What We Can Learn From Donald Trump’s Unreleased Tax Returns
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Version 0 of 1. One of the constants of modern elections is that presidential candidates have released their recent tax returns. There is no law requiring this. This transparency is based on a norm. It’s a norm that has persisted through all modern elections, even among candidates who have suffered a degree of political embarrassment. But Donald Trump has told The Associated Press that he does not expect to release his tax returns before the election, citing a continuing audit. Despite earlier assurances that he would release them, his stated argument is that “there’s nothing to learn from them.” There may indeed be nothing interesting to learn from Mr. Trump’s returns. But economic theory about the incentives for disclosure suggests that voters may reach the opposite conclusion. After all, choosing not to disclose something is an action that reveals something. A thought experiment will help illustrate why. Let’s say that you are running for president, and your tax returns are the absolute classiest tax returns imaginable. Your income is honestly earned, you pay an appropriate amount of tax, you don’t use questionable tax maneuvers, and your returns show that you give generously to charities that do good work. In this situation, you want to release your tax returns so that the voters will think more highly of you. What if your tax returns are very classy, but not quite this classy? If you don’t release your returns, voters will infer that they’re not the very best tax returns. And if that’s all they know, they’ll infer that you’re in the middle of the pack of those who don’t disclose — that they’re merely pretty good. This means that if your returns are better than pretty good and you make your tax returns public, you’ll rise in the electorate’s estimation. And so you voluntarily reveal your returns, so that the voters learn that you’re better than they would otherwise think. O.K., now we’re in a world in which everyone with at least pretty good tax returns makes them public. What if yours are only mildly embarrassing? If you don’t release them, the public will infer that your returns are definitely no better than “pretty good,” and perhaps much worse than that. But “mildly embarrassing” isn’t so bad compared with the universe of tax returns that are worse than “pretty good,” so you’re better off disclosing. This explains why candidates like Mitt Romney and Hillary Clinton were willing to release their returns, despite revealing useful ammunition for their opponents. In each case, it was a savvy choice, because not revealing would have led voters to infer they were hiding something worse. This incentive to disclose keeps cascading. Those with the cleanest tax returns disclose, leading those with the next cleanest returns to disclose, so as to differentiate themselves from the dirtier non-disclosers. As more people disclose, the remaining pool of non-disclosers is even worse, and the least rotten among them will want to disclose to escape the inference that they have something to hide. It’s disclosure all the way down. If you’ve got the second-worst tax return imaginable, and everyone who is cleaner than you discloses, the public will infer that you’ve either got the worst or the second-worst possible return. Far better to clear up the confusion that you don’t have the most dishonorable tax return that’s possible, and so you also choose to release your tax returns. Follow this logic, and you’re left to infer that the only person who won’t voluntarily release their tax returns must have the most to hide. It doesn’t just say that Mr. Trump has more to hide than Mrs. Clinton; it says that he has more to hide than any other candidate you could imagine. Think about it. The problem for Mr. Trump is that the voters don’t know if he’s Honest Donald or some other Donald. But Mr. Trump knows. If he’s Honest Donald, he’ll release his tax returns to make sure that voters know that he’s neither dodgy nor deplorable. And if he’s dodgy, he will release his returns so that we know he’s not deplorable. Only Deplorable Donald — the worst possible Trump — has no incentive to disclose. By this logic, a candidate would hide tax returns only if they paint a terrible picture about finances and integrity. (If there were the risk that Mr. Trump’s returns would reveal commercially valuable information, that would be a reason that he could be not-seedy yet still want to keep his returns private. He has yet to make this argument, though.) You actually use this logic every day to make sure you don’t get ripped off. If I were offering to sell you a used car, and refused to let you take it for a test drive, what would you infer? It must be a dud, unable to even start. After all, even if it ran poorly, you would let me drive it, at least to reassure me that it actually does run. Likewise, you wouldn’t buy stock in a company that refused to show you their books. This same idea is why you demand the right to inspect a good before you buy it, or if it’s in a box, you demand the right to return it if it turns out to be a dud. You can’t return presidents, which is why voters have traditionally demanded the right to inspect them first. There’s something distinct about information: Refusing to share it doesn’t keep voters in the dark. If they think about why, the choice not to reveal it is very revealing. |