Trump Tax Rulings: Who Claims Victory?

Robert Goulder, contributing editor at Tax Notes International, and Joseph J. Thorndike, contributing editor at Tax Notes Federal, discuss the recent Supreme Court decisions on the release of Trump’s financial records.

Here are a few highlights . . .

On the historical perspective of presidential subpoenas

Joseph J. Thorndike: These issues go way back to the early days of the Republic. If you look at the headnotes of one of the opinions, they talk about the 1807 trial of Aaron Burr that implicated sitting president Thomas Jefferson. If you fast forward to the 1970s, you have litigation that is somewhat similar, implicating the sitting president, Richard Nixon. Of course, more recently President Bill Clinton in the 1990s had to sit for a deposition while in office; those presidents all made similar claims of presidential immunity and it didn’t work out. So, given that we have 200-plus years of adverse precedent, was it inevitable that these arguments weren’t really going to fly? . . . The justices of the Supreme court hinted pretty strongly that this was going to be a hard case for [President Trump] to win. 

The Burr case is an interesting one . . . because it actually hits on some of the main arguments that Trump made in both of these cases. In Burr’s case, they serve a subpoena on Jefferson looking for information and Jefferson says, “No, I can’t handle this subpoena because it’s too demanding . . . It’ll take too much time for me to answer a subpoena like this.” And Chief [John] Justice Marshall says [that] the demands of the president are real and substantial, but they are not unremitting. 

On determining political wins versus legal wins 

Joseph J. Thorndike: There are legal ways to define victory, and then there are political ways to define victory. I think a lot of the news coverage conflated those two or chose one of them and focused just on that and ignored the rest. With [Trump v. Vance], the president claims [that] they shouldn’t be able to subpoena all these documents. Well, the Court said, “Yes, they should. Your claim of immunity . . . we reject that argument. They have the right to issue these subpoenas and on some level you’re going to have to allow them to be responded to by the third parties.” I think it’s fair to say that the president lost that case, but what happened in practical terms is that the Court said [that they’re] going to return this now to the lower court where some issues still need to be resolved.

That was always what was going to happen, because there were still issues to be resolved. Some people said that this was a victory for the president because the court didn’t say, “Hey, send over those tax returns this afternoon to the grand jury.” No, they said to finish dealing with it at the lower court and that will probably take more time than we have before the election. Therefore the president was able to delay the resolution of these subpoenas. Some people saw that delay as a victory for President Trump. He managed to push this off until after the election.

On presidential audits

Joseph J. Thorndike: It does seem to me that the House Ways and Means Committee has a pretty solid case. The law that they are relying on for access to presidential tax returns is different than the law that these other subpoenas are based upon in this case. The Ways and Means Committee has clear statutory authority to request tax returns for really any reason that the committee wants them. It’s not clear that the committee has to specify why they want them in the first place. The law seems to suggest that they just have to ask and they don’t have to provide any reason whatsoever.

The Ways and Means Committee has provided an argument for why they need these returns and offered a legislative purpose for why they need them, which I think is also extremely compelling. They say, “We need to look at these returns because we want to evaluate how good the IRS’s audit process is for presidential tax returns.”

The IRS has a process under which they routinely audit presidents and vice presidents every year. They’ve done this since Jimmy Carter was president . . . the last time we took a look at the way the IRS was auditing a president . . . was under President Nixon. It turned out that the IRS was doing a terrible job of auditing the president, that they were missing a lot of things to the tune of like half a million dollars for President Nixon, which was a lot of money in 1973. So, there are reasons to believe that the IRS is not especially good at auditing the person who supervises that agency — they’re auditing their boss — History would suggest that they have reason to be suspicious. 

I have proposed that we try to take some of the politics out of this by putting legislation forward right now [to] make presidential tax return disclosure mandatory for every president after President Trump

. . . but I don’t want to make it about President Trump because it is an issue of governance — it’s not just about whether or not he’s a good president . . . I think Congress should reevaluate whether the disclosure we require is adequate . . . And the reason for that is that I don’t believe that ultimately we can really rely on the IRS to audit the president’s tax returns. The president of the United States

USM
is two things: he is the taxpayer in chief because he’s paying taxes just like the rest of us and he’s the tax collector in chief. You can’t actually believe that the president is going to audit his own taxes, which is really how it plays out here adequately.