A U.S. dollar coin holds the lid top of the water glass of U.S. President Barack Obama at the Port of Tampa in Florida April 13, 2012. Mr. Obama's falling income means he will pay a 20.5-per-cent income tax rate under his own 'Buffett rule' aimed at millionaires.Kevin Lamarque/Reuters
U.S. President Barack Obama paid an effective tax rate of 20.5 per cent on income of $789,674 (U.S.) last year, the first time the President's income fell below $1-million since he entered the White House, according to his tax statement.
Mr. Obama's tax records, released on Friday, showed that the President and his wife have seen their income fall over the past few years amid waning earnings from book sales, but that this would allow them to avoid the proposed "Buffett rule" tax on the wealthy.
The Obama family earnings compared with $1.8-million in 2010 and $5.5-million in 2009. As their earnings have fallen, so too has their effective federal tax rate – from 33 per cent during the first year in the White House, to 26 per cent for 2010 and to 20.5 per cent in 2011.
Mr. Obama has placed a 30-per-cent minimum tax on millionaires at the heart of his re-election message of economic fairness, hitting the stump twice this week to push for the Buffett rule, named after Warren Buffett, the billionaire investor who advocates higher taxes on the wealthy.
The Obama campaign has sought to depict Mitt Romney, the presumptive Republican nominee for president, as out of touch with ordinary Americans, given his wealthy upbringing and career as a private equity executive at Bain Capital. The Obama family's tax returns certainly show a contrast with Mr. Romney – who expects to pay a tax rate of 15.4 per cent on a much larger income of nearly $21-million in 2011, much of it derived from investments.
But some Republicans were chuckling on Friday since the decline in Mr. Obama's effective tax rate moves it closer to Mr. Romney's – and means that the president and his wife may well be paying a lower tax rate than some upper middle-class households. "#Hilarious," quipped Brendan Buck, a spokesman for John Boehner, the Speaker of the House of Representatives, on Twitter.
The top statutory tax rate in the U.S. is 35 per cent, but many wealthy Americans pay less as they take advantage of the preferential tax treatment of income on capital gains and deductions including charitable giving.
Mr. Obama – who earned a salary of $395,000 last year – has now released tax returns dating back to 2000, while Mr. Romney has only released a full return for 2010 and a preliminary return for 2011. The Obama campaign has been trying, so far unsuccessfully, to press the Romney campaign into publicizing his earlier records as well.
"Governor Romney has yet to provide tax returns from the period in which he made hundreds of millions as a corporate buyout specialist, or as governor of Massachusetts, the experience he says qualifies him to be president," said Jim Messina, Mr. Obama's campaign manager, on Friday. "What does he have to hide?"
The Romney campaign did not respond to the release of Mr. Obama's tax returns, but Mr. Romney did renew his criticism of the administration's tax policies – including the Buffett rule – in a speech before the National Rifle Association in Missouri. "The president's assault on economic freedom begins with his tax hikes," Mr. Romney said on Friday. "The president is now touring the country, touting a new tax on investment and the wealthy. Congress does not need more money to spend; Congress needs to learn to spend less," he said.
Under Mr. Romney's tax plan, both he and Mr. Obama would see lower taxes, since Mr. Romney does not impose any millionaire's tax and reduces the top statutory tax rate to 28 per cent. But under Mr. Obama's plan, the top tax rate would rise to 39.6 per cent, on top of the enactment of the Buffett rule, meaning higher taxes for himself and Mr. Romney.
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