In the time-honored tradition of folks with things to hide, Hillary Clinton released her tax returns late today, Friday -- too late for the evening news, if anyone watches that anymore, but in plenty of time for it to be old news by Monday.
Our ultimate power couple has a truly impressive earning capacity -- one that puts that upstart Obama couple in their place. The TaxProf has prepared a nice comparative summary. It's enough to note that all of the Obama returns from 2000 through 2006 together don't come within shouting distance of the Clinton's poorest post-presidential year. All of the Obama returns from 2000 put together come nowhere near the Clinton's $15.8 million 2006 adjusted gross income.
Speaking as a tax preparer, though, after glancing through both the Obama and Clinton 2006 returns, one thought comes immediately to mind:
What is wrong with these people?
In 2006, Bill Clinton had north of $12 million of speaking and book self-employment income. Hillary herself had over $500,000. Both had plenty of income to fully-fund a SEP to the tune of $45,000; they would have saved over $30,000 in federal taxes alone. But like the Obamas, they didn't feel any need to set anything aside for retirement.
It's also notable that despite the example of John Edwards, the Clintons didn't bother to use an S corporation to avoid self-employment tax. Simply by having his S corporation earn his $10 million or so in speaking fees, rather than doing it himself, the former President might have save around $200,000 in the medicare tax, net of the deduction for half of the tax on line 27 of the 1040 -- even if he paid himself a $1 million salary.
Of course, taxes look different to a presidential candidate than to a normal taxpayer. They might see an S corporation as a vulnerability in a campaign. And the $30,000 or so they could save with a SEP is chump change on a return with nearly $16 million AGI. So what looks to us tax drones like madness could well have a method.
The Clinton Campaign makes much of their significant charitable contributions - $1.5 million in 2006 alone. What charity is the happy beneficiary of this generosity?
Why, it's the Clinton Family Foundation! Unlike some foundations, though, the Clinton Family Foundation distributes most of its earnings, at least in 2006. Its 2006 Form 990-PF shows that it distributed nearly $1.3 million of its $1.7 million of contributions and income. The distributions went to close to 50 charities in chunks up to $100,000, from the Tiger Woods Foundation ($10,000) to two children's hospitals ($100,000 each).
The donee list also includes the United Church of Christ, the denomination of Barack Obama's controversial "spiritual mentor," Jeremiah Wright ($3,600). Considering what Rev. Wright's sermons have been doing to the Obama campaign, that may be a bargain.
A TOUGH RETURN
Like many good accountants, the Clinton's tax preparer has buried their fees in the miscellaneous itemized deductions. No matter; the $97,000 of those deductions are far short of the 2% of AGI needed to have any effect on the return. But it can't be a cheap return. With three schedule Cs, 9 k-1s, passive activities, foreign source income, and capital gains and losses, this is a complex and difficult return. Add the fame of the clients and the near certainty of public disclosure and you have a very labor-intensive return. If the 2006 return fee was less than $10,000, the Clintons are getting a bargain.
The Clinton Campaign return page (the returns themselves are linked at the bottom)
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to