Capitol Journal: The fight over releasing politicians' tax returns began in — where else?

By George SkeltonCapitol Journal Columnist

April 15, 2019 12:05 AM PT

Reporting from Sacramento —

The roughneck politics over release of tax returns has century-old roots in two California oil fields.

It grew from the corrupt administration of President Harding and its Teapot Dome scandal, which partly involved the Elk Hills and Buena Vista oil fields in Kern County.

A half-century later, President Nixon resurrected the issue of politicians’ tax returns as he began to drown in Watergate. A highlight of this Nixon tax dodge was his legendary declaration: “I am not a crook.”

Even before that, California Gov. Ronald Reagan gave Democrats a strong reason for demanding the release of his returns.

Reagan had opposed switching to payroll withholding of income taxes, arguing the state should stick with annual lump payments. “Taxes should hurt” so citizens don’t get comfortable paying them, he maintained. Turned out, the conservative Republican hadn’t paid any state income tax the previous year.

Although it’s surely no balm for President Trump’s tormented mind, the Democrats’ cry for release of tax returns hardly started with him.

It should be pointed out that former California Gov. Jerry Brown, a Democrat, refused to release his taxes when he ran for governor in 2010 and 2014. But no Democrat I’m aware of ever demanded that he make public his returns.

Republicans Harding, Nixon, Reagan and Trump became the Democrats’ fat tax targets. Shock!

Not that Trump’s tax returns shouldn’t be examined. They should be. Just not by every rummaging Tom, Dick and Harry looking at stuff that’s none of their business, like charitable donations. The returns should be studied in private by a congressional oversight committee. And if suspect, they should be investigated, perhaps in public hearings.

That’s what an obscure law stemming from the Teapot Dome scandal allows Congress to do. House Ways and Means Chairman Richard E. Neal (D-Mass.) is using the statute. He’s seeking Trump’s returns.

The Harding administration scandal, in 1921-22, involved the Teapot Dome oil field in Wyoming and the two California fields. They were Navy petroleum reserves that Harding turned over to the Interior Department. Interior Secretary Albert Fall then leased them to private companies at low rates without competitive bidding.

A congressional committee investigated. Fall was convicted of accepting bribes from the oil companies. He became the first presidential cabinet member to be imprisoned. Harding died of cardiac arrest in San Francisco’s Palace Hotel in 1923.

In 1924, Congress passed the law that now allows Democrats to go after Trump’s returns.

Fast forward to 1973.

A Watergate lawsuit contained passing reference to a $500,000 tax deduction Nixon claimed for donating 1,000 boxes of papers to the National Archives. Reporters jumped on the story and foundered. Democrats demanded an audit. But Nixon opposed it and refused to release his taxes. The IRS deferred to the president.

Then data were leaked to a relatively small newspaper, the Providence Journal-Bulletin. The paper reported that in 1970 and 1971, Nixon had paid what amounted to a poor man’s taxes — $793 and $878, respectively — on presidential income of $400,000 plus. The documents donation had drastically reduced Nixon’s tax liability. Or so he thought.

At an editors’ conference, a delegate from the Providence newspaper pressed the president. And Nixon famously replied with a quote that would make any political strategist wince:

“I welcome this kind of examination, because people have got to know whether or not their president is a crook. Well, I am not a crook.”

The IRS reversed itself and began auditing Nixon’s returns. The president then caved and publicly released them. The IRS found Nixon’s donation to be improper, and he paid nearly half his net worth in back taxes. The reporter, 31-year-old Jack White, won a Pulitzer Prize.

Since then, all major-party presidential nominees — except President Ford in 1976 and Trump in 2016 — have voluntarily released their tax returns. Ford at least provided a summary. Trump offered only poppycock.

Reagan released his returns reluctantly when he ran for president in 1980. But he had no practical option, especially after what happened in 1971.

A Franchise Tax Board employee opened Reagan’s mailed return and couldn’t keep secret what she found. Who could? She told a downtown Sacramento salesclerk. The clerk told her daughter. Her daughter was a journalism student at Cal State Sacramento and had a campus radio show.

The student, Rose King, reported on air that Reagan had paid no state income tax for 1970. Not many people heard her show. But she also interned for state Senate Democratic Caucus Chairman Mervyn Dymally of Los Angeles. Dymally tipped off a Capitol television reporter. And Reagan was asked about it at his weekly news conference.

The startled governor replied: “You know something, I don’t actually know whether I did [pay taxes] or not.”

He really didn’t know. But minutes after the news conference, Reagan’s office confirmed that “because of business reverses” he had owed no state tax. Something about a loophole cattle herd. He did pay a federal tax.

“I never saw Reagan angry, but he was this time,” recalls George Steffes, his legislative liaison who became a respected Sacramento lobbyist. “And his staff was angry because his lawyer [future U.S. Atty. Gen. William French Smith] had not said anything about it. We were blindsided.

“Reagan slammed his glasses down on the desk and said, ‘I can make more money in a month in Hollywood than I’m making as governor of California.’”

He was making $49,100 — and afterward making sure he was paying taxes on every cent.

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