problem. That was certainly the case in 2012, when the Obama campaign and its outside group allies were able to paint Mitt Romney as someone who got away with paying less in taxes. (Romney paid an effective tax rate of 14 percent because so much of his income came from dividends and capital gains.)

    Copyright 2023 NPR. To see more, visit https://www.npr.org.

    Domenico Montanaro is NPR's senior political editor/correspondent. Based in Washington, D.C., his work appears on air and online delivering analysis of the political climate in Washington and campaigns. He also helps edit political coverage.