The battle over the privacy of returns is as old as the income tax itself. The nation’s first such levy originated during the Civil War, and anyone could get the information. In fact, newspapers regularly published the amounts paid by the wealthy — a radical form of transparency that critics said went too far.
Congress prohibited the practice in 1870, and the income tax itself was rolled back not long afterward. In 1894, as part of a drive to reinstate the tax, Congress made the unauthorized disclosure of tax returns a misdemeanor, further strengthening privacy protections. But the Supreme Court soon ruled the tax unconstitutional, making the point moot.
In 1910, Congress moved to protect the privacy of corporate tax returns on the grounds that their release could reveal trade secrets to competitors. Under the new law, only the president — via the secretary of the Treasury — could release corporate returns. When Congress passed a new income tax law in 1913, it quietly extended this protection to personal returns as well.
Lawmakers soon realized that this effectively deprived their own committees of the right to review tax returns — even in cases where they were considering legislation directly related to Congress’s authority to tax and spend. This struck legislators as absurd, and in 1920 Congress came close to restoring its authority to request tax returns — but the provision was inexplicably removed by the conference committee.
The matter would have rested there, but along came Harding, who presided over one of the more inept and corrupt administrations in U.S. history. He never really expected to be president, and described himself as “a man of limited talents,” who wasn’t “fit for the office and should never have been here.”
Harding surrounded himself with toadies and yes-men who swiftly began helping themselves to the spoils of office. The president abruptly died two years into his term, but the resulting scandals would keep Congress busy with investigations for several years afterward. The most famous of these, the Teapot Dome, involved oil interests that had bribed public officials in exchange for leases on public land.
Congress eventually asked Calvin Coolidge, Harding’s successor, to release the tax returns of some of the Teapot conspirators. Coolidge reluctantly complied after some delay, and the experience left many in Congress concerned that not all presidents might be forthcoming.