Tax Returns Are A Good Start But Let’s Have The Full Story Of Politicians’ Money

Published in the Yorkshire Post 16 April 2012

The Americanization of British politics took a big step forward when David Cameron and his Cabinet promised to publish their personal tax returns.

Cameron was following an ancient rule of American politics: do the right thing when it makes your opponent look bad. He clearly aimed to prolong the discomfiture of Ken Livingstone. Labour’s candidate for Mayor of London had overtaken the incumbent, Boris Johnson, in the polls, largely by talking about his most popular policy, lower fares on public transport. The row over Livingstone’s personal tax arrangements (stoked by some well-chosen expletives from Johnson) drove transport off the agenda, and Johnson is now ahead again.

Personal tax issues invariably force candidates away from their chosen issues and make them discuss things they would prefer to keep quiet. That is what makes them so delightful. In the United States, the Republican frontrunner, Mitt Romney, has already stumbled in his party’s primaries when asked to reveal his tax returns. President Obama’s campaign team renewed the demand after Romney saw off Rick Santorum, his last serious Republican challenger. Obama’s team want to remind American voters that Romney is a very rich man, whose tax plans would make him and people like him even richer. They also hope to expose other issues where they think Romney vulnerable, including use of Swiss and Caymans bank accounts and contributions to the Mormon Church.

Ironically, Romney is a victim of his father’s transparency. George Romney, competing for the Republican nomination in 1968 against Richard Nixon, released 12 years of personal tax returns. Romney’s campaign collapsed after an honest but ill-judged comment on the Vietnam war, but his tax initiative has been followed since then by almost every major American candidate. It established a set scene in American political theatre: candidates publish their tax records to their best advantage, look for embarrassments in their opponents’ records and accuse them of concealment if they cannot find any.

If Cameron fulfils his promise, this American ritual will inevitably become a lasting feature of British politics. Many critics – and not only politicians – are worried by its implications. It would overturn a major principle of British tax policy, that all individual records are private. It could deter talented people from entering British politics and reward mediocre goody-goodies. It could distract British voters from the policy choices on offer from the parties and encourage the media to focus even more intently on politicians’ personal lives.

All of these arguments have some force but there is an overwhelming argument in favour of making politicians publish their tax returns.

They provide information for voters which is not under politicians’ control. In a tax return, politicians have to answer the same questions as everyone else and meet the same standards as everyone else in their replies. A tax return has to be honest and comprehensive, under penalty of law. A tax return represents trustworthy news for voters. Unlike a speech, a policy statement, an off-the-record briefing, an election stunt or scare, a photo-opportunity, a soundbite, a well-rehearsed answer to a prepared question, a tax return conveys information which has not been manufactured or doctored by politicians themselves. Unlike Internet gossip and rumour, the information in a tax return is reliable and verified.

British voters have a right to know how rich their politicians are, and where they got all their money. Particularly at a time of national austerity and sacrifice, they should also be able to see the effective tax rates which their politicians are paying on their full incomes, and whether they have organized their affairs to minimize tax through devices beyond the reach of working taxpayers on average incomes. Tax returns can help to provide all of this information. Politicians should be made to publish them in full (not selected highlights), and they should publish returns over several years, to let voters pick up significant changes.

Even when disclosed on these terms, tax returns will often fail to tell the full story of politicians’ money. They may miss income from trusts or partnerships or routed through private companies or co-operative spouses or relatives. For that reason, there is a good case for combining their publication with a general obligation to disclose all relevant financial details. If Cameron wants to import American practice into our country, he should study the information requirements for American Presidential candidates under the Ethics In Government Act 1978.

British voters certainly deserve full information about their politicians’ money, but no one can be certain what conclusions they will draw from it.

The conventional wisdom is that disclosure harms rich politicians, but this has never been conclusively established. It is equally possible that voters admire politicians who have been personally successful and trust them to achieve the same success running their country. Mitt Romney might test that theory in the United States, and if he wins on that basis, it would have an interesting effect on politicians’ tax returns. Far from underdeclaring they will start to overstate their income. That may not do much for democracy, but it would certainly help to cut the deficit.

30. April 2012 by rkh
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