Richard Kaplan: Additional Rauner tax-return disclosures probably won’t reveal much
Various reporters, editorialists and politicians are clamoring for Bruce Rauner, the Republican candidate for governor of Illinois, to release more of his tax returns — specifically, the detailed schedules that accompany the “top sheets” that he already has released.
They probably will be disappointed, even if Mr. Rauner complies with their requests.
The Republican candidate for governor already released pages 1 and 2 of his federal and Illinois income tax returns for 2010, 2011 and 2012, which clearly show he is a wealthy man with substantial income from investments.
If you dislike him for that reason, you already know enough to do so.
But if the concern is whether Mr. Rauner failed to report income beyond what his disclosures have revealed, this disclosure campaign seems off the mark.
Let’s say he discloses his Form 1040 Schedule B, which details interest and dividend income. We already know what the total amount is — more than $16.6 million in 2012.
What Schedule B cannot show is whether there were additional sources of investment income that he did not report. That seems to be the implication from various observations that some of his investments are based in the Cayman Islands, a well-known tax haven jurisdiction.
But just because an investment is managed there does not mean that an investor such as Mr. Rauner failed to report the income produced by that investment. Most people, to be sure, do not have investments based in the Cayman Islands, but Mr. Rauner is not most people. We already knew that, and the tax return information he released last November proved that.
Even a detailed listing of specific investment sources on Schedule B is likely to disappoint, because many investments are consolidated for tax reporting purposes.
Thus, an ordinary investor might own eight mutual funds though an account at Fidelity, Vanguard, Charles Schwab or some other investment company, but the Schedule B would simply list the name of that company rather than the underlying eight mutual funds.
I am not suggesting that investing through a well-known tax haven does not raise questions of “optics” for someone in the public eye. But beyond such cosmetic considerations, there may not be much there.
Bottom line: whether Mr. Rauner has fully complied with tax rules can be determined only from a full IRS audit of his income sources. More detailed tax return releases won’t settle this issue.
Richard L. Kaplan is an internationally recognized expert on U.S. taxation and tax policy. He is the Peer and Sarah Pedersen professor of law at the University of Illinois.
