I have briefly reviewed the tax returns of President Obama for 2009 , 2010 and 2011, as well as the returns for Mr. Romney for 2010 and 2011.
The majority of Mr. Romney's income comes from dividends, interest and capital gains. Capital gains and dividends are generally taxed at a rate of 15% for Federal purposes. In 2011, his capital gains and qualified dividends amounted to over $9 million and his total adjusted gross income was $13.7 million. From this amount he donated $2.25 million to church and charities. His effective Federal tax rate for 2011 was 21.49% (not the 13% as often publicized). In addition he paid Massachusetts State taxes of $1.3 million, effectively bringing his combined federal and state tax rate to 36%.
In 2009, President Obama earned $5.5 million, with $5.1 million of that coming from his book sales. In 2010, his book sale income was $1.4 million and in 2011 it dropped to $441,000. (Is he becoming less popular?) For the years 2009, 2010, and 2011, President Obama paid combined Federal and State taxes at an average rate of 39%. Interesting to note, all former presidents receive a lifetime pension, but President Obama also took $49,000 of his earned income for each of these years and put it into a SEP IRA for himself. This alone saved him about $19,000 in taxes each year and it really is just moving money from one pocket to the next. I recommend all my self-employed clients do it.
The president often complains about “tax loopholes” for the rich; however he benefited from a loophole that is seldom if ever seen. As you recall, in 2010, he was awarded the Nobel Peace Prize. His Nobel was worth $1.4 million, and he would have had to declare this as income, however, he “declined” the money and had it forwarded directly to charities.
Had he accepted the $1.4 million, and then given it to charity, he would have paid substantially more in income taxes, as current charitable deductions are usually limited to 30 percent or 50 percent of income, depending on the type of organization receiving the funds.
The president has a good CPA.
An added thought, I suspect FDR, JFK or LBJ never had to disclose their tax returns. If so, perhaps we would have never had the benefit of these wealthy men in the highest office.
Tom Edginton, CPA,