President Obama released his 2011 Form 1040 on Friday, revealing that he and his wife, Michelle, paid more than $162,000 in federal taxes on income of $789,674.
The Obamas’ effective tax rate was 20.5 percent, according to the White House. That’s lower than the rate that hits many taxpayers who make less than the first couple, but it’s higher than presumptive GOP nominee Mitt Romney pays. Earlier this year, the Romney campaign released tax documents indicating that the former Massachusetts governor was planning to pay about 15.4 percent of his (substantially higher) income to Uncle Sam.
The disparity here is due to the fact that most of Mr. Romney’s cash inflow comes from investment income, which is taxed at a much lower rate than is earned income. Mr. Obama’s proposed “Buffett rule,” named after billionaire Warren Buffett, would force those who earn $1 million a year to pay at least 30 percent in taxes, whatever the source of their income – a point the administration was eager to highlight with the release of the Obama family return.
The Buffett rule would not have hit the Obamas this year, since their income was below the $1 million mark. In previous years, however, royalties from his books have pushed Obama’s earnings well into the seven figures.
Obama “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 on Friday.
There is no law requiring US presidents, or US presidential aspirants, to release their tax returns to the public. If they choose, White House occupants are entitled to all the privacy in regard to their income that ordinary citizens enjoy.
The custom that presidents do release this information dates to the early 1970s, and the administration of that most maddening of modern-day chief executives, Richard Nixon.
Mr. Nixon’s 1974 resignation over Watergate today obscures the fact that he was also in trouble over how little he had paid in federal taxes.
In an effort to bolster his image, Nixon had boasted at a press conference that he’d been audited by the Internal Revenue Service and found clean. Long story short, this led to pressure to release his returns, Nixon’s developing political weakness led him to comply, and reporters discovered that he’d paid only $6,000 in taxes on cumulative income of $790,000 from 1970 to 1972, due to big deductions he’d taken on donating his vice-presidential papers to charity (among other things).
Upon further review, the IRS decided that Nixon owed $465,000 in back taxes.
Following Nixon’s resignation, new President Ford had to restore faith in the US system of government. In 1976, during the presidential campaign, he released his tax returns.