Leaking taxpayer information is illegal. But is it wrong?
For many, the answer is an obvious yes. But historically, the moral status of unauthorized tax disclosure has been at least a little murky. To illustrate, let’s compare two of the most notorious leaks in IRS history: the giant 2021 leak of wealthy taxpayers’ data to ProPublica and the 1973 leak of President Richard Nixon’s personal tax information to The Providence Journal-Bulletin.
The first is a bad leak: broadly unpopular, at least among opinion leaders and tax professionals. The second is a good leak: rarely criticized, even by people who cherish taxpayer privacy.
At the heart of this dualistic typology is a theory of instrumental morality. People value the privacy of tax information, especially their own. And in the abstract, support for privacy extends beyond the self to other taxpayers — even rich ones.
But when the object of a tax leak is unpopular, moral conviction begins to fade and eventually, as with Nixon, disappears.
Problems With ProPublica
The 2021 leak to ProPublica is top of mind, thanks to a September 29 announcement by the Justice Department that it had cracked the case. The department charged Charles Littlejohn, an IRS contractor, with stealing the tax return information of many of the nation’s wealthiest individuals and leaking it to a news organization.
The leak to ProPublica was controversial, not least because of its astonishing breadth and scope. The disclosure involved more than 15 years of data for thousands of wealthy — and often famous — taxpayers.
Or nonpayers, as it turned out. The fact that rich people weren’t paying (or at least not paying much) was hardly shocking to people familiar with the federal tax system. But critics of that system were still happy to have the facts laid bare.
David Cay Johnston, who won a Pulitzer prize for his coverage of taxes at The New York Times, called the ProPublica revelations the “biggest and most important” tax news of the last half-century. “We should be building statues to honor this leaker, if he or she is ever identified,” he wrote.
Still, other champions of progressive tax reform were troubled by the ProPublica leak. Leslie Book, a law professor at the Villanova University Charles Widger School of Law, spoke for many when he explained the problem for NBC News:
Despite highlighting the different tax systems for those with vast wealth, the ProPublica report also raises questions about the IRS’ ability to keep sensitive financial information confidential. This in turn could undermine the support the IRS needs to crack down on tax evasion (mostly by the merely wealthy — not the 0.001 percent). It would be an unfortunate and ironic consequence of what is truly a historic report.
Book’s concern was mostly practical. Disclosures intended to trigger outrage and bolster reform can backfire if the disclosure itself seems morally suspect. And that may be the case with the ProPublica leak, which sacrificed individual privacy for the sake of systemic reform. The human cost of that disclosure, however, was hardly trivial.
David Kautter of RSM US LLP, a former acting IRS commissioner and current Tax Analysts board member, made a straightforward moral case against the disclosure after the Justice Department announced the Littlejohn charges. “The amount of damage done to those taxpayers whose information was disclosed cannot be overstated and cannot be undone,” he told Tax Notes. “Given the amount of harm caused, while I am glad that the federal government has finally charged someone, I am not sure that the charges brought are proportional to the amount of damage done.” (Related coverage: p. 356.)
Defending Disclosure
While acknowledging the ethical issues surrounding publication of leaked data, editors at ProPublica defended their decision. “We are disclosing the tax details of the richest Americans because we believe the public interest in an informed debate outweighs privacy considerations,” they wrote.
Such arguments are grounded in a long tradition of journalistic ethics. But they did little to mollify critics, including the taxpayers affected by the leak. Many directed their wrath not simply at the leaker and ProPublica, but also the official custodians of taxpayer data. Hedge fund manager Ken Griffin, for instance, sued the IRS for failing to safeguard his tax information. “The government has a fundamental obligation to protect the confidentiality of Americans’ sensitive information, whether it be tax records or healthcare records,” he told Politico.
Outrage has also been abundant on Capitol Hill, where it tends to follow partisan lines. Republicans have treated the ProPublica leak as a case study in IRS incompetence. “I think it’s astounding to people,” exclaimed Senate Finance Committee member Marsha Blackburn, R-Tenn., in a recent hearing, “that they have to submit this information to the IRS — they’re required to do this — and then they find out that there are these data breaches, and each one it’s like, ‘Why can’t these people get this right?’”
In my dualistic typology of leak morality, the disclosure to ProPublica was a bad leak. Not bad in some abstract normative sense, but bad politically. Critics outnumber defenders, even among people eager to raise taxes on the rich; for every David Cay Johnston, there are dozens of David Kautters and Leslie Books — not to mention quite a few Marsha Blackburns on Capitol Hill.
That opposition has rendered the ProPublica leak problematic, at least for now (these things can change over time). Rich people might not be relatable, especially when they are minimizing taxes. But neither are they clearly detestable, which distinguishes them from Richard Nixon.
Leaking Nixon’s Taxes
On January 17, 1974, the IRS announced that one of its employees had quit his job. The departure wasn’t consensual; the unnamed employee had been threatened with dismissal. But his crime was sizable and consequential: In the fall of 1973, he had leaked President Richard Nixon’s personal tax information to a reporter.
On October 4 the Providence, Rhode Island, Journal-Bulletin published an article asserting that Nixon had paid only $792.81 in federal income taxes for 1970 ($6,690.66 in 2023 dollars) and $878.03 in 1971 ($6,856.10 in 2023). These numbers were shockingly low, given Nixon’s annual income of more than $200,000 (roughly $1.6 million in 2023).
The New York Times was quick to point out that Nixon was paying “about the same tax as would have been paid by a family of three with an income between $7,500 and $7,550 in 1970 ($63,294 and $63,716 in 2023 dollars) and a family of three with an income between $8,450 and $8,500 in 1971 ($65,982 and $66,372 in 2023 dollars).”
That sort of comparison was explosive, especially in the early 1970s — a period of famously high inflation, sluggish growth, and widespread economic misery. More to the point, it was the kind of tax inequity that Nixon had used to justify the sweeping tax reform legislation of 1969. Once eager to denounce tax avoidance by the rich, Nixon was now exposed as a shirker himself.
“The 1973 report really struck a chord, especially with blue-collar Americans, who all paid much more in federal income taxes,” recalled Tim White, son of Providence reporter Jack White, who broke the story in 1973.
Indeed, the Nixon tax leak was pivotal in the brewing scandal over the president’s taxes. By the end of the year, Nixon’s returns were being investigated by the Joint Committee on Internal Revenue Taxation, and a few prominent lawmakers (like House Ways and Means Chair Wilbur Mills, D-Ark.) were suggesting that taxes — not Watergate — might force Nixon from office.
Unidentified Leaker
Jack White never divulged his source for the Nixon data — not even to his son, who followed his father into journalism. According to news reports, however, investigators had traced photocopies of the Nixon tax records to a copying machine at the IRS national computer center in Martinsburg, West Virginia.
The IRS declined to identify the leaker, even as unnamed sources close to the investigation offered insight on a possible motive. “The Internal Revenue Service employee who saw Mr. Nixon’s records was so disturbed by what he found that he decided to make the details of the tax returns public in defiance of service regulations,” The New York Times reported.
The Justice Department had decided not to prosecute the leaker. At the time, unauthorized disclosure of taxpayer information was a misdemeanor under federal law. If found guilty, the leaker could have faced a $1,000 fine, a year in jail, and automatic dismissal from the agency. To avoid that prospect, the employee agreed to leave the agency voluntarily.
And with his departure, the IRS declared the matter closed. As one of its officials noted, the agency would not identify the leaker publicly “because there is nothing in the public record at present” concerning him.
A Theory of Doug
It took more than a few years, but eventually a theory emerged about the identity of the leaker. In 2003 the Baltimore Sun reported on the story of John O. Requard, an IRS employee who had attracted early suspicion as a possible culprit in the Nixon leak. In talking to the Sun, Requard vividly recalled his questioning.
“Have you ever seen the President’s 1970 or 1971 Federal Income Tax Returns?” said the paper questionnaire handed him by the IRS investigator, a scary guy in his 50s with thick glasses and a German accent. “Have you ever seen a computer printout, microfilm print, microfilm tape or any other record containing financial data taken from the President’s 1970 or 1971 Federal Income Tax Return?”
Requard said no to all these questions, but he did suggest that a coworker, identified simply as “Doug,” had shown him a copy of the Nixon data in the fall of 1973. And in fact, Doug himself had admitted as much to investigators.
The Sun reporter, Jay Hancock, decided to call Doug, who was still kicking around and willing to talk. But Doug refused to let Hancock identify him; his wife still worked for the government, he told Hancock, and he simply couldn’t take the chance of blowback, even 30 years later.
But Doug knew a lot about the leak. Back in the day, he recounted, the IRS computer system was open and easy. “You could go in and essentially look up whoever you wanted to, including the president and the vice president,” he recalled.
And then Doug offered something close to a confession, replete with motive.
“It wasn’t me, but somebody decided they were going to look up Richard Nixon and, boom, there it was,” Doug said. “We were kind of shocked, frankly. We kind of looked at each other and went, ‘So they’ve got us out in the streets collecting from people in the ghetto and our top guy is getting $50,000 refunds and paying less than $1,000 in taxes.’ That kind of fired a few people up.”
Doug repeatedly declined to take credit for the leak, let alone the initial data theft. But he also wouldn’t firmly deny it. Hancock was certain he had found the leaker.
Different Leaks
Regardless of the leaker’s identity, the most striking aspect of the Nixon tax disclosure was the tacit approval it got (and continues to get) from almost everyone. To be sure, the IRS began investigating the leak immediately after its appearance in the Providence paper. But any real objection to the leak itself was overwhelmed by the shock of the information it provided to the public and its effect on Nixon’s worsening tax crisis.
Even the resolution of the leak investigation suggested that leaking wasn’t so bad, at least when Dick Nixon was the injured party. We don’t know why the Justice Department chose not to charge the leaker. But we do know that the IRS’s decision to allow a voluntary departure — and to grant the leaker anonymity afterward — was a pretty sweet deal.
Certainly sweeter than the criminal charge against Littlejohn for the ProPublica leak.
Outside Washington, tacit approval for the Nixon leak was even more obvious. A January 30, 1974, editorial in the Berkeley, California, Gazette tried to describe the ethical dilemma surrounding disclosure — which wasn’t much of a dilemma at all, at least for the editors. Noting that the IRS leaker was lucky to get off so easily, they acknowledged that tax data should be private.
“It would be a heck of a situation if everybody’s private finances could be made public knowledge at the whim of any Revenue Service clerk,” the editors wrote, “for purposes of embarrassment, business or political revenge, or any other personal grievance.”
But that wasn’t what happened in the Nixon case, they went on. The IRS employee in question had been driven by noble motives: outrage at the “unheroic behavior of the nation’s first citizen.” Had the leaker not chosen to break the law and make Nixon’s tax data public, the country would never have learned the truth. And that would have been a disaster since it was “information which the American people have a right to know about their president.”
Perhaps even more striking than the occasional affirmative defense of the Nixon leak was the public’s broad tacit acceptance of it. The story got wide coverage, but virtually none of it dwelt on the legitimacy of the leak itself. To some extent, that silence may reflect the standards of a different era. Leaks were held in higher esteem in those days, along with the news outlets that published them.
Still, the Nixon leak was almost uniformly treated as a valuable contribution to the public debate over an embattled president. There was virtually no hand-wringing about the propriety of exposing a president’s behavior, even if that exposure was technically illegal.
Leaks Good and Bad
The Nixon tax disclosure was a good leak, in the sense that it enjoyed broad support at the time and continues to receive tacit support even today. You don’t often hear complaints about the Nixon leak, even from people who complain vociferously about the leak of Donald Trump’s tax returns.
The Nixon leak has achieved respectability, its moral status bolstered by the moral failures of Richard Nixon himself. The fact that congressional investigators later confirmed many of the worst suppositions about Nixon’s taxes certainly helped bolster the reputation of the original leak. But ultimately, it was Nixon who made the leak respectable — by disrespecting the tax system itself.
And that’s the bottom-line lesson on tax leaks. Our view of them tends to be instrumental. As a polity, we approve of leaks that uncover facts we want uncovered — that challenge evils in need of exposure and public scrutiny. The historical reputation of a leak has less to do with the leak than with collective judgments about the subject of the leak.
And it can take time for those judgments to form. The ProPublica leaks are controversial now, but it’s easy to imagine that they might be less controversial in a decade or two. That’s not a statement about how they should be viewed. Just an observation about the way that leaks actually are viewed through the long lens of history.