ProPublica FOLLOW-UP: WHEN CRIME IS GOOD

This is a follow-up to the post “Taxes are Good: Why the ProPublica Report Matters” that ran last week.

More releases in a collection of stories titled “The Secret of IRS Files” from ProPublica will be coming throughout the year in the face of officials calling for legal action against the leakers of classified private documents. The FBI, DOJ, and congressional officials have all issued some notion of an investigation of the leaker, whose identity is also reportedly unknown to ProPublica journalists. Republican Senate Minority Leader Mitch McConnell has even stated that the tax leakers should be “hunted down and thrown into jail.”

The leaking is a crime, whistleblowers of classified information have been under bipartisan attacks in recent years regardless of the amount of public good uncovered. In this case, it just isn’t a crime to get rich by exploiting tax loopholes. Just last year, Natalie Mayflower Sours Edwards delivered 50,000 classified documents to Buzzfeed News that resulted in a global investigation involving over 400 journalists. The investigations led to anti-laundering legislation in many countries throughout the world. Edwards was repaid with a six-month prison sentence. There is no clear crime detailed in the ProPublica leak, making it difficult for the leaker to claim whistleblowing protection.

Regardless, the information appears potentially important and can help the public realize the means the rich have at their disposal to avoid taxation. Yes, these men are private citizens, but they also hold more power in society than just about anyone. Also, the crime seems… quite minor? Taxes in the United States have certainly not always been as guarded as they currently are.

The first appearance of the income tax in the United States occurred in 1861 to pay for the Civil War. For the existence of the income tax from 1861-1871, tax records were entirely open to the public. It was not until 1913 when Congress was empowered by the passage of the 16th amendment to levy income taxes again.

In October of 1924, Congress ordered public disclosure of American taxpayers and their paid taxes. A series of bribery scandals erupted public furor over the impact of wealth on democracy. Congress instilled itself with the power to investigate private tax records and subsequently opened them to the public. The law did not make all tax records public but did lead to a public reveal of the amount of taxes paid by individuals and corporations.

Admittedly, the disclosure law did not last long. President Coolidge was never particularly enamored with the public disclosure. He argued that this information put the lives of the wealthy at risk and Congress dropped the requirement in February 1926. But while taxes were transparent, newspapers routinely published the tax liabilities of the rich and famous. J. D. Rockefeller Jr paid $7.44 million. Ford Family and Company paid $19 million. Charles Schwab paid an extravagant sum of $29.5 million while J.P. Morgan Jr. a mere $96,643.

It might be time for transparent taxes once again in the United States, and the ProPublica report serves as an important agonist to the public appeal for open tax records. Taxes are a public good and should be open for public view. No sensitive personal data is necessary, just the reported incomes, assets, and tax liabilities.

This information could lead to additional taxes paid and closing the “tax gap” detailed by the IRS – the difference between what is legally owed and revenue collected by the federal government. The IRS in 2021 reported for the first time in 8 years a tax gap that estimated Americans underpay their taxes by more than $1 trillion each year. This number has increased dramatically from the last official estimate of $441 billion in 2013.

There is some hope that more transparent taxes can lead to additional revenue collected. As usual, the Scandinavian countries are ahead of the curve on these issues. Norway has had public tax records since 1814, but since publishing the records online in 2001 has enjoyed a 3.1% increase in reported self-incomes.

Taxes are not meant for the individual, but rather the collective, and thus should not be limited to a private affair between the state and a citizen. Tax positivity is dearly needed on the left to repair our damaged welfare state and bring it up to modern glory. Finland has a tax positive holiday, “National Jealousy Day” when records of personal tax data are revealed to the public every first of November. The Fins enjoy the gossipy media articles on celebrities --the day stands as the most numerous news deployment of the year for Finnish media. That sort of frenzy may not be an exciting development for most, but the pressure from public exposure of taxes paid by the rich is worth the cost of trying.

The addition of everyone’s salary being open would likely impact mental well-being. A study of Norway after making their tax data publicly available online found that self-reported happiness began to track closer to income, with low earners reporting lower happiness. In 2014, Norway banned anonymous searches, and the number of searches dropped dramatically. Regardless, the information is accessible and provides an incentive to not cheat on your taxes to avoid harmful public relations.

Unfortunately, being unhappy with your income is the cost of having additional data that can only help you in bargaining negotiations with employers. The income didn’t change, merely your knowledge of where you sit on the corporate hierarchy, and that knowledge can be used for positive purposes.

Instances of illegal discrimination would be much easier to discover with transparent income tax records. Minorities and women could access the pay of the males working the same role in the same corporation, but for more pay than themselves, to discover violations of the Lilly Ledbetter Fair Pay Act of 2009.

The additional data alone would provide a wealth of information to economists and data scientists. Scholars that research income inequality could finally move on from poor sources of individual wealth such as the Forbes billionaire list -- regularly cited as, unfortunately, one of the best sources economists such as Piketty and Saez have to analyze the growing problem.

Income taxes in the United States originated with transparent intent. For the first ten years of their inception, income taxes were open to the public. Besides a brief return from 1924-1926 of tax liability figures, citizens have had to make important choices at the ballot box without adequate accounting of who were accumulating the largest sums of local currency. With a return of transparent income tax records the public can be treated as the adults they are to make the correct decisions with all the data necessary.

Income records don’t have to be sensitive. In 2021, after decades of destruction of New Deal labor protections and most recently conservative Right to Work legislation, workers could use any information that can increase their bargaining power. Transparent income records can be an important data point for workers to reclaim that power at the negotiating table.