Hamill: When tax returns were public — and why that ended

When I worked as a professor at the University of New Mexico, my salary was published in the budget book. The university pay of any UNM employee is public information.

You can imagine that seemed to be an invasion of privacy. But I accepted it as a price of being a public employee.

I had other sources of income outside the university, including payment from the school’s private foundation. None of that was reported.

All of my income, plus a lot of other private information, was reported to the IRS and the Taxation and Revenue Department.

People do not accept that the price of filing an annual income tax return is public disclosure of their financial information.

Without understanding the whys and hows, most people just implicitly assume that whatever they file with the IRS will not be widely disclosed.

It was not always that way. Joseph Thorndike has written several pieces in Tax Notes about the history of privacy in tax laws.

Most of the information in this column comes from Thorndike’s two recent pieces. The first income tax acts were enacted during the Civil War.

The 1862 and 1864 tax information was published in local newspapers, posted in public locations and made available at local government revenue offices.

Public posting was considered necessary to allow the government to communicate with taxpayers in an era of poor communication.

It also helped the public to encourage honesty among fellow citizens. After the war ended, people began to push back against public disclosure.

A July 1869 New York Times editorial argued that tax authorities should be able to collect taxes without disclosure of personal data to a “curious crowd.”

The Civil War income tax expired in 1872. When it was revived in 1894, Congress made disclosure a misdemeanor offense.

The 1894 law was found unconstitutional, and the Treasury decided to burn all tax returns that had been filed while the law was in place.

A form of a corporate income tax was enacted in 1909 with full disclosure of tax filings. No funds were appropriated to allow this disclosure.

In 1910, Congress fixed the funding problem but also said that disclosure would only be allowed “upon order of the President.”

In 1924, Congress required that the names, addresses and tax liabilities of everyone paying the income tax be disclosed.

Newspapers reported local taxpayer records and some records of famous people outside the local area.

In 1926, Congress eliminated the requirement to disclose taxpayer information. The data remained a “generalized government asset” available across government agencies.

The Watergate scandal included revelations that White House staff were trying to access private tax information of people on President Richard Nixon’s “enemies list.”

The attempts at tax disclosure and use of that information as a weapon were included in the July 1974 articles of impeachment.

In response to the Nixon disclosures, the 1976 Tax Reform Act added a statutory framework for taxpayer privacy.

Until 1976, the general history of the United States was to treat tax records as public, limited for the most part by the requirement of presidential authorization to disclose.

The 1976 reforms changed taxpayer information to be presumptively private. Congress, rather than the president, could authorize disclosure.

The reforms also adopted a broad definition of tax return information protected from disclosure and limited intra-government — executive and agency — access.

A federal district court judge could authorize disclosure to federal agencies for nontax criminal enforcement.

The law also required reporting from government agencies that received return information. The reporting can help check that disclosure was permissible.

The reforms also added penalties for unauthorized disclosure of tax return information.

Thorndike’s two articles present a history of a country that gradually moved from public disclosure of tax information to protecting the privacy of sensitive information.

This movement occurred because of public demand. People simply do not want their most private financial information shared with the “curious crowd.”

As I struggled sometimes to figure out how universities worked, more experienced colleagues often told me, “There’s a history behind that.”

Today we hear of — but do not fully know — tax return information being shared across government agencies.

What could possibly go wrong? Almost 50 years ago, we learned what could go wrong. The public demanded change. Privacy. Do we still have that?