[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
LEGISLATIVE PROPOSALS AND TAX LAW RELATED
TO PRESIDENTIAL AND VICE-PRESIDENTIAL
TAX RETURNS
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HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
OF THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 7, 2019
__________
Serial No. 116-3
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Printed for the use of the Committee on Ways and Means
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__________
U.S. GOVERNMENT PUBLISHING OFFICE
35-635 WASHINGTON : 2020
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COMMITTEE ON WAYS AND MEANS
RICHARD E. NEAL, Massachusetts, Chairman
JOHN LEWIS, Georgia KEVIN BRADY, Texas, Ranking Member
LLOYD DOGGETT, Texas DEVIN NUNES, California
MIKE THOMPSON, California VERN BUCHANAN, Florida
JOHN B. LARSON, Connecticut ADRIAN SMITH, Nebraska
EARL BLUMENAUER, Oregon KENNY MARCHANT, Texas
RON KIND, Wisconsin TOM REED, New York
BILL PASCRELL, JR., New Jersey MIKE KELLY, Pennsylvania
JOSEPH CROWLEY, New York GEORGE HOLDING, North Carolina
DANNY K. DAVIS, Illinois JASON SMITH, Missouri
LINDA SANCHEZ, California TOM RICE, South Carolina
BRIAN HIGGINS, New York DAVID SCHWEIKERT, Arizona
TERRI A. SEWELL, Alabama JACKIE WALORSKI, Indiana
SUZAN DELBENE, Washington DARIN LAHOOD, Illinois
JUDY CHU, California BRAD R. WENSTRUP, Ohio
GWEN MOORE, Wisconsin JODEY ARRINGTON, Texas
DAN KILDEE, Michigan DREW FERGUSON, Georgia
BRENDAN BOYLE, Pennsylvania RON ESTES, Kansas
DON BEYER, Virginia
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
TOM SUOZZI, New York
JIMMY PANETTA, California
STEPHANIE MURPHY, Florida
JIMMY GOMEZ, California
STEVEN HORSFORD, Nevada
Brandon Casey, Staff Director
Gary J. Andres, Minority Chief Counsel
______
SUBCOMMITTEE ON OVERSIGHT
JOHN LEWIS, Georgia, Chairman
SUZAN DELBENE, Washington MIKE KELLY, Pennsylvania
LINDA SANCHEZ, California JACKIE WALORSKI, Indiana
TOM SUOZZI, New York DARIN LAHOOD, Illinois
JUDY CHU, California BRAD R. WENSTRUP, Ohio
GWEN MOORE, Wisconsin
BRENDAN BOYLE, Pennsylvania
C O N T E N T S
__________
Page
Advisory of February 7, 2019 announcing the hearing.............. 2
WITNESSES
Joseph J. Thorndike, Director of the Tax History Project, Tax
Analysts....................................................... 13
George K. Yin, Edwin S. Cohen Distinguished Professor of Law and
Taxation, University of Virginia School of Law................. 25
Steve Rosenthal, Senior Fellow, Urban-Brookings Tax Policy Center 32
Noah Bookbinder, Executive Director, Citizens for Responsibility
and Ethics in Washington....................................... 42
Kenneth J. Kies, Managing Director, Federal Policy Group......... 49
SUBMISSIONS FOR THE RECORD
The Honorable Anna G. Eschoo, statement.......................... 171
The Center for Fiscal Equity, statement.......................... 173
Public Citizen, statement........................................ 175
Americans for Tax Fairness, statement............................ 177
LEGISLATIVE PROPOSALS AND TAX LAW
RELATED TO PRESIDENTIAL AND
VICE-PRESIDENTIAL TAX RETURNS
----------
THURSDAY, FEBRUARY 7, 2019
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Oversight,
Washington, DC.
The Subcommittee met, pursuant to call, at 3:16 p.m., in
Room 1100, Longworth House Office Building, the Honorable John
Lewis [Chairman of the Subcommittee] presiding.
[The advisory announcing the hearing follows:]
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Chairman LEWIS. The Subcommittee will come to order. I
regret in the delay. We had some votes on the floor.
Good afternoon to everybody. Let me begin by congratulating
the Ranking Member, Mr. Kelly, on his appointment to this
Subcommittee. I hope that we will continue the good and
thoughtful work on behalf of the American taxpayers. We have
been called. We have been chosen to lead at this time in our
history.
I would also like to welcome the new and returning Members
of the Oversight Subcommittee. I look forward to working with
each and every one of you in the 116th Congress.
During today's hearing, we will examine a topic of great
interest to the American people. We will review whether a
President, vice president, or any candidate for these office
should be required by law to make their tax return available to
the public. In other words, we will ask the question: Does the
public have a need to know that a person seeking or holding the
highest office in our country obeys the tax laws?
To help inform our thinking, we will review the voluntary
release of tax return by Presidents and others. The Federal tax
laws that protect taxpayer's information recent bill, including
H.R. 1, that would require Presidents and vice presidents to
disclose their tax return, an Internal Revenue Service tax
return filed by President and vice president.
This afternoon, I am reminded that over 45 years ago, we
were in a situation that is not much different than today. Many
of you are old enough to remember when President Nixon faced
questions about his Federal income taxes. During a press
conference call for review by Congress of his return, he said,
In all of my years of public life, I have never profited, never
profited from public service. And in my many years of public
life, I welcome this kind of examination, because people have
got to know whether or not their President is a crook.
He concluded by saying, Well, I am not a crook, even though
the IRS wrote him a letter stating his return wasn't correct.
The investigation by Congress found that he owed almost
$480,000 in tax and interest.
The question that arose then and remain today are, first,
should the public know whether a person who is running for the
office or who is currently leading our Nation paid the correct
amount of tax? In the case of Nixon, the answer was yes.
Secondly, is it fair to expect the IRS to enforce Federal
tax law against the President who is the head of the executive
branch and has final control of the agency? In the case of
Nixon, the answer was no.
These and other grave questions require thoughtful and
serious consideration. We have to do the right thing. We are
called to do the right thing. We have been selected. We have
been chosen.
I thank our experts for joining us today, and I look
forward to their testimony.
[The prepared statement of Chairman Lewis follows:]
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Chairman LEWIS. Now I am pleased to recognize the Ranking
Member for his opening statement, Mr. Kelly.
Mr. KELLY. Thank you, Mr. Chairman, and thanks for holding
this hearing today.
As this is my first hearing as Republican leader on the
Oversight Committee, I want to start by saying that I very much
look forward to working together with you, as well as other
Members of the Subcommittee, specifically on issues of
bipartisan concern.
Personally, I must say that when I found out we would be
serving together on this Committee, I was particularly
delighted. I so fondly remember our time in Alabama as we
walked across the Edmund Pettus Bridge with my grandson back in
March of 2015 to mark the 50th anniversary of the Selma to
Montgomery march. At that time, George was 8 years old, and you
were so gracious with him. We have many pictures of the two of
us talking with George.
And one of the things that George and I talked about, I
said, Georgy, you and I are going to come back for the 100th
anniversary of the bridge and we are going to walk across
together. He said, well, Grandpa, how old are you now? I said,
I am 65. He said, Grandpa, you are going to really be old. And
I said, well, maybe you can push me across the bridge.
But you took time to spend with that little 8-year-old, and
he still has those pictures and those memories to go with it.
So serving with you on this Committee is phenomenal.
And I know that you and Chairman Jenkins had a good working
relationship, particularly with things like the bill to
redesign the IRS. And I would like to continue to build upon
that foundation in this Congress also.
The primary role of this Subcommittee, I believe,
Government Oversight, is an important role for every Member of
Congress, because we are the taxpayers' watchdogs here in
Washington as well as being legislators. Government oversight
is critical to the protection of taxpayers and the safety of
all Americans.
As Senator Grassley once said, oversight is about keeping
faith with the taxpayers and giving people confidence that the
government plays by the rules or is held accountable. That is a
role I hope to play on this Committee, and I look forward to
serving with you in this capacity, Mr. Chairman.
Now, for today's hearing, I want to start by stating the
obvious. All Americans, every single American has a right to
the privacy and of the personal information contained in their
tax return. That is why we have a statute in law, 6103, that
covers every American from the President to your next-door
neighbor and your family. It mandates that the Federal
Government must keep tax returns and tax return information
private.
Congress enacted taxpayer protections that are embedded in
Section 6103 of the Tax Code to ensure every American's privacy
and to prevent the use of taxpayer information from being made
public. Americans should be able to trust that the Federal
Government or some unelected bureaucratic in Washington is not
going to publicly release their tax returns without the
taxpayer's consent.
Tax returns can have a lot of sensitive information in
them. It is not just all income, expenses, and deductions.
There is information on where you live, what you do for a
living, what kind of car you drive, information on your bank
account, which cell phone is yours, whether you have health
insurance, and the names and Social Security numbers of your
spouse and all of your children.
Keeping this information confidential is critical to the
integrity of the U.S. tax system, which is only functional
because taxpayers voluntarily pay their taxes. According to the
National Taxpayer Advocate, 98 percent of all tax revenue paid
by American taxpayers is paid voluntarily. That means that only
a small, percentage, 2 percent of taxes are collected through
audits and enforcement. Ninety-eight percent is voluntarily
paid. Ninety-eight percent of anything is a lot.
So I have to take a closer look and ask why. I believe this
is because of the trust the American taxpayers have in our
system and that privacy is at the foundation of that trust.
Now, some of my colleagues on the other side of the aisle
have suggested using this Committee as an avenue to obtain and
release the President's tax returns in the name of
transparency. As leaders of the Ways and Means Committee, I
don't believe we have to choose between protecting privacy and
promoting transparency among public officials. To begin with,
Congress is prohibited by law from examining and making public
the private tax returns of Americans for political purposes.
Such an abuse of power would open a Pandora's box, and it would
be tough to get a lid back on. It would set a very dangerous
precedent.
And the question is where does it end? What about the tax
returns of the Speaker, the Members of Congress, or Federal
employees or, for that matter, any political donors? There is
no end in sight for those whose tax information may be in
jeopardy.
Thankfully, violating taxpayer privacy is not the only
option for increasing transparency. I support the current
ethics review in place which ensure that Presidents and vice
presidents are held accountable to taxpayers. My colleagues on
the other side of the aisle have voiced the need to have
experts review the President's tax return with a fine-tooth
comb. But isn't that the exact reason why the IRS, the agency
with just that level of expertise, conducts mandatory audits of
the President and vice president every year? Yes, that's right,
the IRS audits the President and the vice president every
single year, whether he or she is a Republican or a Democratic.
I don't think most Americans know that is the case. I certainly
didn't know it until I started doing some research myself and
inquiring.
In addition to IRS audits, there are also financial
disclosures required. If my colleagues have a valid concern
with the financial disclosure requirements, then let's come
together to legislate a thoughtful solution to require
additional disclosures. If there are challenges in obtaining
required documents for disclosure, then let's look at how we
can make that process better and more transparent. But the
reckless sharing of a taxpayer's private information for
political purposes would be unprecedented and completely
outside the bounds of Congress' role as a legislative body.
Our role is oversight and certainly not overreach. And we
can and must do better. Therefore, I look forward to hearing
from our witnesses on how to do that better, that is, how to
best protect our American taxpayers.
Thank you, Mr. Chairman. It is great to be with you.
[The prepared statement of Mr. Kelly follows:]
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Chairman LEWIS. Well, thank you, Mr. Kelly. And thank you
for your wonderful comments about our trip to Alabama with your
grandson George.
Mr. KELLY. Yes, with George.
Chairman LEWIS. Without objection, all Members' opening
statements will be made part of the record.
Now we will hear from our panel. I ask that each of you
limit your testimony to 5 minutes. I know you have been so
patient. You have been waiting for a long time. So you can, you
know, cut it as short as possible. We will not object. Without
objection, your entire statement will be included in the
record.
It is now my pleasure to introduce the director of the Tax
History Project, Mr. Joseph Thorndike.
You may begin, sir.
STATEMENT OF JOSEPH J. THORNDIKE, DIRECTOR OF THE TAX HISTORY
PROJECT, TAX ANALYSTS
Mr. THORNDIKE. Good afternoon, Chairman Lewis, Ranking
Member Kelly.
Chairman LEWIS. I should have said Dr. Thorndike.
Thank you, Doctor.
Mr. THORNDIKE. Thank you.
It is an honor and privilege to be here today to talk about
the long voluntary tradition of tax return disclosure by
American Presidents, vice presidents, and major party nominees.
As has been said, I am Joseph Thorndike, director of the
Tax History Project at Tax Analysts, a nonprofit, nonpartisan
provider of tax information. As part of my job, I am the
curator of a collection--an electronic collection of
Presidential tax returns. I speak today on my own behalf, not
for any organization.
I will be making two main points. First, for more than 40
years, American Presidents have been making substantial
voluntary disclosures of personal tax information. Since 1977,
those disclosures have been annual, with each sitting President
releasing a complete tax return. Disclosures by vice presidents
have been nearly as consistent. And major party nominees, while
generally restricting their disclosures to campaign years, have
also released at least one complete tax return and sometimes
many more.
This unbroken string of disclosures ended in 2016 when
first candidate and then President Donald Trump declined to
release any personal tax information.
Secondly, this tradition of voluntary tax disclosure is
fragile. By its nature, a tradition can lack clear standards
and procedures. It tends to vary and change and perhaps to even
weaken over time. Some political leaders have resisted or
dragged their feet about disclosure. Until 2016, all ultimately
chose to comply. But absent clear, binding, bright-line
requirements, the nature of that compliance has varied
considerably. That variability has underscored the
vulnerability of the tradition itself.
Let me talk just briefly about origins, which the chairman
has already mentioned. Rarely does the hand of history weigh
quite so heavily on current policy as it does around this
topic. Over the past four decades, American politicians have
been releasing their personal tax returns because President
Nixon chose to release his personal tax returns, albeit under
some duress.
Nixon's tax troubles came to light in a lawsuit that
happened to mention a large deduction he had taken for the
donation of his vice presidential papers to the National
Archives. That revelation gave rise to months of speculation
and ultimately a leak from within the IRS. To help quell the
scandal, Nixon released 4 years of personal returns and invited
the Joint Committee on Internal Revenue Taxation, as it was
then called, to examine those returns. It is worth noting that
Nixon made this release while already under audit by the
Internal Revenue Service.
Beginning with Jimmy Carter, every President through Barack
Obama has opted to release a complete tax return during each
year in which he has held office. The same is true for vice
presidents since Walter Mondale, including Vice President
Pence.
Similarly, beginning in 1976 and continuing through 2012,
every major party nominee and his or her running mate has made
at least one significant disclosure. From 1980 to 2012, these
have included at least one complete tax return and sometimes as
many as 30.
While Presidents, vice presidents, and major party nominees
have generally observed the tradition of disclosure, there have
been occasional issues, especially around the disclosure of tax
returns filed by candidate spouses, some of which have included
partnership and business returns that those spouses were
disinclined to release.
In addition, the 2016 election featured numerous incomplete
tax disclosures with candidates from both parties opting to
release just the Form 1040 rather than a complete return. It
bears notice that if Nixon had released only his Form 1040 in
1973, investigators would have been unable to discover the most
serious problems with his returns.
I would like to turn briefly to the subject of these
Presidential audits that have already been mentioned. In 1977,
the IRS established new procedures, still in force, requiring
an annual audit for every President and vice president while in
office. According to IRS officials at the time, the policy was
established in light of, quote, everything that has happened.
The past in question was Nixon's, and the Nixon returns had
actually been audited twice, the second audit finding numerous
serious problems. The first had found none and it instead
concluded with a commendation for the President from the IRS
for the care shown in the preparation of his returns. A routine
politeness maybe, but one that was disconcerting in retrospect.
And indeed, that episode underscored a key question both at
the time and now: Can we rely on the IRS to fairly and
vigorously enforce the tax laws when applied to a President?
Doubts about the answer to that question are what prompted
Nixon to make his release essentially allowing for what we
would today call a crowdsourced backstop to the IRS audit. And
until recently, that backstop remained in place.
In conclusion, I believe that the four-decade tradition of
return disclosure is clearly imperiled most seriously by
President Trump's refusal to release his returns, but also by
the growing popularity of these partial disclosures. I believe
we would all be better off, candidates, the news media,
historians, and public, if this informal tradition were
transformed into something more substantial, well-defined, and
legally binding.
Absent clear standards and procedures, a tradition can be
interpreted, manipulated, and ultimately diminished by anyone
reluctant to observe it. And the indeterminacy of a tradition
is also an invitation to endless begging, pleading, and
shaming, none of which is good for the body public.
I am happy to answer anybody's questions.
Chairman LEWIS. Thank you very much.
[The prepared statement of Mr. Thorndike follows:]
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Chairman LEWIS. And now we will hear from a distinguished
professor of law, Professor Yin, from the University of
Virginia.
STATEMENT OF GEORGE K. YIN, EDWIN S. COHEN DISTINGUISHED
PROFESSOR OF LAW AND TAXATION, UNIVERSITY OF VIRGINIA SCHOOL OF
LAW
Mr. YIN. Thank you, Mr. Chairman, Ranking Member Kelly,
other Members of the Subcommittee and Committee. I am a law
professor at the University of Virginia and a former chief of
staff of the Joint Committee on Taxation. My testimony concerns
the existing authority of the Committee to obtain and disclose
the tax return information of any taxpayer, including the
President, vice president, and any business that they own. I
have three points to make.
First, the chairman of the Committee may request the tax
return information of any taxpayer from the Treasury Secretary,
who is obligated to furnish it. I don't see any wiggle room in
this statute for the Secretary to refuse a request. I believe
Congress drafted the authority without conditions, to match the
unrestricted right of the President at the time to access and
disclose any tax return.
Should the Secretary refuse, we would be in unchartered
territory. The authority appears to have been rarely invoked
since its creation in 1924, and I know of no instance when a
request has been refused. If a court were to become involved,
it might look to precedents involving congressional enforcement
of a subpoena. Those cases generally indicate that Congress
must act with a legitimate purpose, meaning, generally, a
purpose consistent with its constitutional responsibilities.
The chairman, therefore, would be well advised to request tax
return information only if he has a legitimate purpose.
Secondly, if it has a legitimate purpose, the Committee may
submit any tax return information to the House. The present
statute places no condition on this authority. But as
originally passed in 1924, the Committee could submit only,
``relevant or useful,'' information to the House, words that
were removed by technical amendment in 1976.
In recent research, I examined the meaning of these words
very closely and concluded that they require the Committee to
have, at a minimum, a legitimate purpose for submitting tax
return information to the House. I also concluded that the
meaning did not change even after the removal of the words in
1976. I believe the amendment in 1976 was a mere technical
drafting change with no substantive effect.
In short, the Committee must have a legitimate purpose to
submit tax return information to the House. Since the
submission might result in public disclosure, the Committee
should act only if it has a legitimate purpose to disclose the
tax information to the public.
Finally, since 1976, the tax committee authority to obtain
and submit tax return information is the sole means by which
Congress can make public disclosures of such information. The
authority, therefore, should be interpreted in a manner that
does not frustrate Congress' informing function with respect to
such information.
I provide an example in my testimony of why the legitimate
purpose for tax committees to act should not be limited only to
purposes within the specific legislative jurisdiction of the
Committee. Rather, a permissible purpose should include any
responsibility given to Congress under the Constitution.
Congress, in effect, placed tax return information in a
locked safe in 1976, but it preserved one key for purposes of
disclosing the information to the public. It gave that key to
the tax committees. The law, therefore, should be interpreted
to enable the tax committees to use that key in appropriate and
necessary circumstances.
Thank you very much.
Chairman LEWIS. Thank you very much, Professor Yin, for
your testimony.
[The prepared statement of Mr. Yin follows:]
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Chairman LEWIS. Now, it is my pleasure to present Steven
Rosenthal, a senior fellow at the Tax Policy Center.
You may begin, sir.
STATEMENT OF STEVE ROSENTHAL, SENIOR FELLOW, URBAN-BROOKINGS
TAX POLICY CENTER
Mr. ROSENTHAL. Chairman Lewis, Ranking Member Kelly,
Members of the Subcommittee, and other Members of the Ways and
Means Committee, thank you for inviting me to speak today on
disclosing Presidential and vice presidential tax returns. My
name is Steve Rosenthal. I am a senior fellow at the Tax Policy
Center. I am speaking only on my own behalf, and my views
should not be attributed to any other organization or person.
I would like to highlight three points for my testimony.
First, disclosing tax returns of Presidents, vice presidents,
and candidates for these offices is important because it
increases public confidence in the government in support for
our voluntary tax system. As Ranking Member Kelly observed, our
tax system is based on self-assessment. For it to work
properly, taxpayers must be confident that it is fair.
In my view, disclosure of tax returns to the public can
help. Tax returns reveal effective tax rates, which is the
amount of taxes divided by taxable income. Effective tax rates
are useful to measure whether a taxpayer makes a fair share
payment of taxes. Tax returns also show to the dollar the
source and nature of income, losses, and deductions.
Secondly, tax return information and other tax information
of Presidents and vice presidents enhances the ability of
Congress to oversee the executive branch, which is critical to
our checks and balances. Congress may, for example, use tax
information to evaluate the fairness of IRS audits, investigate
potential financial conflicts, or to develop new tax
legislation or other legislation.
Thirdly, there are two paths to obtain tax information on
Presidents and vice presidents. As Professor Yin has observed,
existing law, section 6103(f) of the Tax Code, permits the
Committee on Ways and Means to request tax information on
Presidents or vice presidents that is held by the IRS. And new
legislation, like H.R. 1, would require Presidents and vice
presidents to disclose a minimum number of years of tax
returns. Both paths are important, in my view.
The existing Tax Code permits the Committee to request tax
returns and other information held by the IRS. The scope of the
Committee's request would be based on its purpose for the tax
information. Some information, such as IRS audit work papers,
would help the Committee evaluate the fairness of an IRS audit.
Other information, such as related business and trust returns,
would help identify potential financial conflicts. After
reviewing the information, the Committee could exercise its
discretion to determine whether and how to release it.
Now, new legislation such as H.R. 1 can require Presidents
and vice presidents to disclose publicly a minimum number of
years of tax returns, but Congress cannot anticipate all of the
information to require in the future. It may not foresee how a
future President will make his or her income or what potential
conflicts may arise. But Congress could still use section
6103(f) to obtain extra years of returns or wider information
on a President or vice president, if appropriate.
In summary, the public would benefit from the disclosure of
tax returns of Presidents and vice presidents and candidates
for these offices. Congress would help fulfill its oversight
responsibilities by obtaining tax information, and of
presidents and vice presidents as appropriate. And there are
two paths to obtain the tax information: One in existing law
and one in proposed legislation. And in my view, both are
important.
I am happy to take any questions. Thank you.
Chairman LEWIS. Thank you for your testimony.
[The prepared statement of Mr. Rosenthal follows:]
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Chairman LEWIS. Now it is my pleasure to present Mr. Noah
Bookbinder. Thank you for being here. I think I remember in
another time, another period, your father.
Thank you for being here.
STATEMENT OF NOAH BOOKBINDER, EXECUTIVE DIRECTOR, CITIZENS FOR
RESPONSIBILITY AND ETHICS IN WASHINGTON
Mr. BOOKBINDER. Chairman Lewis, Ranking Member Kelly,
Members of the Committee, thanks so much for the opportunity to
appear before you today to talk about key reforms included in
H.R. 1, the For the People Act.
My organization, Citizens for Responsibility and Ethics in
Washington, or CREW, focuses on reducing the negative influence
of money in politics, promoting ethics in government, and
increasing transparency in our institutions. In all of these
respects, the For the People Act is a vital first step in
restoring trust in our democratic systems.
I am here today to speak to one aspect of this important
legislation: the need for transparency in Presidential and vice
presidential tax returns. As others on the panel have
explained, President Trump's continuing refusal to release his
tax returns is a departure from the practice of candidates and
Presidents of both parties over the last 40 years. The For the
People Act would codify this commonsense principle of good
governance for Presidents and vice presidents.
There are a number of important things the public can learn
from a President's or vice president's tax return. For example,
the President could be concerned with whether the President,
vice president, or a candidate paid his or her fair share of
taxes. And if this seems like a far-fetched consideration, it
is worth recalling the recent blockbuster report that President
Trump's family appears to have engaged in an elaborate decades-
long tax avoidance scheme. Or the public could want to know
more about how a President or vice president approaches
charitable giving. In the case of President Trump, the public
would be able to build on CREW's work and the subsequent work
of New York's attorney general investigating how the President
may have misused his now defunct charitable foundation.
However, I would like to highlight one critical function of
Presidential and vice presidential tax transparency: to
identify and publicly expose potential financial conflicts of
interest. If not addressed, these conflicts cast doubt on every
aspect of a President's job. The past 2 years have demonstrated
this in vivid detail. The public cannot currently have
confidence in President Trump's decisions because his finances
remain opaque. We cannot know if his decisions are made in the
public's interest or in his own financial interest because we
don't know what his financial interests are. These unknowns are
particularly troubling given President Trump's decision to
maintain ownership of his businesses while serving as
President.
Understanding President Trump's financial interests could,
for example, shed light on exactly how he and his businesses
will be affected by the massive tax legislation he championed
last year. It could help us understand whether he is receiving
funds from foreign sources, be they Russian, Saudi Arabian,
Chinese, or otherwise. Or we could learn other things about his
finances that we haven't even thought to ask yet. Ultimately,
tax transparency would open the public's eyes to investigative
threads that could lead to greater accountability for the
occupants of our Nation's highest offices.
The example of President Trump's tax returns demonstrates
one way in which the current provisions in H.R. 1 should
actually go further. Simply obtaining the President's
individual tax returns will not necessarily shine light onto
the hundreds of distinct corporations he owns under the
umbrella of the Trump organization. It is equally, if not more
important, to obtain the President's business tax returns,
something that this legislation does not currently require. I
would be happy to work with the Committee to update the
legislation to include such a requirement.
One justification President Trump has provided for not
disclosing his tax returns is that his returns are under audit.
As many have noted, this did not stop others in the past,
including even President Nixon, from releasing their tax
returns. But more importantly, Congress should consider whether
the existing requirement that the IRS audit every President's
and vice president's tax returns can realistically serve its
purpose. Congress must question whether we can have full
confidence in the IRS, which is overseen by a Presidential
appointee, to thoroughly review the President's taxes.
Public disclosure of the President's and vice president's
tax returns can substantially mitigate these concerns. If the
public can ultimately see what is filed, the IRS can be
protected against charges that it was too easy or too hard on
the President. Public review also has the added benefit of
giving the American people a greater ability to evaluate the
decisions made by the President and any conflicts that may
affect these decisions, something an IRS audit cannot provide.
I will close by reiterating an important point. By ensuring
the transparency of Presidential and vice presidential tax
returns, H.R. 1 would not only impact this current President,
it would force every President and vice president and every
major candidate for these positions in the future, regardless
of party, to publicly disclose this information. This provision
is nonpartisan.
We must ensure the transparency we need at the highest
levels of government in order to restore faith that our leaders
are acting in the interest of the American people, not in their
own interest. For all of these reasons, Congress should
implement and indeed strengthen the tax return provision in
H.R. 1.
Thank you for the opportunity to address the Subcommittee
today. I am happy to answer any questions Members may have.
Chairman LEWIS. Thank you very much, Mr. Bookbinder. Good
to see you.
[The prepared statement of Mr. Bookbinder follows:]
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Chairman LEWIS. Now it is my pleasure to welcome a
gentleman back to the Committee who is not a stranger, Mr. Ken
Kies, the managing director of the Federal Policy Group.
You may begin, sir.
STATEMENT OF KENNETH J. KIES, MANAGING DIRECTOR, FEDERAL POLICY
GROUP
Mr. KIES. Thank you. Thank you.
Chairman Lewis, Ranking Member Kelly, and distinguished
Members of the Subcommittee, and also Members of the Ways and
Means Committee, I am the managing director of the Federal
Policy Group. Thank you for inviting me to speak on tax law
related to Presidential and vice-presidential tax returns.
During my time in governmental service as chief of staff of
the Joint Committee on Taxation, as well as when I was the
chief Republican tax counsel of Ways and Means, I have had the
occasion to review the law surrounding the handling and
disclosure of tax return information, as well as to advise
Members of Congress with respect to thereto. And my comments
today are informed by this experience.
Section 6103(a) of the Internal Revenue Code specifically
provides, quote, returns and return information shall be
confidential, and except as authorized by this title, no
officer or employee of the United States shall disclose any
return or return information obtained by him in any manner in
connection with his service as such an officer or employee or
otherwise under the provisions of this section.
The code provision has sometimes been described as a
general prohibition on the disclosure of tax returns and tax
return information. While I agree that the provision does
prohibit disclosure, I note that the characterization of this
rule as a general restriction is somewhat misleading. Instead,
I would describe the provision as a blanket rule against
disclosure by any authorized recipient of returns, with
disclosure allowed in some limited situations that I will
describe later.
For purposes of this hearing, an even more relevant aspect
of the blanket restriction as it pertains to Members of
Congress and their staff is that the prohibition rule
explicitly refers to returns obtained, quote, in any manner
with any Member of Congress or employed by one, including
returns that were obtained under the provisions of this
section. This is a crucial point to remember when considering
how the blanket rule against disclosure of returns relates with
the limited exceptions provided in this section.
Just because a Member of Congress or employee of such
Member is entitled to have returns disclosed to him or her,
that Member or employee is still prohibited from then
disclosing the returns to another, unless further disclosure is
explicitly allowed by reason of this section. To willfully do
otherwise is to commit a felony punishable by up to 5 years in
prison.
As for the exception that is relevant to Members of
Congress and their staff, I read the plain language of section
6103(f) and find no comfort whatsoever that any public
disclosure of tax returns is clearly permitted. A sentence in
section 6103(f) does refer to one of the three listed
committees submitting returns it has received to the Senate or
House or both. This sentence explicitly says nothing about
permitting disclosure to the public. It likewise says nothing
about public disclosure being permitted when Members have a
valid legislative purpose and does not say that the permissive
disclosure to the Senate or House overrides the blanket
restrictions.
Thus, since every disclosure of returns is prohibited
unless it is explicitly allowed, the only conclusion I could
feel safe adopting is the disclosure can be made by a listed
committee to the House or Senate Members generally but that
such disclosure can go no further unless permitted by some
other section of which there is no relevant part.
Further, while I acknowledge the existence of a colorable
argument that the so-term speech and debate clause of the U.S.
Constitution could prevent prosecution of a Member of Congress
or staff member for a violation of the tax return
confidentiality rules so long as the act was undertaken in
furtherance of the performance of their legislative tasks, I
would observe that this clause has never been tested or applied
by the Supreme Court in the context of a felony violation under
Section 6103. Thus, if I were advising a Member of Congress and
any of their staff, I would tell them I could provide them no
firm comfort on what this clause actually allows them to do
with respect to tax returns when they have legally received
them under Section 6103. In my mind, the risk to such Members
and staff is grave when one considers the potential penalties.
Given everything I have briefly described above, I would
never feel comfortable advising a client that he or she could
safely disclose, let alone make public, any tax return in a
manner that was not unequivocally enumerated in Section 6103.
In my capacity as chief of staff of the Joint Committee on
Taxation, I never did so nor would I have counseled any of my
staff, any Member of Congress, or any congressional staff to
ever do so.
That concludes my formal remarks. I thank the Subcommittee
for this attention, and I welcome any questions.
Chairman LEWIS. Thank you very much, Mr. Kies, for being
here.
[The prepared statement of Mr. Kies follows:]
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Chairman LEWIS. I want to thank each member of the panel
for being concise. And we want you to continue to give a short
answer.
The hearing is now open for questions. I ask that each
Member follow the 5-minute rule. And all Members should have an
opportunity to ask and answer questions, if we follow the 5-
minute rule. That is for the panel also. Okay?
Professor Yin, does the tax law provide any basis for the
Secretary of the Treasury to refuse a request for tax
information from the Committee?
Mr. YIN. The statute provides no basis for a refusal.
Chairman LEWIS. Furthermore, Professor Yin, can a person
release his or her tax return while under audit?
Mr. YIN. I know of no restriction that would prevent a
taxpayer from disclosing information even if it is under audit.
Chairman LEWIS. Well, we have heard some people say, I have
been audited and I cannot release any information.
Mr. YIN. Well, I think that if I were advising a client and
my client's return were under audit, I may well want to have
the client not share the information very broadly. And I would
provide that advice to the client. But if the question is:
there anything under the law that would prevent a taxpayer from
disclosing information that is under audit, the answer is I
don't know of any such prohibition.
Chairman LEWIS. Thank you very much, Professor.
I now yield my remaining time to Mr. Pascrell. You have
been a leader in this effort.
Mr. PASCRELL. Thank you, Mr. Chairman. Thanks for holding
the hearing, and thanks for your courtesies.
Every President should release his or her tax returns to
the public as a matter of course. And when we have cause for
concern over conflicts of--or tax violations, we have every
reason to use the authority given to this Committee. The law is
on our side. 6103 is very clear. 6103(f) is even clearer, that
section of it, of what we have the responsibility to do. For 2
years, I have been highlighting this Committee's authority to
do so.
We introduced the Presidential Tax Transparency Act along
with Representative Anna Eshoo of California. Our bill would
require every Presidential and vice presidential candidate to
release their tax returns to the public. I am pleased our
proposal is part of H.R. 1, the first bill introduced by
Democratic Members of the House in this Congress.
This Committee has oversight over our Nation's tax system
and laws. In fact, the Ways and Means Committee has oversight
over IRS. Our tax system requires honesty from taxpayers and
from the IRS.
The element of good faith is implicit to a functioning tax
system. If a President is cheating the system or evading taxes
or otherwise violating the tax laws of our country, why should
any citizen feel compelled to comply? No one is above the law.
I want to get into questions, because we have great
witnesses who have laid it out better than I can. But before I
do, I want to enter into the record, Mr. Chairman, with your
approval, three specific articles that I think go to the very
center, the very heart of this issue. And we're introducing
them now.
I ask unanimous consent to enter into the record the
chronology of actions taken by this Committee and by the full
House by using 6103 to obtain the President's tax returns so
that the record has that. The record illustrates the broad
support.
Chairman LEWIS. Without objection.
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Mr. PASCRELL. Thank you. Mr. Rosenthal have you ever looked
at a President's tax returns? And if so, what did you find,
since you participated in that expose last summer in the New
York Times, to some degree? What did you find, Mr. Rosenthal?
Mr. ROSENTHAL. So I have worked at the Tax Policy Center
for 7 years. I have been through two Presidential cycles.
Mr. PASCRELL. Could you speak up, please.
Mr. ROSENTHAL. I have worked at the Tax Policy Center for 7
years. I have been through two Presidential cycles. I have been
asked many a questions about what has been released by
candidates and officeholders.
With respect to, say, President Trump, I have seen or at
least believe to have seen his 2005 and 1995 returns which, in
my judgment, showed some aggressive tax planning. I spent a lot
of time with The New York Times and other media helping to
translate what you see when you find glimpses of an
officeholder's tax returns. And we have been able to determine,
in some instances using other court documents and the like, for
instance, the most likely source of the $916 million of losses
that the President generated in the 1990s and could have
eliminated his taxes for a couple of decades.
So I have seen a lot, and I have published my findings in
various periodicals, and there is a lot to find.
Mr. PASCRELL. Mr. Chairman, thank you for yielding, and I
appreciate it very much. We will be back later.
Chairman LEWIS. Thank you very much.
I understand now that Mr. Kelly would like to defer till
later.
I now recognize the gentlelady from Indiana for 5 minutes.
Mrs. WALORSKI. Thank you, Mr. Chairman. Thank you to you
experts that are here. We so much appreciate it. I am grateful
for the information you bring with you.
I would like to direct my question to Mr. Thorndike. Are
Presidential candidates required to release their tax returns?
Mr. THORNDIKE. No, they are not.
Mrs. WALORSKI. In your experience researching the history
of Presidential returns, is there a set of rules that governs
what Presidential candidates do and do not have to release?
Mr. THORNDIKE. There are no written rules. There are norms,
but that is hard to describe them as, like, well defined.
Mrs. WALORSKI. Or required. Right.
So Presidential candidates can choose what tax return
information, if any, to release. Isn't that correct?
Mr. THORNDIKE. Yes. And, indeed, they have, which is why
they have varied quite so dramatically over time.
Mrs. WALORSKI. So, Mr. Thorndike, how many years of returns
is typical for a Presidential candidate to release?
Mr. THORNDIKE. It is really not possible to answer that
word typical--with anything. I mean, it ranges from 1 to 33.
Mrs. WALORSKI. So there is no set number.
Mr. THORNDIKE. And there is not even, really, a trend. I
mean, there are some single releases in the beginning. There
are a couple recently that released only two. But Jeb Bush
released 33 this last time around.
Mrs. WALORSKI. Right. There is no set number.
Mr. THORNDIKE. There is no obvious trend.
Mrs. WALORSKI. Right. Then in the 40-plus years of
Presidents and Presidential candidates releasing their returns,
have they ever released the returns of businesses in which they
have some form of involvement, that you are aware?
Mr. THORNDIKE. So I cannot answer that question
definitively, because we don't actually have a lot of those
returns which were released as part of a campaign but are not
archived anywhere, so we don't know where they are anymore.
Senator Romney did--when he ran, he did release returns for
some of his family trusts. Those are the only ones that I am
certain about.
There are a few times when candidates or, more
specifically, the spouses of candidates have refused to release
tax returns related to trusts or other businesses. Once
Geraldine Ferraro's husband and then again Senator Kerry's
wife.
Mrs. WALORSKI. But to summarize your responses, Mr.
Thorndike, Presidential candidates are not required to release
their returns. There is no standardized process for releasing
Presidential returns. The level of disclosure varies widely,
and business income tax returns have not been a part of the
disclosure process.
So, really, Mr. Thorndike, what we are talking about here,
and I believe you called this voluntary disclosures, what we
are talking about here is an informal tradition. It is not a
law.
Mr. THORNDIKE. It is not a law. And it is an informal
tradition, a long one, but as I say in my testimony, I think
those sorts of traditions are not the way to handle these sorts
of issues. If we believe that this kind of disclosure is
important enough that we want them to do it, then we should
require it. If we don't think it is that important, then we
don't need to require it. I don't think we should let a
tradition handle it.
Mrs. WALORSKI. And yet we are holding this hearing today
under the guise of an academic discussion when in reality this
is all about weaponizing our tax laws to target a political
foe. Doing this, I believe, sets a dangerous precedent, eroding
the very laws put in place to protect the private tax return of
each and every American.
Privacy and civil liberties should still matter in this
country. And I, for one, am here to protect those, every single
individual in this country, every single American.
And with that, Mr. Chairman, I yield back.
Chairman LEWIS. Pursuant to the committee rule 14, and
based on the Members in attendance, we will question the
witness two Democrats to one Republican.
The chair now recognizes Ms. DelBene.
MS. DELBENE. Thank you, Mr. Chairman. And thanks to all our
witnesses for taking your time to be with us today.
I want to start with you, Mr. Kies. Given your testimony,
would you have advised Committee Republicans to release
taxpayer information in 2014?
Mr. KIES. No, I would not have advised them to do that.
Ms. DELBENE. Thank you. Also, current policy requires that
Presidential tax returns be automatically reviewed, but I am
concerned that the IRS may not have the ability to accurately
and fairly carry this out free from political pressure.
So, Professor Yin, according to the report on the
impeachment hearing, President Nixon reportedly received a
letter from the IRS stating, quote, our examination of your
income tax returns for the years 1971 and 1972 reveal that they
are correct. I want to compliment you on the care shown in the
preparation of your return, end quote.
Upon exam, a congressional investigation found that
President Nixon actually owed nearly $480,000. What does this
show about the ability of the IRS to impartially review the
President's tax returns?
Mr. YIN. Congresswoman DelBene, I can't comment on the
impartiality. I think it is suggestive that there was a
problem. Whether it is simply incompetence or partiality, I
don't know.
In fact, what happened in that instance is, after the
Congress--the Joint Committee did its determination, the IRS
went back and actually audited again and essentially confirmed
the Joint Committee's determination and reversed its own first
determination. So there was obviously a problem with the first
audit, but I can't tell you whether it was out of a feeling of
partiality or whether there was undue influence or simply some
people weren't doing the job they were supposed to be doing.
Ms. DELBENE. But by allowing others to review those
documents, we were able to find out that they were not actually
correct.
Mr. YIN. Well, I think it certainly raises an issue that
might be worthy of the Committee's concern, which is that if a
very high-ranking official is being audited, whether it is the
President or the Treasury Secretary or somebody of that nature
who has a supervisory role over the auditors, it seems to me
that it might be a good policy for the Committee to double
check that type of situation.
Ms. DELBENE. Thank you.
Dr. Thorndike, given the current pressures on the IRS and
what happened with Nixon, should the IRS requirement to audit
tax returns of Presidents and vice presidents be codified?
Mr. THORNDIKE. As with the disclosure requirements, I think
that these would be better off codified than handled through
the internal policies of the IRS. And to just--I just wanted to
add that, during that Nixon episode, there was very real debate
and real concern about the sufficiency of an IRS audit. And
there were calls for outside auditors. Or what that even meant,
they weren't sure. And eventually their answer was the joint
committee could be that outside auditor. But there was real
concern that the IRS had missed this the first time through.
Part of the explanation is that they actually had a change of
commissioner in the middle of that, and the new commissioner, I
think, took a much more vigorous approach to this.
But I think it is quite reasonable for people now to worry
based on the actual experience in the Nixon Administration that
the IRS may not be able to really vigorously enforce the law
relative to the President. I think they try very hard. I don't
mean to slander the IRS. I see this as a structural problem,
not as a criticism of the IRS itself.
Ms. DELBENE. Thank you.
Professor Yin, I will go back to you. The Committee must
make a written request to receive a return. Is there any
limitation on what returns or return information can be
requested?
Mr. YIN. No, there is no limitation. The Committee can ask
for anything it wants. I think good practice would suggest that
the Committee be somewhat targeted in its request simply
because it would take a lot of time if the requests were very
broad.
Ms. DELBENE. Thank you. Thanks to all of you.
And I yield back, Mr. Chairman.
Chairman LEWIS. The chair now recognizes for 5 minutes Ms.
Sanchez.
Ms. SANCHEZ. Thank you, Mr. Chairman. And to our witnesses,
your testimony has informative as we work through this very
important issue, so I want to thank you, first and foremost,
for being with us.
I think it is long past time for this Committee to do its
constitutional duty and operate as a coequal branch of
government. And I can say that I have been proud to be part of
the Committee and House floor efforts to properly exercise our
authority. Because as Members of Congress, we take an oath to
uphold and defend the Constitution. And when we swear that
oath, we recognize our responsibility and our duty to uphold
the integrity of this institution. Holding the executive branch
accountable is a bear minimum step, I think, in fulfilling that
constitutional duty.
To me, here the facts are pretty simple. The American
people deserve a full picture of potential conflicts of
interest for those who have the privilege of holding the
highest elected offices in our country or those who aspire to
hold them.
Transparency is a pretty good thing. The American people
have the right to know the financial interests of those that
are crafting policy that affect them. And hearings like this
and passage of legislation like H.R. 1 will move our country
forward, not backward, in the issue of transparency.
Since this Administration began, we have seen countless
examples of why this information should have been disclosed,
like in every other Presidential candidate in modern history
has done before for the last several decades.
From tax reform to dealing with foreign entities and
individuals, the American people deserve to know exactly
whether their executive stands to personally benefit or be
unduly influenced. The personal business endeavors of the
leader of the free world should be held to very high standards
indeed.
Dr. Thorndike, you previously mentioned that you would like
to see the release of tax returns codified. Are you worried
that this tradition, because it is just a tradition right now,
is being eroded?
Mr. THORNDIKE. I am concerned that it may, in fact, be
completely broken. And I think that we can't count on
traditions.
Again, if we believe that this sort of transparency is
important, and I do, then we can't really depend on a tradition
to get the job done. And, I mean, just as an example of that,
let's think about the--maybe the most hallowed tradition in
American politics, which was the two-term Presidency which was
revered by everyone until it wasn't. And when Franklin
Roosevelt broke that tradition, Congress responded by actually
making it a law--or the Nation responded by making it a part of
the Constitution.
I think if things are important enough, and I believe that
transparency is one of those things, we should, in fact,
require them legally, rather than just hectoring people to try
to get them to do what we want them to do.
Ms. SANCHEZ. I happen to agree.
And, Mr. Thorndike, if Presidential hopefuls' tax returns
are released, they are redacted so that sensitive information
like Social Security numbers and other important information is
not released to the public. Is that correct?
Mr. THORNDIKE. Yes. Social Security numbers have been
blacked out for a long time. They were not originally. I think
this was before the era of rampant identity theft. But they
have been now, and they are routinely. I mean, Presidents have
been blacking them out for 40 years.
Ms. SANCHEZ. Thank you.
Professor Yin, you just heard Mr. Kies' testimony. Do you
have any comments with respect to his testimony?
Mr. YIN. Yes, I do. I think a few words of history would
help to clarify the misunderstanding that Mr. Kies seems to
have on this point.
In 1924, when Congress began thinking about the law that is
before us today, Secretary Mellon vigorously objected and was
concerned specifically about the potential disclosure of the
tax return information to the public. And he urged over on the
Senate side in a Senate hearing two changes. One is, he said,
any committee that receives the information must do it in
closed session. And, second, if any of the information goes to
the full House or full Senate, it also must be done out of
public eye with nothing included in the Congressional Record.
Congress in 1924 agreed with the first step, which is why,
if you were to seek information today, you would need to do it
in closed session. But it specifically rejected the second
step. And the reason was that it was inconsistent with the
congressional goal in 1924, which was, as a coequal branch of
government, it wanted to give itself the exact same rights as
the President. The President at the time had the ability to
obtain and disclose anybody's tax returns.
Fast-forward to 50 years later, the same issue arose in
1976. And what Congress did is they took away the ability of
nontax committees to make disclosures, but they did not take
away the tax committee right.
If I could add one final point, which is that some of you
may be wondering, well, why does the statute, as Mr. Kies
suggests, the statute only says you may ``submit'' and not make
a public disclosure? And although I don't find anything
specific in the historical record on that point, I think there
is a very easy explanation. And it goes to the fact that in the
mid 1920s, party affiliation was not nearly as important as it
is today. There were a lot of progressive Republicans who
tended to vote with Democrats on issues like this one, issues
of disclosure, investigations, and so forth.
Meanwhile, Congress was controlled by the old guard
Republicans. The leaders of Congress did not want a single
committee to make the determination of whether something is
disclosed to the public or not, because they didn't know what
the specific makeup of that committee might be. It might have a
number of progressive Republicans on it who would vote in favor
of disclosure. They wanted the full House or the full Senate to
make that determination, and that is why they developed this
procedure where all the Committee can do is to submit----
Chairman LEWIS. Thank you, Professor.
Mr. YIN [continuing]. To the House and Senate.
Ms. SANCHEZ. Thank you. I am sorry. My time is expired.
But, Mr. Chairman, I would ask unanimous consent to submit
a letter from the former acting director of the Office of
Government Ethics, Don Fox, in support of Title X of H.R. 1.
Chairman LEWIS. Without objection. Thank you very much.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Ms. SANCHEZ. Thank you, Mr. Chairman.
Chairman LEWIS. The chair now recognizes for 5 minutes Mr.
LaHood.
Mr. LAHOOD. Thank you, Mr. Chairman, I want to thank the
witnesses for your testimony here today.
In a prior career, I was honored to serve as a Federal
prosecutor and a State prosecutor. I appeared before many grand
juries. Section 6103 under the statute allows the Federal grand
jury to subpoena tax records.
I guess as I look at this issue, obviously, it is not a
surprise to anybody, we have an ongoing independent counsel
investigation, a grand jury that has been impaneled for over 18
months. Out of that grand jury investigation have been a number
of indictments related to tax fraud.
Clearly under this grand jury, the independent counsel, as
with others over the last 40 years, there is the broad
authority to go after tax records, look at criminal violations,
and look at civil violations. I have no doubt that is ongoing
today.
I guess as I look at this, I am a little perplexed and
confused on why we would give the authority or why we would
have the chairman of the Ways and Means Committee ask the
Department of Treasury for the President's tax records.
As I look at the last 40 years of the independent counsel
investigation statute, I have been trying to figure out whether
there has been another example of this. I have not seen any so
that causes me some real concern.
I guess, Professor Yin, you are the historian. Can you
provide the Committee with an example of where the chairman of
the Ways and Means Committee has asked the executive branch for
their taxes when there is an ongoing Department of Justice
independent counsel investigation?
Mr. YIN. Congressman LaHood, I can't think of an example
off the top of my head, but I think it is important to
understand----
Mr. LAHOOD. Thank you. Reclaiming my time.
Would it surprise you to learn that one does not exist?
Mr. YIN. Well, again, I can't think of one off the top of
my head. The authority itself has been rarely invoked, so----
Mr. LAHOOD. Thank you.
Mr. YIN [continuing]. It is clearly just a handful of
situations.
Mr. LAHOOD. Thank you.
Dr. Thorndike, can you provide the Committee with an
example of where the chairman of the Ways and Means Committee
has asked for the President's tax records when there is an
ongoing independent counsel Department of Justice
investigation?
Mr. THORNDIKE. No.
Mr. LAHOOD. Do you have any evidence to support that that
has been done in the past?
Mr. THORNDIKE. I am not aware of anyone having requested
the President's tax returns in the past.
Mr. LAHOOD. While there is an ongoing independent counsel
investigation?
Mr. THORNDIKE. Yeah, I mean--I mean, I--but has there ever
been any--have they ever requested one?
Mr. LAHOOD. Again, would it surprise you to learn that that
in fact has not happened?
Mr. THORNDIKE. No.
Mr. LAHOOD. Okay. Mr. Rosenthal, same question to you. Can
you provide the Committee with an example of when that has
occurred?
Mr. ROSENTHAL. I am unaware of a historical record on this
point.
Mr. LAHOOD. Thank you.
Mr. Bookbinder.
Mr. BOOKBINDER. I guess I would say that I believe the
Presidents have voluntarily disclosed their tax returns while
under independent counsel investigation. So I am not sure the
issue would have come up.
Mr. LAHOOD. So let me ask you on that point, Whitewater was
an independent council investigation, correct? During that
time, do you know if the Ways and Means chairman asked for the
President's tax records?
Mr. BOOKBINDER. I don't know, but I believe the President
voluntarily disclosed them.
Mr. LAHOOD. So President Clinton voluntarily disclosed
them. Is that your testimony today?
Mr. BOOKBINDER. You know, I would really defer to the
historians, but my sense is that for 40 years, Presidents
routinely have voluntarily disclosed tax records.
Mr. LAHOOD. Would you be surprised to learn that the
chairman of the Ways and Means Committee has never asked for
that with an ongoing independent counsel investigation?
Mr. BOOKBINDER. I don't have any reason to think
differently than the historians on this panel.
Mr. LAHOOD. Well, thank you for that.
I guess going back to my original thoughts on this, as I
look at it, we have had approximately 30 independent
investigations by DOJ. The broad authority that they have, like
this independent counsel has, is real. So to think that this
Committee would want to be engaged in asking the Department of
Treasury for the President's tax records again is confusing to
me. It has never been done. And as I look at what this
Committee should be based on, this seems to me like a waste of
time of resources and energy here.
As we talked, Professor Yin, you did a great job talking
about the legitimate purpose for why this should be used. I
look at the legitimate purpose and the legal purpose on this
and I do not see it. I go back to what a number of my
colleagues said on weaponizing the Tax Code and setting a
precedent that has never been done. We should all be concerned
about that.
Thank you. I yield back.
Chairman. LEWIS. The chair now recognizes for 5 minutes Mr.
Suozzi.
Mr. SUOZZI. Thank you, Mr. Chairman. Thank you so much for
conducting this hearing. And thank you to the witnesses for
your time and for your expert opinions.
Dr. Thorndike, I was going to ask this question, but just
in response to my friend Mr. LaHood's questions, did President
Clinton voluntarily disclose his tax returns?
Mr. THORNDIKE. Yes, every year that he was in office and
while running.
Mr. SUOZZI. So there would be no need for the chairman of
Ways and Means to ask for his tax returns despite the fact
there was an investigation going on because they were disclosed
publicly?
Mr. THORNDIKE. Yeah. I mean, more generally, there would
have been no need to request any President's tax returns in the
last 40 years because they have all been a matter of public
record.
Mr. SUOZZI. Okay. I really want to focus on H.R. 1 and the
conflict of interest questions. That is the thing that I am
most concerned about. We have a duty here to try and protect
the American people and to make sure that we are doing our
jobs. This can't be a partisan thing; it has got to be
something we are doing to follow our duties under the
Constitution to make sure that the public has the information
that they need.
Mr. Thorndike, you told me earlier that your doctorate is
in history of 20th century politics in America. So what would
be examples of conflicts of interest that someone might have
had throughout history or maybe something that was uncovered in
some of these disclosures that have taken place? Or if you
can't think of a specific instance of something that has been
discovered, what would you speculate could be a potential type
of conflict? Give us, like, real type of examples.
Mr. THORNDIKE. Well, I mean, I am not aware of there ever
being any discovery of financial conflicts of interest
involving an American President. They may have been there and
not revealed. Most Presidents have put their assets in blind
trusts, so it is not clear whether or not the President would
even be aware of what those conflicts might be.
I mean, you know, one could imagine that any piece of
legislation, if it is going to change the Tax Code in a way
that benefits the President, might be of relevance to the
President. Is that a conflict of interest? I mean, that is hard
to know.
Mr. SUOZZI. Well, it is really the appearance of a conflict
of interest is what we are most concerned about, isn't it?
Mr. THORNDIKE. Yes.
Mr. SUOZZI. For example, President Johnson had a lot of
business interest, for example. Would there be potential
conflicts of interest based upon your knowledge of his history?
Mr. THORNDIKE. I would imagine so. I mean, this was before
Presidents with releasing their tax returns, so we wouldn't
know exactly what they are.
Mr. SUOZZI. So, Mr. Bookbinder, you talked about different
types of conflict of interest that could potentially exist.
What are the ones that you are concerned about most?
Mr. BOOKBINDER. Well, I would just first of all say that a
part of the reason why it is hard to find a historical example
is because no President has retained massive global business
interests the way that President Trump has previously. So we
are really in unchartered territory here. But I would be very
interested in the most basic conflicts kinds of questions in
terms of how would the President's own tax interests be
affected by the changes to the tax law he has made.
And then we have also seen that this President has had
extensive business dealings with foreign interests. That is
something we could learn more about from--potentially from tax
returns. That could be incredibly----
Mr. SUOZZI. How would we find them in a tax return, you
know, if it is his individual tax returns? Would the individual
tax returns be sufficient or would you need to see his business
tax returns as well?
Mr. BOOKBINDER. I mean, of course it is hard to know
exactly what would be in his tax returns. It may well be that
if he is receiving foreign income, that he would be disclosing
that. But certainly with the kinds of very complex business
interests with literally over 500 different interrelated
companies that this President has, it points out the importance
of getting those business tax returns, which are going to give
a lot more--potentially a lot more information about where the
money is coming from and what----
Mr. SUOZZI. So it doesn't have to be specific to President
Trump, but could you give an example of a foreign interest in a
business that would be a conflict for a chief executive?
Mr. BOOKBINDER. I mean, certainly--really almost--for
instance, if there were--if a President had an LLC or some
other kind of company which had a foreign--which had a partner
that was a foreign company, potentially----
Mr. SUOZZI. So an investor could be someone from a foreign
country that you could have undue influence?
Mr. BOOKBINDER. Exactly.
Mr. SUOZZI. What would be a type of businesses that a
President could have an interest in that, if money was brought
in through that business, would potentially impact the
President's decision or vice president?
Mr. BOOKBINDER. Well, for instance, a lot of foreign
governments have very extensive funds that invest in
businesses. And so if there was a sovereign fund that was
putting money into, say, a construction project, if there was a
Saudi fund or a UAE fund, that could affect the way the
President looks at any decision that involves that country,
conceivably.
Mr. SUOZZI. Okay. My time is about to expire.
I yield back, Mr. Chairman. Thank you.
Chairman. LEWIS. Thank you very much.
Now that you are recognized for 5 minutes, Ms. Chu.
Ms. CHU. Mr. Yin, I understand that the chair of Ways and
Means has the authority to ask for the President's tax returns.
Then Ways and Means can vote to submit it to the House, and
then the House can vote to make the returns public. Mr. Kies
made a startling assertion when he said that if the Committee
votes to release any tax return information to the full House,
it would risk a criminal violation. In fact, he talked about a
felony that would be worth 5 years in prison. Based on your
expertise, do you agree with his interpretation?
And I would like to also ask, do we indeed have the legal
authority to obtain these tax returns and to submit it to the
House to make it public? And why is it that we have had this
authority for 100 years?
Mr. YIN. Thank you, Congresswoman Chu. I don't agree with
his view. I think that the historical record is very clear as
to what the intention of Congress was in creating this
authority for the tax committees, and it was to allow the
potential of a public disclosure. I think that to think
otherwise right now would require us to believe that Congress
forfeited its ability to exercise its informing function with
respect to tax return information. That is, nobody could ever
inform the public about any matter of importance to the
government if it involved the disclosure of tax return
information without suffering a criminal penalty. I don't
believe that is the case. That would be an inconceivable
outcome, in my view.
And I would further add that in the few instances where
this authority has been used, in every single instance, there
has been a public disclosure at the end of that exercise of the
authority. And I just commend to you the floor statement of
former Ways and Means chairman, Wilbur Mills, in 1974 when he
submitted the Nixon report to the House and he explained in
just a few paragraphs exactly his understanding of what he was
doing and why he was doing it. And it is exactly consistent
with the idea that he was doing it so that the report could
become public.
Ms. CHU. Mr. Bookbinder, some opponents of requiring the
disclosure of Presidential tax returns as written in H.R. 1
argue that candidates are already required to file a financial
disclosure form or OGE Form 287e. Can you explain the primary
differences between the information found on the disclosure
form and the information found on a tax return and why it would
be critical, in fact, to have a tax return involve a financial
disclosure?
Mr. BOOKBINDER. Sure. There are a number of differences.
One of the most stark ones is that, for instance, for income on
a financial disclosure, any income over $5 million is simply a
box that says over $5 million. So somebody could be making $6
million or $600 million and we wouldn't know the difference
looking at their financial disclosure form. Obviously, a tax
return is going to be much more precise. There are a lot of
areas from loans to investment partners where we are likely to
get very different information from the tax returns than we get
from the personal financial disclosure form.
Ms. CHU. How about the issue of whether the candidate has
paid taxes or has avoided taxes?
Mr. BOOKBINDER. Absolutely. And the personal financial
disclosures are not going to provide any information about what
taxes somebody paid, they are not going to give any information
about charitable giving. And those are things that are
potentially very important for the American public in
evaluating a candidate and evaluating a President.
Ms. CHU. And, Mr. Rosenthal, you said--you discussed when
it would be appropriate to submit a request under Section 6103,
for instance, when there has been a refusal by the office
holder to divest financial interests in a large empire or a
refusal to transfer their interests in a blind trust. Why is it
important for Congress to obtain the office holder's tax
returns and other tax information?
Mr. ROSENTHAL. Well, in my written testimony, I described
the unusual circumstances in which the Committee might seek
information from tax returns, one of which being if the
President has not divested his financial interests in a
sprawling business or transferred to a blind trust. In that
circumstance, the possibility of the President having income
from many different sources is pretty likely. And so to see
those partnership returns and the business returns could be
pretty important. I would point out, as Congressman Suozzi was
asking the other witness here about partnership returns, I
could tell you line 16 of the partnership return asks: ``does
the partnership have any foreign partners.'' Line 20 of the
partnership return asks: ``enter number of partners that are
foreign governments.''
And so when there is a sprawling global economic empire
that is comprised of LLCs and partnerships around the world,
there are just a lot of questions to be asked. The 1040 is
merely the collector of composite information without
disclosing the kinds of detail you might like to have.
Mr. SUOZZI. Mr. Chairman, let the record reflect that my
name is Suozzi, not Suozzi.
Mr. ROSENTHAL. I apologize.
Ms. CHU. I yield back.
Chairman. LEWIS. Thank you.
The chair now recognizes for 5 minutes Dr. Wenstrup.
Mr. WENSTRUP. Thank you, Mr. Chairman. I appreciate that.
Let me start with you, Mr. Kies. What is the purpose of the
IRS?
Mr. KIES. To collect the revenue to fund the Federal
Government.
Mr. WENSTRUP. What is the purpose of an audit conducted by
the IRS?
Mr. KIES. To hopefully make sure that people, when they are
voluntarily complying, are actually--are complying with the
statues of which are, in some cases, quite complex, but that is
the purpose of audits.
Mr. WENSTRUP. And the President and vice president get
audited every year?
Mr. KIES. Correct, according to law now.
Mr. WENSTRUP. Okay. So, Mr. Pascrell, you said something
before that really hit home. You said no one is above the law,
and I agree with you 100 percent.
Is it the law that the President or vice president bring
forward their tax returns to the American people?
Mr. KIES. Is it the law that what?
Mr. WENSTRUP. Is it a law that the President or vice
president bring their tax returns forward to the American
people?
Mr. KIES. As I think we have confirmed----
Mr. WENSTRUP. We have seen testimony on that. That is not
the law.
Mr. KIES. That is correct.
Mr. WENSTRUP. And no one is above the law. But at the same
time, no one should be forced to violate a law that maintains
their privacy. You know, as a doctor, I think about what we go
through to make sure we understand HIPAA and the privacy of our
patients and how important that is. And is there for a reason.
That privacy is there for a reason for patients to be protected
from disclosure their private information and especially about
their healthcare or other personal information. Why is that? In
part, because people can take something from their health
record and possibly use it for nefarious means or for political
purposes, if they so choose. That is the purpose of that,
whether it is an innocent part of your healthcare record or
not.
So I kind of look at this the same way. I also want to
bring up, maybe any of you can tell me, and I know in the past,
some Presidents have put forth their health record, and given
the results of their entire physical. Is that true? Can anyone
attest to that? I know you are mostly tax experts, but is that
true?
Mr. KIES. And some have not.
Mr. WENSTRUP. And that should be their choice. That should
be their privacy. We have the checks and balances in place. We
have the audits in place. But people, every American, deserves
their privacy. I compare the two. Let's take an example. And I
was not around to necessarily know, but America did not know
that President Roosevelt could not stand. My guess is maybe he
wanted to keep that private so it wasn't used against him for
nefarious purposes.
I think of the privacy of American citizens at every level,
whether it is their healthcare or their tax returns. There are
other checks and balances in place for the President and vice
president, and they have their rights, just like each and every
one of us.
With that, I would like to yield the balance of my time to
Mr. Kelly.
Mr. KELLY. Thank you, Doctor.
Just while you are all there, I am trying to understand
this, is there anybody that doubts that the President or the
vice president's tax returns are not being audited by the IRS?
Mr. PASCRELL. Right here.
Mr. KELLY. Doctor. Dr. Thorndike.
Mr. THORNDIKE. I don't doubt that they are being audited.
Mr. KELLY. Professor Yin.
Mr. YIN. I really don't have any knowledge on that.
Mr. KELLY. Oh, yes, but you do. You are the historian. Are
you are telling me that you don't know that the President and
the vice president's taxes are being audited?
Mr. YIN. I know what is in the IRM, but I don't know
whether in fact that is being carried out. I have no knowledge
of that.
Mr. KELLY. Okay.
Mr. Rosenthal.
Mr. ROSENTHAL. Like Professor Yin, I have read the Internal
Revenue Manual which calls for----
Mr. KELLY. So the fact that we all know that they get
audited to the fact that you weren't there to see the audit,
makes you wonder if it actually is being done?
Mr. ROSENTHAL. Whether the President is being audited or
not is tax return information and cannot be disclosed, and so
to ask----
Mr. KELLY. Not until we had this meeting tonight.
Mr. ROSENTHAL. Not until a law were passed.
Mr. KELLY. Okay. I get it. I get it.
Mr. Bookbinder.
Mr. BOOKBINDER. No, the same. We certainly don't know what
manner of audit was done, assuming it was done.
Mr. KELLY. Okay.
Mr. Kies.
Mr. KIES. I think it is highly unlikely that the IRS is not
auditing the President and vice president, given what their own
Internal Revenue Manual says. I find that inconceivable.
Mr. KELLY. I think we all know that, especially if I was a
historian that studied this, I would have pretty good idea of
what is taking place.
So the only difference tonight is we are talking about the
ability to make this President, this duly-elected President's
tax returns public.
Thank you. I yield back.
Chairman. LEWIS. The chair now is pleased to recognize for
5 minutes Ms. Moore.
Ms. MOORE. Thank you so much, Mr. Chairman. And I am,
again, so pleased to be a Member of this Subcommittee and
appreciate the witnesses for their patience today.
I just came off of the Financial Services Committee to--on
this body, and one of the things that we were looking at was
the unusual lending pattern of Deutsche Bank to the President
of the United States. Deutsche Bank had a subsidiary called
VTB--I can't say the Russian name, so VTB. And at some point--I
am just giving you background for my question--Donald Trump had
borrowed $600 million and owed another $300 million, and they
had called for a $40 million payment and he said, as a result
of an act of God, the financial meltdown in 2007, 2008, that he
shouldn't have to pay it back. He was in court in New York.
Didn't want to pay Deutsche Bank back. Suddenly, he left the
commercial real estate division of Deutsche Bank and went to
the private wealth fund, VTB Bank, a bank that certainly had
many Russian oligarchs who invested in that. Suddenly, his debt
was paid off and they offered him an additional $25 million.
VTB Bank also is associated with this spy that was just--
the sanctions removed and so on and so forth. So other banks
couldn't believe it, they said are you F'ing, kidding when
Donald Trump was given this loan by Deutsche Bank.
So we have a letter here from our distinguished Ranking
Member saying if there are valid concerns with financial
disclosures, then let's come together to legislate a thoughtful
solution to require additional disclosures. And this has been
quoted a lot by Members here. And so I am wondering, will--he
goes on to say that we ought to improve our ethics laws. Are
there any ethics laws or any audits that will help us get to
this unusual lending activity under Deutsche Bank that any of
you on the panel can think of? Dr. Thorndike, Dr. Yin, Mr.
Bookbinder.
If we want to look at the business transactions, the line,
line--did you say line 40 on the 1040, that is going to give us
the information that we need regarding these business
partnerships, relationships, and loans.
Yes, sir.
Mr. YIN. Just a quick comment. I think that tax return
information may provide useful leads for additional inquiries
along the lines that you are describing. I am not suggesting
that the tax return information in and of itself would find
some smoking gun that would satisfy your inquiry. But there may
well be useful leads that you could pick up from the tax return
information that, with additional inquiries----
Ms. MOORE. Do you think IRS audits would give us that lead,
or voluntary disclosures of just the front page of the 1040
versus the attachments?
Mr. YIN. No. I am sorry, Congresswoman Moore. I am talking
about if the Committee were to seek information, they would
then have whatever return information that they sought. And
from that information, that there may well be helpful leads
along the lines of your inquiry.
Ms. MOORE. Do any of you--Mr. Bookbinder, the distinguished
Ranking Member said that we ought to strengthen our ethic laws.
What ethic laws is he referring to that we could strengthen in
order to clear up this mystery about Deutsche Bank's
relationship with Trump and the Trump organizations? By the
way, Trump Tower was supposed to be built by VTB, the
subsidiary of Deutsche Bank. Can you just tell us what ethic
laws we could strengthen that would give us this information
versus these tax returns?
Mr. BOOKBINDER. Well, I do certainly think there is room to
make the financial disclosure forms more rigorous than they
currently are. I also think, especially with a President and a
vice president where conflicts of interest are so important,
you really need all the information you can get. And tax
returns are going to provide more information on this kind of
question than probably you would ever be able to get in a
financial disclosure form that all government--all senior
government officials have to fill out.
Ms. MOORE. And just reclaiming my last 10 seconds. You
know, I just would appeal to my colleagues to not accuse us of
lazy legislating to ask for these tax returns when we have such
a conflicted President.
And with that, I yield back.
Chairman. LEWIS. The chair now recognizes for 5 minutes Mr.
Boyle.
Mr. BOYLE. Thank you, Mr. Chairman and Mr. Ranking Member,
and I thank the witnesses.
Under the Constitution and our system of checks and
balances, Congress has not just the right, but the
responsibility to oversee whether our laws are faithfully
executed by the executive branch. In accordance with this duty,
almost a century ago, Congress explicitly enumerated this
Committee's right to review any return or return information in
the aftermath of two crises of public trust; two scandals,
incidentally, which have remarkable parallels to the present
day and this President.
One was the Teapot Dome scandal where senior officials in
the Harding Administration granted public oil field leases in
exchange for bribes. And the other involved, as was previously
referenced, Treasury Secretary Andrew Mellon, who continued to
own many business interests while serving in government. Sounds
familiar. Some believe the Bureau of Internal Revenue, as it
was then called, gave him and his businesses preferential
treatment.
So, again, the parallels between the scandals of a century
ago that gave birth to this 1924 law and the present day are
really remarkable. For example, President Trump maintains a
sprawling business empire, which he refuses to transfer to a
blind trust. According to multiple published reports, the
President, through his businesses, derives income from foreign
governments and their lobbyists, which also may violate the
Constitution's prohibition against emoluments.
The President reportedly intervened personally to block the
FBI from moving its headquarters, and thus, opening up for
commercial development a site just a few blocks from his
downtown Washington hotel. The President reportedly paid little
or no tax for many years, in part because of aggressive tax
planning and in part, perhaps, tax evasion.
Finally, his foundation and inaugural committee are
currently under criminal investigation.
So I would open it up really to any one of you to comment
on what I have had to say about the historical precedent that
gave birth to this important law and the current facts as we
know them. Professor Yin and then Mr. Rosenthal.
Mr. YIN. I would just say briefly that I completely agree
with your point of the parallels of what happened almost 100
years ago that caused this law to be developed and the current
time. I think the parallels really are very close.
Mr. ROSENTHAL. Congressman, I would just add that the use
of 6103(f) authority is use designed to further a legislative
purpose, the checks and balance of our constitutional system. I
do not believe the use by this Committee to try to reaudit the
President is what this Committee would be pursuing. Of course,
it is your purposes and goals that would need to be achieved.
However, the conflicts that we are discussing, the conflicts
with respect to the execution of the Office of the President,
the conflicts with respect to whether audits are being run
correctly, the conflicts with respect to whether or not the
President is running the country for his benefit or for ours,
those are all conflicts that are within the purview of the
legislative branch to determine with respect to the executive
branch.
Remember, in my view, the legislative branch oversees the
executive branch, not the other way around, and we have one
President who runs it.
Mr. BOYLE. Well, it is not just your view, it is also
explicit in the United States Constitution, so I obviously
agree.
Mr. KIES. Can I----
Mr. BOYLE. One final kind of specific in-the-weeds point on
this. The distinction between personal returns and business
returns. In your view, would also looking at the business
returns be necessary in order to address some of the questions
that we have?
Mr. ROSENTHAL. So, yes. Let me quote the current IRS
commissioner who during the campaign said: To fully understand
the financial status of Trump, one would need to see his
returns from multiple years, the work papers for the individual
returns, and the returns for numerous related entities.
If you look to the President's own lawyers who wrote a
letter describing whether his tax returns reflected Russian
entanglements, they said that, and they looked at the 500,
business entities that were listed on President Trump's
financials and are linked and the income flows through to his
returns, I don't think there is any question, but if you want
answer some of the questions that have been raised at this
hearing, you would have to have business returns.
Mr. BOYLE. Thank you. I am out of time. I yield back.
Chairman. LEWIS. Thank you so much. I thank all of the
Members for your participation.
The chair now recognizes for 5 minutes Mr. Arrington.
Mr. ARRINGTON. Thank you, Mr. Chairman. And Mr. Kies--and
thank you, witnesses.
Mr. Kies, you look like you might want to comment on that
last question and dialogue.
Mr. KIES. Well, the only comment I was going to point out
is that there clearly are ways in which the financial
disclosure rules could be modified to make them much more
useful and much more informative without getting tax returns.
But this issue of whether or not the current statute is a
consequence of what happened back in the 1920s I think is
misguided. It is more a function of what happened in the 1970s.
In fact, when Congress rewrote Section 6103 in 1976, it was
because they were concerned that Richard Nixon and his White
House were handing out tax return information all over the
place. And that is why Congress, this Committee, wrote as tight
a provision as Section 6103 as it exists today.
And contrary to what my friend George Yin suggested as my
misunderstanding, I don't have a misunderstanding of the
statute. I encourage all the Members of the Committee to
actually read the statute. It is unequivocal in terms of what
it says.
Mr. ARRINGTON. Are you trying to tell me that in the 1970s,
there were actually petty, self-serving, politically motivated
people in this line of business?
Mr. KIES. It is hard to believe, but yes. That is correct.
Mr. ARRINGTON. And that is why we tightened up the
restrictions, so that we wouldn't open up people's tax returns
to political abuse of power?
Mr. KIES. The difference between the 1976 rules, which is
basically what we have today, versus pre-1976 was fundamental.
It referred to tax returns prior to 1976 as public property,
public information. The 1976 act, which basically is what we
have today, tightened those rules down immeasurably, and it is
reflected in 6103(a), which is the only provision of Section
6103 that contains a substantive penalty for failure to comply
with it. The rest of 6103 is a bunch of procedural rules.
And with all due respect to my friend George Yin, he is
looking at 1920s legislative history to try and inform us as to
what this provision means today. I strongly encourage every
Member of the Committee to actually read the statute.
Mr. ARRINGTON. Mr. Kies, I am surprised that with a panel
of experts, tax experts, experts on this issue, that when asked
if they believed that the IRS was fulfilling its duty to
execute on mandatory annual audits for the President, that
there was great uncertainty. It seems like we have a very
distrustful panel, but I would give them the opportunity again
if they believe in fact that those mandatory audits are going
on.
But before that, if they are going on--and I am going to
assume that the IRS is doing its job in auditing this
President--would the issues like effective tax rates and
whether the President is paying his taxes or if he is evading
them or sources of income loss and deduction, those things that
Mr. Rosenthal mentioned, would those not be discovered in an
audit? If there were problems with that, would those not be
flags, red flags that would come up in such an audit? Yes or
no.
Mr. KIES. Certainly, all of those things would be
information which the IRS could get. And I guess I would say in
response to the issue of whether or not people believe that the
President and vice president are being adequately audited, I
will say, for me personally, and I would speak for everybody in
this room, I don't think you want to have done to you what
probably is being done in the form of the audits to the
President and vice president. I suspect they are pretty
intense.
Mr. ARRINGTON. So nobody up here is against improving
transparency and identifying information where it would present
a better picture of potential conflict of interest? I think of
financial disclosure forms, ethics forms, there are plenty of
other ways that we can do this without opening up such abuse
that occurred in the 1970s. Abuses which then transpired into
more restrictions to prevent that abuse of power.
Mr. Rosenthal, do you have confidence in the American
people's judgment when it comes to this issue of disclosure of
people's tax returns, the President's in particular?
Mr. ROSENTHAL. Well, I have seen polls----
Mr. ARRINGTON. Do you trust the judgment on this issue?
Mr. ROSENTHAL. I have seen polls that more than 60 percent
of the American public believe the President should, you know,
disclose his tax returns. Those have been almost constant since
the campaign.
Mr. ARRINGTON. Mr. Rosenthal, did you see the election
results? Because this was an issue during the Presidential
election. If I recall, this was an issue in the primary, it was
an issue in the general when candidate Hillary Clinton
disclosed her tax returns. So the American people were well
aware of this. And I have got a whole lot more confidence in
the American people than they have in this body to conduct
themselves in an objective and fair manner when it comes to
these sorts of issues.
I am very concerned with giving this body politic more
power to abuse, not only this President, but potentially the
American people.
Mr. Chairman, I yield back.
Mr. ROSENTHAL. I would just say I don't know what to make
as a matter of policy from the election. The American people
may have expected the legislative branch to continue to oversee
vigorously the executive branch and may have expected further
oversight.
Chairman. LEWIS. Thank you very much.
The chair now recognizes for 5 minutes Mr. Gomez.
Mr. GOMEZ. Mr. Chairman, thank you so much. Thank you for
having this important hearing.
I find it interesting on a couple of things. First, on the
question of is it required by law. It is not required by law
that a Presidential candidate submit their taxes, to reveal
them. But as a matter of custom and practice, that is what has
been done since the early 1970s. And it is oftentimes somebody
who comes along and rips apart that custom that then the body
politics, the legislative branch or the public itself has to
take action to codify that custom and practice. We do that all
the time here in the House where there was unwritten rules, our
custom and practice and then somebody breaks them, and then the
House takes action to codify those. This is just another
example of taking that step, as part of H.R. 1 to take that
step to require all Presidential candidates and vice president
candidates to reveal their tax returns.
You had a good historical point where I was actually
thinking the same thing regarding the two term. A lot of things
over time in our history of government were custom and practice
and somebody came along and broke it, and then we passed a law
to fix it. So on that issue, let's set that one aside.
On the issue of excuses. First, the President when he was a
candidate said his tax returns were under audit, he couldn't
return them. Now, the gentlemen on the other side of the aisle
are saying that it is under investigation by the special
counsel. Sooner or later, I am going to hear that a dog has
eaten his tax returns, and I don't know even if this President
has a dog. So we hear one excuse after excuse. And our
responsibility is to see if there is a reason to go after, a
legitimate reason.
Mr.--just to kind of clarify some of the rule and authority
of this Committee. Mr. Yin, you mentioned--there was a
discussion on post-1976 rule. What facts give you the
understanding that we do have that authority and we continue to
still have that authority today?
Mr. YIN. Thank you, Congressman Gomez. I completely agree
that the 1976 act was designed to strengthen taxpayer privacy.
That was the overriding goal, without any question. But it
should be noted that in 1976, Congress specifically took away
the ability of nontax committees to submit information to the
House or the Senate and to have a public release of it. They
amended the statute to say that any submission could only take
place while the full House and the full Senate are sitting in
closed executive session.
Importantly, even though they obviously had the ability to
put the same condition on the tax committee submission, they
did not. And my reading of that is that Congress wanted to keep
at least one vehicle open to preserve its informing function
relative to tax return information. If it had imposed the same
restriction on the tax committees, then, in effect, Congress
would have said nobody ever has an opportunity to inform the
public if it relates to tax return information. And I find that
result completely inconceivable.
And so I believe that the history of this provision, which
was unchanged in 1976 relating to the tax committees, prevails
in explaining exactly what the authority of the Committee is.
Mr. GOMEZ. And just to reiterate, to really kind of focus
in, why is Congress so committed to retaining that authority?
Mr. YIN. Well, I think Congressman Boyle said it very
correctly, which is that one of the principles, if not the most
important responsibility of Congress, is to make sure that the
laws are being faithfully executed by the agencies and by the
high-ranking officials--that serve the country. And so it is
important then to have the ability to inquire about whether
those laws are being faithfully executed, and to the extent
that Congress were to find that there has been a violation, it
certainly is the congressional responsibility to inform the
public of that. That seems like a very foundational
responsibility of Congress.
Mr. GOMEZ. That is the basis of our government, right?
Checks and balances. And without that ability to do that, then
we don't have a check on the executive branch.
Mr. YIN. Exactly right.
Mr. GOMEZ. I yield back.
Chairman. LEWIS. The chair is pleased to recognize Mr.
Pascrell for 5 minutes. And I apologize for passing you over.
Mr. PASCRELL. No problem, Mr. Chairman.
Mr. Chairman, I want to enter into the record the articles
How a Simple Tax Rule Let Donald Trump Turn $916 Million Loss
Into a Plus; second, Trump Engaged in Suspect Tax Schemes as He
Reaped Riches From His Father; number three, Trump Foundation
Will Dissolve, Accused of ``Shocking Pattern of Illegality.'' I
didn't mention those articles, now I mention those articles.
Put them in the record. My request. Thank you.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. PASCRELL. Mr. Chairman, I can't--I must be--it is going
to take time for my questions. Thank you. About hypocrisy,
hypocrisy. So we want to protect the privacy of the President,
and I would too, but we don't want to follow law. When I said
no one is above the law, I mean, no one is above the tax law.
And in this case, the tax law is 6103. It is the law of the
land. When Democrats and Republicans feasted on scandal and
bribery. That is the law of the land.
So he is not above the President of the United States.
President Trump is not above 6103. And it pertains to everybody
in the executive branch of government, not just the President.
Because Secretary Fall, who was the Secretary of the Interior
at the time, is the one who put this scheme together, and went
after him back in 1923. Okay. That is what happened.
So, Mr. Kies, thank you for joining all these great people
like yourself. I have read your stuff. We don't agree on some
things and we do agree on some things. What do you know about
that?
So, Mr. Kies, do you believe--this is a different part of
the question. Do you believe Committee Republicans violated the
law in 2014 when they released taxpayer information, over 50
taxpayers, and they found nothing? Do you believe they violated
the law?
Mr. KIES. Absolutely.
Mr. PASCRELL. Thank you very much, Mr. Kies. Thank you for
your honesty. That is what I expected.
So let me have a question here for Mr. George Yin,
Professor Yin. Some on this Committee have claimed that
releasing the tax returns of the President under 6103, that
authority to be a political abuse of power. By the way, we sent
numerous letters to Mr. Brady when he was the chairman of the
Committee saying let's do this together so it is not partisan.
Bull to what they are saying today.
Professor Yin, you have written about this Committee's use
of 6103, this Committee, to obtain and release the tax
information of more than 50 taxpayers in 2014. That happened
along partisan lines. Republicans voted to release the
information, Democrats are opposed. Can you explain your
thoughts on the Committee's use of 6103 in 2014?
Mr. YIN. Congressman Pascrell, I would be happy to. In that
instance, the Committee did release the tax return information
of, by my count, 51 separate organizations, with almost half of
them having multiple pieces of tax return information
disclosed. And I looked very closely at that whole situation.
Forty-one of the organizations had absolutely nothing to do
with the specific Committee investigation and allegations
relating to Lois Lerner and the IRS and the purported
discrimination by the agency against right-leaning exempt
organizations. They had absolutely nothing to do with it. And
so the release of those the information for those 41 seemed to
me to be a clear violation.
The other 10 organizations, which were all right-leaning
exempt organizations, the Committee's allegations with respect
to them were that they weren't processed quickly enough. The
allegations did not go to the substance of the actual
applications themselves. And so it seemed to me that if the
Committee wanted to publish a letter indicating the objection
as to how it viewed the IRS and Ms. Lerner's treatment, they
there was absolutely no reason to name the organizations and to
reveal any tax return information. They could have made exactly
the same point as the Treasury Inspector General had made just
a few months earlier in bringing the matter up to the attention
of the Committee by referring to 10 right-leaning exempt
organizations or 10 Tea Party type organizations, or whatever
name would be appropriate, to provide the general sense without
necessarily naming and revealing any tax return information. So
I concluded all 51 disclosures were a violation of the law.
Mr. PASCRELL. Mr. Chairman, thank you for your courtesies
and your indulgence. This is a very critical issue for the
American people who are interested in this subject. We are not
interested in getting someone; we are interested in following
the law. Period. That is it. Give us the chance to do that.
Give us a chance--what am I saying? Give us a chance to follow
the law, and that is what we are doing, and we will not stop.
Thank you.
Chairman. LEWIS. Thank you, Mr. Pascrell.
The chair is now pleased to recognize Mr. Ferguson, 5
minutes.
Mr. FERGUSON. Thank you, Mr. Chairman. And I would like to
yield as much time as he may consume to my colleague, Mr. Rice.
Mr. RICE. Mr. Pascrell said that we need to follow the law,
right? We need to follow the law.
Mr. Thorndike, can you cite any statutory authority as a
law that requires the President to disclose his tax returns?
Mr. KIES. There is no requirement that the President----
Mr. RICE. Mr. Yin.
Mr. YIN. Nothing in the law right now.
Mr. RICE. Okay, thank you.
Mr. Rosenthal.
Mr. ROSENTHAL. None to my knowledge.
Mr. RICE. Mr.--I can't read it. I am sorry.
Mr. BOOKBINDER. Bookbinder.
Mr. RICE [continuing]. Bookbinder.
Mr. BOOKBINDER. No current law, though there is a bill that
you are discussing----
Mr. RICE. Mr. Kies, what is the statutory requirement?
Mr. KIES. There is none.
Mr. RICE. There is none. So we are following the law. And,
you know, why would we want the President to be required to
disclose his tax returns? I mean, it has been real clear from
the testimony of all of the witnesses here that we want to
check for conflicts. I mean, really that is the primary reason,
right? We want to see personal benefit or conflicts. So why
hadn't we thought about that till now? Oh, wait, we have.
Doesn't the President have to make disclosures, Mr.
Thorndike, Dr. Thorndike?
Mr. THORNDIKE. In what sense, disclosures----
Mr. RICE. Doesn't he have to make financial disclosures?
Mr. THORNDIKE. Yes, but that is not--those are not--that is
not necessarily what we are talking about, I don't think.
Mr. RICE. Well, I mean, the Ethics in Government Act of
1978 requires personal financial disclosure forms by the
President and all Members of Congress as well, right?
Mr. THORNDIKE. It is true, but if the President----
Mr. RICE. And it is very detailed about what we have to
disclose. I mean, we have to disclose--I am a CPA, I am a tax
lawyer.
Mr. THORNDIKE. It is true----
Mr. RICE. We have to disclose a lot more information than
you have to disclose on a tax return about ownership, about
percentages, about--you know, in fact, Ms. Moore was asking,
she would like to know more about the President's loans at
Deutsche Bank. I just pulled up the President's forms, it is
108 pages long. The loan to Deutsche Bank is listed right
there, the rate, when the loan matures, the amount of the loan.
Could you look at the President's tax return, Mr. Kies, and
determine what the rate was on his Deutsche Bank loan?
Mr. KIES. I think it is probably unlikely.
Mr. RICE. Yeah. And would you even know he borrowed the
money from Deutsche Bank if you were looking at his tax return?
Mr. KIES. It is unlikely. Probably the only way you would
know these things is by, and as has been pointed out by some of
the other witnesses----
Mr. RICE. Now, if Congress thought, you know, if the
government thought that disclosing tax returns should be
required, Mr. Rosenthal, could we not have required that in the
ethics acts of 1976?
Mr. ROSENTHAL. At the time, there were voluntary
disclosures going on, it may not have been viewed as necessary.
Mr. RICE. Could we have required that, Mr. Bookbinder? Yes
or no.
Mr. BOOKBINDER. Yes.
Mr. RICE. Yeah, of course we could--but we didn't think it
was sufficiently important to require it. We don't think it is
sufficiently important unless it is our political enemy.
Mr. Pascrell was talking about hypocrisy. I will tell you,
the Democrats are about anything hypocritical. They love to
weaponize the IRS, a/k/a Lois Lerner and now going after the
President's tax returns.
I think in the STOCK Act, we recently reviewed this ethics
disclosure, and we tightened it up, what, 2 or 3 years ago. So
this is something that is not new. This is something that has
been considered over and over again. It has been tightened more
and more. And, you know, in our zeal, in the zeal of my friends
across the aisle to attack this President, to weaponize
agencies of the Federal Government, including the FBI and the
DOJ and now the IRS, to pursue him with any means possible, now
they want to go after his tax returns when it is not required,
it has never been required. We could have required it any time
we thought it was appropriate. We could have passed the law.
There is a prospective bill put out there now that may be
considered at some point and, hell, maybe it will pass, but
there is nothing that requires the President to disclose his
tax returns. To say that the President is not complying with
the law is an abject falsehood. It is an abject falsehood.
One more time. Mr. Kies, is the President required to
disclose his tax returns?
Mr. KIES. No.
Mr. RICE. Thank you, Mr. Chairman. I yield back.
Chairman. LEWIS. The chair is pleased now to recognize the
gentleman from Texas, Mr. Doggett.
Mr. DOGGETT. Thank you very much Mr. Chairman.
We, today, pursue two issues. One is how to address with
new legislation a situation where a future President might
decide to reverse himself or herself the way President Trump
did and not make available tax returns as all recent candidates
for President have done. And the second is to look at the basis
and the process under a law that is almost a century old that
gives the chairman of this Committee the authority to review
tax returns, and if this Committee so decides, that it is in
the public interest for this Committee to vote to send that
information to the House where it can eventually be made a
matter of public interest.
I, seeing the President's reversal, his entanglement with
interest abroad and at home, seeing reports that he and his
family may have benefited in excess of $1 billion from the tax
bill that he forced through here without a single person from
his Administration coming to testify in favor of it or explain
it, seeing all that, I moved on six different occasions in this
Committee over the last 2 years to use 6103 to obtain the
President's tax returns. And each time, there were excuses and
coverup from our Republican colleagues as they obstructed and
protected the President.
Now, the President apparently had enough concern about this
that he did have a review made of his tax returns. The review
was made by the President's own lawyers; in fact, from a firm
that proudly declares that it was the Russia law firm of the
year that made the review of his returns, noting not only that
he had personal returns, but more than 500 separate entities,
entities that stretch from Azerbaijan to Panama. And they gave
him an all clear, this personal law firm, of that. And I
suppose that is a kind of review, but it is not one that
inspires public confidence.
The Commissioner of the Internal Revenue Service, Charles
Rettig, before he was appointed, said that, quote: For wealthy
individuals, individual tax returns sometimes only provide a
brief financial overview linked to numerous other conclusions
and entities. To fully understand the financial status of
Trump, one would likely need to see returns from multiple
years, the work papers for the individual returns, and the
returns for numerous related entities.
Mr. Rosenthal, do you agree with that statement?
Mr. ROSENTHAL. Yes, I do.
Mr. DOGGETT. And while having a President with such a
sprawling business empire may be unprecedented, we know there
are others. Some have already announced as possibilities as
independents or Democrats for the 2020 election. Every
President, vice president, and candidate for the future, I
think, should be held to the same standard that we would apply
to President Trump.
Mr. Bookbinder, do you believe that H.R. 1 should be
strengthened to include a requirement that all candidates
disclose their business entities?
Mr. BOOKBINDER. Yes. I think recent events make clear that
that is really important.
Mr. DOGGETT. And, Mr. Rosenthal, might such information
inform how much weight is given to a given policy of the
President of the United States?
Mr. ROSENTHAL. Yes. Those type of disclosures would inform
Congress' weight and deference to executive action.
Mr. DOGGETT. We know that the President plays a central
role in tax policy, that his Office of Management and Budget
offers a review of tax regulations that he lobbies for and
influences and signs legislation, that the Treasury Department
that he appoints plays a big role.
With these multiple roles that the President plays on tax
policy, is it essential, Mr. Rosenthal, that we have his
returns to review the impact on those policies?
Mr. ROSENTHAL. Yes. I believe the regulatory process and
the discretion the President has with that process, warrant the
Congress and this Committee understanding what financial
interests he might yet have.
Mr. DOGGETT. Thank you.
And, Professor Yin, an important point, while our focus in
this Committee is the tax system and the public confidence in
that system and whether this President is using his office for
personal gain, the responsibilities when you talk about the
legitimate purpose for using 6103, doesn't that extend to many
other issues, such as his possible violation of the emoluments
clause, his entanglement with Russians and Saudis and others
who he may be doing business with or for? Because this
Committee has a responsibility broader than just its own
jurisdiction over the tax cut.
Mr. YIN. Congressman Doggett, I believe you are right, and
that is simply because Congress right now has delegated,
exclusively to the tax committees this ability to inform the
public about tax return information. So I believe that the
legitimate purpose for the Ways and Means Committee would
extend to a constitutional responsibility of Congress and not
be limited to the legislative jurisdiction of the Committee.
Mr. DOGGETT. And just one final one, Mr. Chairman.
And, Professor Yin, is it also not true that this
Committee, should it decide to make these records public, has
powers that even the special counsel, Mr. Mueller, does not
have?
Mr. YIN. Yes. That is a very valid point. And that is,
again, another issue down the road, which is that the special
counsel can disclose tax return information only in limited
circumstances, such as a judicial or administrative proceeding.
If he were to issue a report, it is not clear whether tax
return information that might be critical to his conclusion in
the report could, in fact, be revealed to the public, even
assuming the Attorney General were to allow the report to be
revealed at all. So that is another issue.
Mr. DOGGETT. Thank you, Mr. Chairman. And I just would ask
unanimous consent to include in the record a--the testimony of
Public Citizen concerning its support for the disclosure of
Presidential and vice presidential tax returns, and the
important report of Americans for Tax Fairness, The Case for
Congress Obtaining Trump's Tax Returns.
Chairman. LEWIS. So ordered.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. DOGGETT. Thank you for your tolerance.
Chairman LEWIS. Now it is my pleasure to recognize the
gentleman from California, Mr. Panetta.
Mr. PANETTA. Thank you, Mr. Chairman. I appreciate this
opportunity, and thank you for letting me sit in on this
hearing. I appreciate that.
Gentlemen, thank you very much for being here today as well
as your preparation for your testimony today too.
As you heard from one of my colleagues, and as you know
well, there is no law requiring a taxpayer to turn over the tax
returns to this Committee, correct, Mr. Yin?
Mr. YIN. You are referring to the President?
Mr. PANETTA. Yes.
Mr. YIN. There is no law that requires that, that is
correct.
Mr. PANETTA. But there is a law saying that this Committee
can obtain those tax returns, correct?
Mr. YIN. That is correct.
Mr. PANETTA. Okay. And that is 6103, subdivision F,
subdivision 1, correct?
Mr. YIN. That is correct.
Mr. PANETTA. And it actually says that any taxpayer shall
furnish the tax returns to the Committee, correct?
Mr. YIN. It says the Treasury Secretary shall furnish the
requested information to the Committee.
Mr. PANETTA. Exactly. So that is not a should or a could
have or a would have. It is a shall. It must if we ask for
that, correct?
Mr. YIN. That is correct.
Mr. PANETTA. Okay. Great.
And, Mr. Yin, I am going to focus on you. Gentlemen, please
excuse me, but I am going to focus on Mr. Yin, if that is okay.
In your testimony, Mr. Yin, you basically talk about--on
page 2, you talk about--this is your formal written testimony--
you talk about the situation where there would be a refusal to
turn over these tax returns in this situation that we have been
talking about and that most likely you say that it would lead
to the courts. It would be a potential judicial resolution, as
you say, correct?
Mr. YIN. It might. It depends on how the Congress reacts to
that refusal. Obviously, Congress could simply say, well, okay,
that is too bad. Or Congress could try to enforce its request,
and that might end up in court.
Mr. PANETTA. Understood. And if it went to a court, what is
your--how do you think these courts would look at that
situation? What would they use?
Mr. YIN. Well, again, as I indicated in the testimony, I
think we are in unchartered territory, because I don't think
the specific issue has ever arisen before, at least I am not
familiar with it. But there is a little bit of law about
enforcing congressional subpoenas, and this would be somewhat
analogous to that. And the law generally says that Congress
must act with a legitimate legislative purpose.
Mr. PANETTA. And in regards to the case law that talks
about a legitimate purpose, can you go into a little bit more
detail behind those words?
Mr. YIN. Yes, I would be happy to. So the foundational case
was an 1880 case, the Kilbourn v. Thompson case. And that
involved a situation where Congress was making an investigation
relating to a bankruptcy. And there was a settlement, and there
was a particular company that was affected by it. And the
congressional inquiry essentially went to the nature of that.
The party that was being subpoenaed refused, and so this
eventually went to the Supreme Court. And the court found that
it could not find any legislative purpose for this inquiry. The
court said there is no legislation envisioned in this conflict
that has arisen. And, in fact, the court said, we can't even
imagine how there would be any legislation relating to it. It
said, essentially, if this is a conflict, it is a conflict for
the courts. It is a conflict for the judicial branch to
resolve, not the legislative branch to resolve. And in that
instance, the court concluded that the legislative inquiry was
not going to be enforced.
Mr. PANETTA. Okay.
Mr. YIN. There are other examples, obviously, I can give
you.
Mr. PANETTA. Please, in regards to any that have been
enforced.
Mr. YIN. Yes. Certainly. Well, so in 1927, there was
another Supreme Court court case, the McGrain v. Daugherty
case. Daugherty, in this particular case, was the brother of
the former attorney general, Harry Daugherty. Harry Daugherty
had been one of the principals allegedly involved in some of
the Teapot Dome matters.
And in this instance, Congress was seeking testimony and
documents from the brother of Harry Daugherty to, again,
complete the investigation of this. And the brother refused. So
this also went to the Supreme Court. And in that case, the
court made it very clear that there was an appropriate
legislative purpose to investigate the possible wrongdoing in
the executive branch and, therefore, did enforce that request.
Mr. PANETTA. And these are the types of cases you believe
that courts will look at for precedence, correct?
Mr. YIN. Well, again, it is speculation on my part. But it
would be--I would think, if I were a judge or the clerk for the
judge, that would be certainly an area that I would direct the
attention to.
Mr. PANETTA. Thank you.
I yield back my time. Thank you again, Mr. Chairman.
Chairman LEWIS. Thank you.
The chair now recognizes for 5 minutes Mr. Reed.
Mr. REED. Thank you, Mr. Chairman.
This has been a very insightful panel, and I appreciate the
testimony of the witnesses.
But as I venture down my questioning, I just want to make
sure we are clear. I have heard from each one of the witnesses
that there is a right-to-privacy issue here based on the
historical review of the documents from each of their
testimony. Does anyone disagree with the issue or concern that
is legitimate being raised on the rights of privacy of
individuals under 6103 or this proposed law, and that we need
to take that into consideration? Does anyone disagree with
that? Mr. Yin.
Mr. KIES. One thing I would say in response to that, and it
is something that no one on the Committee has asked about yet,
but I think it is an important piece of information. 6103 has
never ever been used to request taxpayer information by the
Ways and Means chairman, the Finance Committee chairman, or the
chief of staff of the joint committee that has been released
publicly.
Professor Yin referred to the Nixon situation. Nixon had
agreed to let his return.
When I was chief of staff of the joint committee in 1985,
we requested individual income tax returns in connection with
our study of why wealthy Americans were giving up their
citizenship. That return information was never released to the
public.
So we can debate whether or not the authority exists, but
what is not in debate is it will be unprecedented if that
authority is used to release taxpayer information.
Mr. REED. And, Mr. Yin, so do you disagree that there is
no----
Mr. YIN. Yes, I--so I disagree with that response----
Mr. REED. No, not with--I have limited time.
Are you concerned about the right of privacy that is being
raised here? Do you think there is no right of privacy to
anyone?
Mr. YIN. Yes. I believe there is a balancing between the
right of privacy of individuals and the right of the public to
know. And it is up to the Congress to determine how to strike
that proper balance.
Mr. REED. How to strike that, right? And that is exactly
what we are wrestling with.
So the issue I have, because when I heard you testify to, I
think it was John Kerry's wife, Geraldine Ferraro's husband who
was concerned about their privacy, they didn't run for public
office, right? They didn't venture down this public domain path
that their husbands or spouses did, wives did.
So the question I have for you is that if you get a
Presidential return that shows the President having a
relationship with Mrs. Jones down the street, Mrs. Jones'
privacy right needs to be respected, correct? She has a privacy
right, that her information that because she happened to do
business with an individual who happens to run for President,
unbeknownst to her, 10, 20, 30 years, 10 years down the road, 5
years down the road, her right needs to be respected in this
conversation, correct?
Does anybody disagree with that?
Mr. ROSENTHAL. I agree. Yes, her rights should be
respected.
Mr. REED. Yes. So the issue that I am wrestling with here
is, is there a better way to do this? Because, Mr. Bookbinder,
you are very familiar with our financial disclosure statements.
You offered testimony that said, you know, what we can't find
from this financial disclosure, if it is a $6 million deal or a
$600 million deal, that is potentially a conflict of interest.
But isn't that irrelevant?
The fact on the financial disclosure, it discloses the
relationship upon which the conflict arises. So if the
financial disclosure shows that, regardless if it is a dollar
or a trillion dollars, it is still a conflict that can be
investigated, and that information is out there. Isn't that
correct?
Mr. BOOKBINDER. I think that is correct. But there are
likely to be relationships that are going to be shown in the
tax returns that are not shown in the financial disclosures.
And certainly, when--privacy is incredibly important. But when
somebody chooses to run for President, they give up lots of
pieces of their right to privacy.
Mr. REED. So, Mr. Bookbinder, you just teed up exactly what
I think may be a wiser course for this Committee to pursue, is
if there is a concern about the financial disclosure and the
information that that President or that vice presidential
candidate, or any candidate who runs, if that individual
chooses to do that, isn't that the more appropriate vehicle for
us to be considering legislation to say, look, if you are
running for President, we want your own form under the
financial disclosure information, we want you to fill out all
of these issues? Rather than run the risk of some Mrs. Jones'
privacy being violated because someone wants to get a tax
return.
I don't challenge Mr. Neal's integrity in regards to his
authority to use 6103. He is a gentleman. I respect him. But I
am concerned about the next Ways and Means chairman or the next
political battle that is--chooses to utilize this weapon that
could potentially be abused by a future chairman or any
chairman.
So shouldn't we focus our time on what actually could
potentially bring Members like me from the other side to say
let's amend the financial disclosure reforms, target the
information to that form for that individual, and at the same
time we respect the privacy of individuals that had nothing to
do with running for President or vice president?
I will let you ponder that.
And with that, I yield back.
Chairman LEWIS. The chair now recognizes for 5 minutes Mr.
Kelly.
Mr. KELLY. Thank you, Chairman. And, again, thanks for
holding the hearing. All the panelists, thanks for coming in
today.
I want to go back to what Mr. Reed said, Mr. Bookbinder,
would you clarify for me, so when somebody runs for President,
they give up their expectations of privacy? Is that what----
Mr. BOOKBINDER. Well, I think anyone who runs for President
expects to have a lot less privacy than most individuals.
Mr. KELLY. Okay. So anybody that is a candidate for
President or serves in the office is an American citizen. Is
that correct?
Mr. BOOKBINDER. Yes.
Mr. KELLY. Okay. So are we saying if you reach a certain
level, even though you are an American citizen, you are subject
to greater scrutiny than anybody else? And then my next
question would be: So at what point do people say are you
kidding me? Why would I ever run for any of these offices? It
makes no sense.
I don't want you to even answer that because I know what
the answer is. But I want to really be clear. And I want each
of you to say, and I want an answer. I am not--this may be--and
I really appreciate your opinions. But you know what, may
doesn't answer the question, because every time we ask you a
question, well, this may be what happened, that may be what
happened.
Do the President and the vice president, not undergo the
scrutiny of having their tax returns audited by the IRS?
Mr. Thorndike, Dr. Thorndike. It is just a yes or no.
Mr. THORNDIKE. Yes.
Mr. KELLY. Okay. They do.
Professor Yin.
Mr. YIN. The internal revenue manual----
Mr. KELLY. The question is--it is a yes or no, Doctor. I
appreciate that, but we are going to run out of time.
They are audited, are they not? Are not the President and
the vice president audited for tax returns?
Mr. YIN. The internal revenue manual does require it.
Whether they in fact----
Mr. KELLY. Okay. I know you don't sit on it, so you can't
be sure. But you know what the answer is.
Mr. Rosenthal.
Mr. ROSENTHAL. I have the same response.
Mr. KELLY. You don't know either. Okay.
Mr. Bookbinder.
Mr. BOOKBINDER. I believe so, but I don't think it
addresses all the issues----
Mr. KELLY. Okay. Mr. Kies.
Mr. KIES. Yes.
Mr. KELLY. Okay. Thank you. I am glad we had experts here
that could maybe know but couldn't really know.
I just want to be clear on this. Listen, this would not be
taking place if we were not about a duly elected President by
the name of Donald Trump sitting in that office. This is an
incredible overreach. This is an oversight Committee. Our very
role is to be the watchdogs to make sure that American citizens
are protected.
Now, if I were to go home to my hometown and walk up to
somebody and say, I don't know that you realize it, but you
know what, this 6103 is something right now that we really have
to look at. And they are going to look at me, like, I have
absolutely no idea what you are talking about. I would say in
too many cases we have absolutely no idea what we are talking
about or what we are leading to. This, I said earlier, is a
Pandora's box. You take the lid off this, and you make anybody
subject to this type of scrutiny.
And it is hard for me to believe that since the mid 1970s
when we had the Watergate fiasco, that the changes to the IRS
then, especially what happened under President Nixon, that we
are saying today, that this many years later, that we are just
not sure that the IRS really knows how to do their job.
I can remember not too many years ago--Mr. Reed, you sat
here with me, whenever we talked about Lois Lerner. We
questioned whether we thought the IRS was doing the right job
of what was happening and the weaponizing of the IRS. We were
told, listen, are you telling us you don't believe the IRS
knows what they are doing. Now, that was not done by our side
of the aisle, by the way. It was the other side of the aisle
that said you can't possibly question the integrity of the IRS,
and I do not question their integrity.
Look, if there is better ways to do things, I think Mr.
Reed hit on so many. I mean, this isn't the financial
disclosures. If there are loopholes, if it is too wide, why not
narrow it down?
And one of the Members said this is not lazy legislation
what we are doing. Well, if it is not lazy legislation, I guess
we can find some other term for it. It sure as heck is not
doing our job as legislators. If there is some confusion, then
we need to straighten it out.
There are better ways to do it. I understand that. As far
as the trust and the faith the American people have, each one
of us got elected for this very purpose, to protect their
freedoms and liberties and their privacy. It is not to go after
a political person that we just don't care for.
Mr. Kies, am I missing something here tonight? I mean, you
answered things pretty explicitly. And I know you all have this
great deal of background. But when you can't say you know for
sure that the IRS knows how to do an audit or if they are doing
the audit, that is troubling to me. What else would you do?
What else could we do to make this process better?
Mr. KIES. Well, I actually think what Mr. Bookbinder has
talked about is a more productive route of identifying the kind
of information that you really want here, which is a more
vigorous financial disclosure for people running for President.
And you can steer clear of having to delve into releasing
individual tax returns, which has never ever been done under
Section 6103. And it is not a route that I think you should
think about going down unless you are very, very careful. And,
frankly, I think if there is other ways to get the information,
it is much better to go in that direction.
Mr. KELLY. Okay.
Dr. Yin, you had something to say.
Mr. YIN. I would just like to correct the record on that,
because Mr. Kies has made the statement twice. He seems to have
forgotten that both in 2014 and in 2015, 2014 in the House Ways
and Means Committee, 2015 in the Senate Finance Committee,
there was the use of exactly the authority we are talking about
now combined with a public disclosure in each instance.
Mr. KELLY. That was during a criminal investigation. Is
that right?
Mr. YIN. It was----
Mr. KELLY. Yeah. Okay. It was. Thank you.
Listen, I wish we had more time. I would really love this
could go on for a long time. I know I share the same feelings
as the chairman. Thank you so much for giving us your time and
your expertise in weighing in on this.
Let's make sure as we leave this room today, we are the
oversight Committee. Our main role is to protect the privacy
and the rights of every individual American citizen, of which
our President happens to be.
Mr. KIES. I would just add one thing. I agree with what
George just said. What I would say is it has never been legally
used. George and I both agree that what was done in 2014 and
2015 was inconsistent with 6103. This Committee and--has never
legally released an individual tax return under the authority
of Section 6103.
Mr. KELLY. It sounds like you and George get together a lot
and discuss this. So thank you so much for your time.
Chairman LEWIS. Let me just say to the Ranking Member, my
friend, Mr. Kelly, it is my strong belief that the American
people have a right to know. We live in a democratic society.
We should know people running for office, the office of
President and vice president, how they earn their money and
what conflicts they have. So the hearing--this is not the end.
This is just the beginning.
I want to thank each member of the panel for your
participation, for your contribution.
Please be advised that Members have 2 weeks to submit
written questions to be answered later in writing. Those
questions and your answers will be made part of the formal
hearing record.
With that, the Subcommittee on Oversight stands adjourned.
And thank you again.
[Whereupon, at 5:34 p.m., the Subcommittee was adjourned.]
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