Obama managing his money ‘pathetically,’ says an accountant

President Barack Obama and his wife, Michelle, paid 20.5 percent in federal taxes on their $789,674 in adjusted gross income for 2011, according to tax returns released today by the White House.

The Obamas reported earning less than half of the $1.7 million they made in 2010 and less than 20 percent of the $5.5 million they made in 2009. Obama, whose salary as president is $400,000 a year, received most of the rest of his 2011 income from sales of his books. His gross income from book sales declined to $487,928 for 2011 from more than $1.5 million the previous year.

As the April 17 tax-filing deadline nears, Obama this week has been emphasizing his tax-fairness campaign theme and promoting his proposal to impose a minimum tax on those making $1 million or more a year. That measure, known as the Buffett rule after billionaire investor Warren Buffett, is scheduled for a procedural vote in the Senate on April 16.

The administration also put a “Buffett rule” calculator on the White House and the campaign websites. With a few keystrokes, the average taxpayer can find out “how many millionaires pay a lower effective tax rate than you.”

If the Buffett rule were currently in effect, the Obamas wouldn’t be subject to its provisions because they earned less than $1 million in 2011. They would be affected by other tax policies the president is proposing.

‘Pay More’

“Under the president’s own tax proposals, including the expiration of the high-income tax cuts and limitations on the value of tax preferences for high-income households, he would pay more in taxes while ensuring we cut taxes for the middle class and those trying to get in it,” Jay Carney, the White House press secretary, said in a blog post today.

The Obamas overpaid taxes during the year and requested that their $24,515 refund be applied to their 2012 tax payment. They donated $172,130 to charitable organizations, or 21.8 percent of their adjusted gross income.

Their charitable donation figure is a lower dollar amount and a greater percentage of their income than for 2011, and it’s a big reason why their tax rate is lower than that of many households with incomes in that range.

According to the nonpartisan Tax Policy Center in Washington, households with cash income of between $500,000 and $1 million in 2011 paid an average of 23.7 percent of their adjusted gross incomes in federal income taxes.

Military Charity

The largest recipient of the Obamas’ donations was the Fisher House Foundation, which provides lodging to relatives of hospitalized members of the military and scholarships to children of deceased and disabled soldiers. The Obamas gave $117,130 to that organization in 2011.

They also donated $5,000 each to the Boys & Girls Club, Habitat for Humanity, the United Negro College Fund and Sidwell Friends School, which their daughters attend.

Unlike last year, the Obamas were subject to the alternative minimum tax, the parallel tax system for high earners. The AMT added $12,491 to their tax bill for 2011.

Steven Bankler, an accountant in San Antonio, Texas, said Obama’s returns don’t show smart money management because his investments are in low-yield U.S. government securities and he is most likely paying interest on the mortgage of his Chicago home at a higher rate than he is earning.

“He manages his money pathetically,” Bankler said. “He’s got it backwards. This is a man that’s trying to tell us how to make decisions on managing our money.”

Book Earnings

Bankler also questioned Obama’s decision to report his book earnings as business income subject to self-employment payroll taxes. He wouldn’t have to pay those taxes if he reported the income as royalties.

More than half of Obama’s book sales occurred outside the U.S., according to his foreign tax credit form.

Anthony Nitti, a tax partner at WithumSmith & Brown in Aspen, Colorado, said Obama seems to have taken a relatively conservative approach to his tax return.

“To me, his return looks like it’s been carefully considered for public release,” he said.

Vice President Joseph Biden and his wife, Jill, reported paying $87,900 in federal taxes for 2011 on $379,035 in adjusted gross income for a 23.2 percent rate. The White House also released the Bidens’ tax returns today.

‘Their Fair Share’

Citizens “ought to be able to know that everyone one else is paying their fair share as well,” Biden said yesterday at a campaign event in Exeter, New Hampshire.

“But the truth is you know they’re not,” he said. “The truth is, when you pay those taxes, you know not everyone is paying their fair share.”

Republican presidential candidate Mitt Romney, a former Massachusetts governor, released an estimated 2011 tax return earlier this year. His final 2011 return will be released when it is filed, spokeswoman Andrea Saul said in an e-mail.

The Obama campaign has called on Romney, a former private- equity executive, to release more tax returns from prior years.

For 2010, Romney paid a 13.9 percent effective tax rate on more than $21 million in income, largely because he receives most of his income from capital gains and dividends taxed at preferential rates capped at 15 percent.

Obama, in contrast, is subject to ordinary income tax rates of as much as 35 percent on almost all of his income.

“You have two wealthy individuals, both in the top 1 percent, that have as disparate tax returns as humanly possible,” Nitti said.
–Bloomberg News–