If you think the legal battle over President Donald Trump’s tax returns is heated, you should have been around in October of 1924.
That was when Treasury Secretary Andrew Mellon decided to take literally the wording of that year’s new revenue law, which said the names, addresses and amounts of income taxes paid by everyone filing a return that year “shall as soon as practicable … be prepared and made available to public inspection …”
Suddenly, newspapers everywhere reported that John D. Rockefeller Jr. paid $7,435,169.41 in income taxes, to lead all Americans, and that, curiously, banker J.P. Morgan Jr. paid only $98,643.
New York City, at least in the tops of the skyscrapers and in the financial district, erupted in indignation and protest over this data dump. The Brooklyn Citizen announced in print that it was refusing to report any of the figures and that Washington’s “invasion of privacy” would be a huge setback to President Calvin Coolidge’s election chances that year (spoiler alert: it wasn’t).
Going through these dusty (electronic, courtesy of newspapers.com) archives has made me think. Why don’t we do this again? Why not make everyone’s tax returns public? Yes, I think the president should release his tax returns, but what about you releasing yours? More importantly, what about that guy down the street you’ve always wondered about?
I’ve written about this in years past, with somewhat tepid feelings, but my thinking has evolved. The upside to this universal release of information could be enormous. Consider what this would do to tax cheats, or to public debates over who pays their fair share and which deductions make sense. If we did it like 1924, actual income figures would be hidden. Only amounts paid would be public.
States already make your property tax records public. I can easily see how much my neighbor’s house is worth, at least according to the county assessor. Of course, my neighbor can’t reduce his or her property tax by deducting for children or charitable contributions or through clever accounting, but maybe that is, in part, because the figures are public.
We also make public employee salaries public. You can go to openthebooks.org and see what every such worker in Utah earns.
As Binyamin Appelbaum of The New York Times editorial board wrote last year, “Calling for more disclosure may seem discordant at a time of growing concern about privacy. But income taxation is an act of government, not an aspect of private life.”
If you want a modern example of what would happen in such a transparent society, look to Norway, the land of my ancestry. There, income tax information always has been public. The history of this offers some insights into human behavior, as well as how to temper it.
As the BBC reported a few years ago, people used to line up on the day the books were compiled so they could see what other people were making, and what they were paying. You had to be quick because others were waiting behind you. For most people, curiosity typically wasn’t strong enough to overcome the tedium of waiting in line.
But then came the 21st century, and the information went online. Looking people up became such a pastime that Norwegians coined the term “tax porn.” The continentaltelegraph.com reported that 40% of Norwegians were using these databases by 2007.
So the government changed the rules. You still can look up all the information you want, but you have to have a Norwegian identification number, and the person whose information you are searching also will be notified that you, by name, were looking.
After this change, “We saw a significant drop to about a 10th of the volume that was before,” Hans Christian Holte, the head of Norway’s tax authority, told the BBC: “I think it has taken out the Peeping Tom mentality.”
The U.S. could impose similar rules. Washington could even confine the information only to name and taxes paid, as in 1924, reducing the likelihood that burglars would use the information to find targets.
Think of the benefits. Even though actual income would remain secret, it would be easy to deduce which companies pay women less for work equal to males. The methods people use to reduce their tax bills would become matters of urgent national discussion. Tax reform would surely follow.
And people running for president would have no excuses for withholding information.
But here’s a note of harsh reality: Back in the ’20s, enough rich and powerful people complained that Congress quickly ended its brief moment of income-tax transparency. Sadly, the same reason is likely to keep it from reemerging a century later.