Obama and Biden Release Tax Returns – Are They Fair?
by AccountingWEB on
By Ken Berry
The two top executives in the US government – President Obama and Vice President Biden – released their 2011 federal tax returns this past week. The Prez's return resulted in an effective tax rate slightly higher than 20 percent. For the Veep, the effective tax rate was more than 23 percent.
Neither one had to pay tax at a rate anywhere near the highest marginal tax rate for 2011 – 35 percent – but the estimated effective tax rate in 2011 for presumptive Republican presidential challenger Mitt Romney is 15.4 percent, due mainly to tax breaks on investment income.
Obama intends to turn tax fairness into a high-profile issue on this year's campaign trail. He has argued that wealthier Americans, and that includes himself and Biden, haven't been paying their fair share of taxes. "He believes that people like him should be paying an effective tax rate that is no lower than the rate paid by hard-working, middle-class Americans," said White House press secretary Jay Carney.
Although the president hasn't spelled out any specifics yet, he supports the basic premise behind the so-called Buffet Rule, named for the business mogul who proposed that the rich should pay higher taxes. The Buffet Rule would apply to those who earn at least $1 million a year.
The 2011 federal tax return for the president revealed that the family paid more than $160,000 in tax on earnings of $789,674. That was down significantly from federal income tax of $453,770 on $1.7 million of income in 2010 when Obama's books were top sellers. The president's salary represented approximately half of the 2011 income. Most of the remainder came from book sales.
Obama listed his occupation as "US President" and his wife, Michelle, stated hers as "US First Lady" on their 2011 return. The couple claimed their two daughters as tax dependents, for a total of $14,800 in personal exemptions. They also deducted more than $172,000 in charitable donations.
The vice-president's 2011 return was remarkably similar to his 2010 return. Biden and his wife, Jill, paid $87,900 in federal taxes on income of $379,035. The income was $143 less than the amount stated on their 2010 return, but their tax liability was $1,274 higher. Biden earned $225,521 from his salary as vice president, while Mrs. Biden's was paid wages of approximately $82,000 for teaching at Northern Virginia Community College. The couple claimed donations of $5,540 to charity.
Regardless of your political affiliation, it's safe to say that the two top Dems, as well as the GOP's Romney, aren't cheating on their tax returns. The moral of the story: There's a distinction between "tax avoidance" and "tax evasion." It's your job to help clients pay no more or no less than they're legally obligated to. If you can help them lower their 2011 tax bill through perfectly legitimate means, so much the better.