I, like so many of you, have listened to the recent national campaign rhetoric and finally decided to take a look at both President Obama’s and Mitt Romney’s most recent tax returns. There are many sites that list the tax returns for both individuals with some of the sites listing tax returns for several years prior to 2011.
To set my parameters, I admit that I did not prepare either tax returns and was, therefore, not privy to information or data used to formulate and prepare these returns. My comments are mine alone and I made determinations based on my superficial review of the tax returns, but with experience in federal taxation.
The first thing you will notice is the redacting of the social security numbers on both tax returns. Both are filed as Married Filing Jointly with Obama’s return claiming their daughters, Malia and Natasha, as dependents. The Romney return only claims themselves for the personal exemption. My assumption that that their five sons are no longer dependent financially or claiming domiciliary to be claimed on their parent’s tax return.
Both individuals had professionals prepare their tax returns. Maybe the tax laws are really too complicated for the average person to prepare a tax return. Michael S. Solheim, a Certified Public Accountant with Wineberg, Solheim Howell & Shain, PC of Chicago, Il. prepared Obama’s tax return. We don’t know how much Mr. Solheim’s fee was for preparing Obama’s past tax return since line 22 of Schedule A is blank, “Tax preparation fees.” Even if he had listed the tax preparation fee for 2010 on the 2011 tax return, in order for it to be deductible it would have to exceed 2% of the Adjusted Gross Income, AGI, of $789,674 or $15,793.48. However, should the fee exceed the AGI, the stealth tax, Alternative Minimum Tax (AMT) would have zeroed out this deduction.
Romney’s tax return also does not list the tax preparer fee. The tax return was prepared by Daniel P. Feheley of PriceWaterhouseCoopers LLP in their Boston office. Romney’s return has a total of 104 pages, without possibly other attachments, and Obama’s return has 28 pages, a difference of 76 pages. This may be understandable since Romney’s tax return has a significantly higher level of activities, but the same number of lines utilized on page 1 of the form 1040 for taxable income.
Line 8, Taxable Interest $10,694 $4,099,156
Line 9, Ordinary Dividends $3 $3,168,867
Line 10, Taxable Refunds $-0- $352, 905
Line 12, Business Income $441,369 $110,500
Line 13, Capital Gains $-3,000 $10,700,179
Line 14, Other Gains $ -0- $-0-
Line 17, Rentals/royalties, etc. $698 $2,830,078
Line 21, Other Income $-0- $-352,805
Line 27, Deductible
Employment Tax $5,911 $7,805
Line 28, Self Employ SEP, etc. $49,000 $-0-Adjusted Gross Income $789,674 $20,901,075
Regular Tax $143,603 $2,988,626
AMT $12,491 $224,425
Total Tax Before Credits $156,094 $3,213,051
Foreign Tax Credits $5,841 $-0-
Net Tax After Credits $150,253 $3,213,051
Self Employment Tax $11,821 $13,572
Total Income and S/E Tax $162,074 $3,226,623
Overall Effective Tax Rate 20.524166% 15.437594%
AMT Tax Rate 1.581792% 1.073749%
Since Romney had $10,700, 179 of long and short capital gains and qualified dividends of $3,689,646 which together comprised 68.85% of his total AGI, the capital gains and qualified dividend tax was 15% on a total of $11,515,850 = $1,727,378 tax plus the regular tax of $1,261,248 and AMT of 224,425. Thus, the overall lower tax rate for Romney. In terms of capital gains for Obama, he could only take the capital loss carryover from prior years of -$3,000 and still carryover to 2012 an unused capital loss of $116,151.
Romney had no taxable income from any foreign country, which would have taxed the same stream of income and under existing tax treaty. Romney would have been allowed a foreign tax credit; see above that there was no foreign tax credit to reduce U.S. tax. For all of the television commercials claiming Romney had significant overseas income, there was none reported on his tax return with an offset for foreign tax credits. However, Obama reduced his U.S. tax by utilizing the foreign tax credit of $5,841 of money he earned overseas on income totaling $269,710.
Even more odd, Romney DID NOT have any financial interest in or authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country for 2011. Romney DID NOT receive distributions from, or was the grantor of, or transferor to, a foreign trust. See Romney’s tax return for 2011, schedule B, Part III.
Almost all of Obama’s passive gross interest income was from U.S. Government securities of $16, 640. Romney also made considerable interest income from U.S. Government Bonds and other obligation in the amount of $2,639,021. Interestingly, Romney made only $13,325 of Bank of America bank account interest! I would imagine that with the current U.S. bank interest on savings accounts being under 1% this is understandable.
I hope this gives a different perspective on the claims made in our national and international news media.
You can review presidential tax returns here at Tax Analysts.