Why Tax Returns Fall Short of Reasonable Requirements for Financial Disclosure
Quick Read- While there have been significant calls for gubernatorial candidates to release their tax returns, this method of gathering financial information is completely voluntary, and often leads to an incomplete financial picture.
- Statements of Economic Interest, currently required of all Illinois political candidates, should require deeper and wider disclosure of candidates’ finances and potential conflicts of interest.
- Using other states’ requirements as a guide, Illinois can make meaningful changes that would help the public understand candidates’ sources of income, clients, and financial dealings.
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| For the past several years, the public has come to expect candidates to release their tax returns, or provide other types of financial disclosure, especially when running for high political office. By doing so, candidates give voters and the media a chance to assess the possibility of conflicts of interest. However, this expectation is often unfulfilled for two reasons. First, tax return disclosure is entirely optional for candidates, and is not required by any state. Second, and more importantly, tax returns may not include important financial information voters want, and may fall far short of disclosing important sources of a candidates’ income. |
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Current Reporting Requirements in Illinois
In Illinois, candidates are not required to disclose their tax returns. However, they are legally required to file a “Statement of Economic Interest” when they submit their nominating petitions to the State Board of Elections. In it, candidates must disclose their economic activities from the preceding calendar year, including:- Ownership in a company doing business in Illinois valued over $5,000
- Service as an officer or partner for professional organizations where a candidate received more than $1,200 in income
- The nature of professional services from which a candidate received more than $5,000 in income
- Ownership of capital assets from which candidates received capital gains of $5,000 or more
Statements of Economic Interest are filed using prescribed forms, which are often maligned by reform advocates and journalists, who cite a lack of detailed information necessary for a full financial picture. Asking candidates to release their tax returns does not necessarily fill the gap. Here’s why: the Statement of Economic Interest does not require information on the degree of ownership or income received from a particular business or entity. Furthermore, the required form does not ask candidates to disclose the names of individual clients they serve. Instead, candidates are only asked to list the types of services they provided, and types of businesses utilizing their services. Because candidates can simply release tax return summaries, and no guidelines exist for these disclosures, tax returns are unlikely to fill the gaps in transparency left by the current, vague Statements of Economic Interest in Illinois. In order to adequately assess potential conflicts of interest, the public needs access to specific income sources and clients served. |
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How Illinois Can Become a Leader on Financial Disclosure
To be a leader in financial disclosure for political candidates, Illinois should require the following information to be disclosed in each Statement of Economic Interest:
- Names of businesses and investments with financial ties to the candidate
- The amount of income a candidate received from reported entities
- A list of the candidate’s professional clients, as allowed by law
None of these reforms are unprecedented. At the federal level, and in ten states, including California and New York, candidates are already required to provide a list of assets, sources of income, and the amount received from each source. Many more states have versions of these requirements, where specifics on sources of income, but not value, are disclosed.
Additionally, the National Conference of State Legislatures reports that 15 states have laws requiring state legislators to disclose the names of individual clients when they receive income from sources beyond their state salaries.
A Chicago Tribune report from December 7th highlighted the importance of transparency in identifying state lawmakers’ potential conflicts of interest. Additionally, the State Journal-Register connected the issue of insufficient disclosure to an overall lack of robust recusal procedures for potential conflicts of interest.
Requiring these additional disclosures from candidates would make Illinois a national leader in financial transparency, for both candidates and elected officials. Additionally, detailed disclosure would become a requirement, rather than an expectation, empowering voters to make informed choices in state elections.
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