Wall Street Journal - Protecting Tax Privacy


Last week we criticized the Internal Revenue Service for revealing the names of hundreds of taxpayers in its tax-shelter lawsuit against KPMG. Then on Monday we published two carefully worded letters from Treasury, IRS and Justice Department officials involved in the dispute acknowledging "missteps" and promising that it won't happen again.

Mark Levin, president of the Landmark Legal Foundation, now says that's not good enough. He thinks the release of the names may also have been illegal. The clients themselves are accused of no wrongdoing; the disclosures were simply meant to bully and embarrass a court opponent at the expense of taxpayer privacy.

On Tuesday Landmark asked Justice, which sued KPMG on behalf of the IRS, to investigate the attorneys involved. In a letter to Justice's Office of Professional Responsibility, Mr. Levin says the department's lead lawyers may have violated a section of the tax code that explicitly guarantees the confidentiality of tax returns. While the tax code does provide for some exceptions, says Mr. Levin, "the facts of the KPMG matter do not satisfy the requirements."

An official investigation is certainly in order. Our tax system works in part due to privacy guarantees that motivate individuals to comply. The IRS's actions violated a public trust, and those involved should be held accountable.

The partisan odor surrounding these actions is also worrisome. California gubernatorial candidate William Simon Jr. was among several prominent Republicans who had tax information disclosed by the IRS. Stuart Gibson, the Justice attorney leading the prosecution against KPMG, is a well-known Democratic activist in Virginia. Mr. Simon's rival, Governor Gray Davis, naturally made political hay of this, and Mr. Simon has spent the past 10 days talking about his taxes. This week he released tax returns for the past 11 years.

Reasonable people can disagree over whether a candidate for public office should volunteer such information, but we're certain that partisan government officials should play no role in forcing it. Let's find out if they did.

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