Raw: [Trump Tax Leaker Gets Much Harsher Treatment Than IRS Leakers in Nixon and Silicon Valley Cases DCReport] {Article Source: https://www.dcreport.org/2024/02/02/trump-tax-leaker-gets-much-harsher-treatment-than-irs-leakers-in-nixon-and-silicon-valley-cases/}
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Home»Crime»Trump Tax Leaker Gets Much Harsher Treatment Than IRS Leakers in Nixon and Silicon Valley Cases
Crime DCJ Featured Story Law Opinion Taxes
Trump Tax Leaker Gets Much Harsher Treatment Than IRS Leakers in Nixon and Silicon Valley CasesBy David Cay JohnstonFebruary 2, 20248 Mins Read
Charles Littlejohn, who leaked IRS files on wealthy Americans, and lawyer Lisa Manning after his sentencing. Photo: C-SPAN screen grab
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A Federal Judge Biden Appointed Declares Pro-Trump Bias, Ignores History
Lost in the reporting on the five-year sentence handed down Monday to the IRS contractor who leaked the tax returns of Jeff Bezos, Elon Musk, Donald Trump, and other wealthy Americans is the history of past leaks.
The case raises two significant policy issues:
– leakers cannot defend themselves by arguing their conduct benefitted the public. That should be allowed.
– why are federal tax filings secret? A century ago, they were public record.
Charles Littlejohn, the latest leaker, received the maximum sentence, a punishment urged by House Republicans. That treatment was exceptionally harsh compared to two others in IRS tax return leaks.
Why tax secrecy? The pay and pensions of tens of millions of Americans are already made public.
In 2004, I broke the backdated stock options scandal, which cost investors billions of dollars. I named my source, Remy Welling, a senior IRS auditor who was disturbed by corruption inside the tax agency. The IRS fired Welling, but our government declined to prosecute her because that would have meant endless news coverage exposing more about the improper influence accounting firms wield inside the IRS on behalf of wealthy clients by dangling lucrative future jobs in front of auditors and audit managers
A half-century ago, a low-level IRS employee leaked Richard Nixon’s tax returns to the Providence Journal in Rhode Island, revealing criminal tax cheating. Nixon got a pardon, but one of his tax lawyers, Frank DeMarco Jr., was prosecuted and the appraiser of the documents went to prison. Donald Alexander, Nixon’s IRS commissioner, told me he decided against prosecuting the leaker because of the public good that came from the crime.
Public Benefit Crime
Charles Littlejohn’s leaks marked the endgame of a calculated plan. He had been an IRS contractor. Littlejohn got himself re-hired as a contract employee, working until he could access 15 years of tax information from super-wealthy people who paid little to no income taxes. He gave the tax files to the nonprofit investigative news organization ProPublica in 2021.
“Whoever dared to do this should be hailed as a national hero,” I wrote at DCRepoprt three years ago. “Thanks to the leaker, we now know beyond any doubt that the endless claims America has a progressive income tax system are bunk. A progressive system means that the more you make, the greater the share of your income you pay in taxes. In 2005, I got the George W. Bush administration to acknowledge that the system stops progressing near the top. But, unfortunately, ProPublica shows that it’s even worse than what I reported back then.”
IRS investigators quickly identified Littlejohn. In October, he pleaded guilty to illegally disclosing tax return information. His lawyers told the court that he acted out of a “deep moral belief” that the public should know that many super-wealthy Americans pay little to no income tax.
The law doesn’t allow Littlejohn to argue he acted out of good intent for the public benefit. It should.
People who act with no motive of profit or other personal gain, as with Littlejohn, and who seek to inform the public about wrongdoing inside our government should be allowed to make a good intentions defense.
Backed Stock Options
That’s what motivated Remy Welling in the backdated stock options scandal. She was ordered to close an audit of a computer chip maker without conducting one and quickly ferreted out undue outside influence from a big accounting firm. Many experienced IRS auditors and audit managers leave the government for lucrative jobs at the Big Four accounting firms and their smaller competitors.
Welling’s leaks eventually revealed that Apple fabricated minutes of board meetings where Al Gore and other directors supposedly approved stock option grants because of backdating. Apple and its directors were never prosecuted.
The Nixon case leaker had the same motives. That case might never have drawn broad public attention but for the diligence of the then new nonprofit magazine Tax Notes. A 1973 Tax Notes article detailed the reasons to believe Nixon commited tax crimes, one of many important arrticl;es Tax Notes has published in the last half century.
Nixon soon declared, falsely, that “I am not a crook” before resigning the presidency in 1974.
Had Welling or the Nixon leaker been prosecuted, they could not have argued that they acted for the public benefit. Congress and the courts don’t allow that, but they could.
The burden in such cases should be on the leaker to persuade a judge or jury that the good their actions wrought outweighs their crimes. Leakers should be allowed to make their case before a judge or jury and, should they fail, suffer the consequences.
Why tax secrecy? The pay and pensions of tens of millions of Americans are already public knowledge. Cops, teachers, and recreation center janitors all have their pay posted on public websites.
Not So Secret Pay
If you imagine your pay is confidential, think again.
Millions of Americans already have their pay and pension payments published. Cops, teachers, recreation center janitors, and millions of other government employees have their pay posted on public websites. See examples from California, New York, and Texas here, here, here, and here.
Here is the complete 2022 payroll, by name, for California’s Bonny Doon Union Elementary School District, so tiny that at one time 3% of its students were my children.
Nonprofit and Union Pay
Congress requires that the pay of union officers be publicly disclosed, in fine detail, as well as fees and expenses paid to union consultants. The same rule, however, does not apply to business.
Nonprofit employees, especially executives, have their pay disclosed each year on Form 990, which, unlike Form 1040, is a public record. My wife’s pay as a charity CEO was public for three decades, published in our local business newspaper each year. Never hurt us.
In this Digital Age, tons of highly detailed income and wealth data is already commercially available. Commercial purveyors pretty much know the income, debt, and property values of everyone in America.
A decade ago, when I was president of Investigative Reporters and Editors, I asked a Google employee who spoke at our annual training conference whether I could buy ads that would go only to lesbian homeowners who drove Subaru Foresters and had a household income of $50,000 to $75,000. “Sure, easy,” he said. That tells you how finely Internet companies slice and dice demographic information, including information on household incomes.
A century ago, the Chicago Tribune published on its front page that chewing gum king and Chicago Cubs owner William Wrigley Jr. paid $865,815 in federal income tax in 1923.
The same day, The New York Times reported that John D. Rockefeller Sr. paid $124,266.47, while his lesser-known son, John D. Jr., paid 60 times as much — $7,435,169.41, roughly $133 million in today’s money.
Federal income tax payments were public records that made Page 1 news a century ago, unlike today.
If we went back to making income tax returns public, you wouldn’t learn anything surprising for most people, even those in the private sector. Who lives in your neighborhood or any other depends on the housing price and the range of incomes that can support such purchases.
But if you know someone who lives in a mansion and public postings of tax information showed that they pocketed millions in refunds or paid only $750 of income tax, as with Donald Trump, you would suspect something is amiss and could alert tax authorities to likely tax cheating, just as you no doubt would if you suspected that neighbor of stealing public funds, selling drugs or molesting children.
The IRS used “lifestyle” audits to detect such tax cheats, but Congress banned them at the end of the 20th Century. You used to be able to find out if your neighbor had filed a tax return, but Congress stopped that in the 1970s. The only beneficiaries of these policy changes are tax cheats.
Justice Louis Brandeis served on our Supreme Court from 1916 to 1939.
Tax law provisions that make tax returns public or secret, allow or deny a good intentions defense, and all the other rules are by the grace of Congress. It can change the rules. We can demand better rules, backing up words with our votes.
Whatever the rules are, they ought to optimize integrity.
As Justice Louis Brandeis observed in 1913, nothing disinfects better than sunlight. Bringing tax information into the light of day would help cure the rot in our federal tax system.
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David Cay Johnston
David Cay Johnston co-founded DCReport. He is a best-selling author and investigative journalist who for 13 years reported for The New York Times. Johnston is a specialist in economics and tax issues. He won a 2001 Pulitzer Prize. He teaches at Syracuse University College of Law.
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