Each year, the President of the United States releases his own personal Federal Income Tax Return. I was curious about what those Returns looked like and what they might tell me about the President. I decided to review Barack and Michelle Obama’s 2010 Federal Return and George W. and Laura Bush’s 2007 Federal Return (the last Return filed by them while W. President). Most aspects of the Returns are quite mundane. However, the Returns also give a small insight on what the Presidents want the public to see about them.

Here are some similarities and differences:

  1. Filing Status: Both Presidents were married and filed as Married Filing Jointly.
  2. Dependents: President Obama listed his minor daughters as Dependents. President Bush had no dependents listed.
  3. Address: President Obama listed his address as being 1600 Pennsylvania Avenue, NW. However, President Bush listed his address as being in care of Northern Trust, with a Chicago mailing address. Perhaps President Bush felt that the IRS would not know where his principal residence was actually located.
  4. Occupation: President Obama listed his Occupation as being the “U.S. President” and Michelle Obama listed her Occupation as being “U.S. First Lady”. President Bush and Laura Bush listed their occupations without the “U.S.” Perhaps President Obama wanted to be sure that the IRS knew the name of the organization for which he was President.
  5. Wages: The Gross Wages of the President of the United States has been fixed at $400,000 since 2001. However, both Presidents’ reflected their wages on their Returns as being several thousand dollars less than that amount ($395,188 for President Obama and $397,839 for President Bush). Without seeing their respective Form W-2’s one cannot be sure as to why they are not listed as being $400,000. However, it may be related to elective pension deductions or other pre-tax items such as an HSA.
  6. Interest and Dividends: Both Presidents earned interest and dividends. However, President Bush reflected roughly $263,633 of Interest and just over $50,000 of Dividends while President Obama had roughly $8,000 of Interest and just under $10,000 of Dividends.
  7. This would tend to indicate that President Bush had greater accumulated wealth that President Obama.
  8. Both Presidents appeared to have much of their interest from U.S. Government securities.
  9. Both Presidents appeared to use Northern Trust as their investment advisors. Perhaps their investments are held in blind trusts so as not to be accused of executing policies that tended to favor their personal investments.
  10. Book Royalties: Both Presidents earned significant income from sales of their books. In 2007. President Obama earned nearly $1.6 million from book royalties while President Bush earned roughly $150,000 as an author.
  11. Under the law, royalties are reported as a Schedule C Business where the taxpayer is in the business of being an author. Both Presidents reflected their royalties on a Schedule C. Neither had much in the way of business expenses.
  12. Net income from a Schedule C Business is subject to Self-Employment Income (SE Income). SE Income is subject to income tax plus SE tax. Both Presidents attached Schedule SE and paid SE tax. President Obama paid SE tax of $37,036 while President Bush paid SE tax of $16,107.
  13. Although SE tax was paid, both Presidents deducted 50% of the SE tax, as allowed by law.
  14. Capital Gains/Losses: President Obama deducted a Capital Loss of $3,000. This was part of an unused Capital Loss from prior years. President Bush had a small capital gain. This may highlight that the Return sampled for President Bush was for 2007, the tax year before the big market crash of 2008.
  15. Mortgage Interest: President Obama deducted just under $50,000 of mortgage interest and President Bush deducted no mortgage interest. One would assume that President Bush has no loan secured by his principal residence in Crawford Texas.
  16. Real Estate Taxes: President Obama deducted just over $25,000 of real estate taxes (presumably for principal residence in Chicago) and President Bush paid just over $21,000 of Ad Valorum / real estate taxes (presumably for his principal residence / ranch in Crawford, Texas).
  17. Charitable Contributions: Both Presidents were charitable. President Obama contributed $245,075 to qualified charitable organizations while President Bush contributed $165,660.
  18. Total Tax: President Obama paid a total of $453,770 of Federal Income Tax while President Bush paid $221,635.
  19. Balance Due / Overpayment: President Obama had a Federal Tax Overpayment of just over $12,000 which was applied to his 2011 tax year. President Bush had a Balance Due of $17,741.

Separately, President Obama filed a Federal Gift Tax Return (Form 709) showing that he and Michelle Obama gifted money to their daughters. Based upon the amounts reflected, the contributions must have been contributions to Section 529 Education Plan accounts.

 

Conclusion:

One would assume that the tax preparers would have been carefully selected. Further, the Returns would have been reviewed by a number of other professionals to assure that they were complete and accurate. Of course, both Presidents know that their Returns are published. Accordingly, certain activities could be chosen by a President based in part upon how it would reflect upon them. For example, significant charitable contributions tend to reflect well upon them. Further, contributions by President Obama to his daughters Section 529 Plans highlight his support for education.

For those who are interested, the Federal Tax Returns of Vice President Biden, past Vice President Cheney have been published. Candidates McCain and Palin’s Returns have also published.

 

 

05/2011

Copyright ©, Keith B. Baker – 2011

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