What’s Under the Hood: Tax Return vs. Financial Disclosure
Presidential vetting is not for the faint of heart. Rigorous debates, interviews, fact checks, and disclosures are well-established components of any national campaign. As part of this, the Federal Election Commission (FEC) requires all candidates for federal office to file a disclosure of their personal finances.1 The vast majority of presidential candidates have gone beyond this requirement, however, and also released their tax returns.
Why? After all, Donald Trump, who has withheld his tax return, recently claimed that you could learn more about him through his financial disclosure.2 But the fact is, tax returns are very different from the FEC’s financial disclosure—and provide very different information about a candidate. Specifically, here are six things tax returns show that financial disclosures do not:
- How much a candidate paid in taxes. Financial disclosures do not include how much a candidate paid in taxes and, thus, what their effective tax rate was.
- What tax breaks a candidate claimed. Financial disclosures do not list what types of tax deductions a candidate has claimed. These could range from deducting interest paid on one’s mortgage to putting a goat on a golf course to qualify for farmland tax credits.
- Whether a candidate has offshore accounts. Financial disclosures ask candidates to list assets but are not required to provide detailed information, so offshore accounts can be easily masked.
- Charitable giving. Financial disclosures do not include information on what, if anything, a candidate has given to charity.
- A more truthful picture. Financial disclosures are reviewed by the FEC for compliance with reporting requirements, but they are not audited for accuracy like tax returns which carry fines and possible jail time for fraud.3 Because of that, a tax return presents less of an opportunity to inflate claims of wealth.
- Numbers down to the cent. Financial disclosures report assets in broad ranges (e.g. $1,001 - $15,000; over $1,000,000),4 while tax returns focus on the exact dollar figure of an asset.
United States, Federal Election Commission, “Quick answers to candidate questions.” Accessed September 28, 2016. Available at: http://www.fec.gov/ans/answers_candidate.shtml.
Aaron Blake, “The first Trump-Clinton presidential debate transcript, annotated,” The Washington Post, September 26, 2016. Accessed September 28, 2016. Available at: https://www.washingtonpost.com/news/the-fix/wp/2016/09/26/the-first-trump-clinton-presidential-debate-transcript-annotated/?postshare=8371474976325410&tid=ss_tw.
Richard Rubin and Laura Saunders, “Donald Trump’s tax return: What we could learn,” The Wall Street Journal, March 1, 2016. Accessed September 28, 2016. Available at: http://www.wsj.com/articles/trumps-tax-returns-might-not-answer-questions-1456876429.
Richard Rubin, “What a presidential candidate’s financial disclosures do, and do not, reveal,” Bloomberg, May 15, 2015. Accessed September 28, 2016. Available at: http://www.bloomberg.com/politics/articles/2015-05-15/what-a-presidential-candidate-s-financial-disclosures-do-and-do-not-reveal.