Obama likely paid higher tax rate than Romney in 2011
WASHINGTON (Reuters) - President Barack Obama released tax forms on Friday that reveal he will probably pay a higher tax rate on much lower income than likely Republican opponent Mitt Romney in 2011, adding fuel to a Democratic election-year effort to raise taxes on the rich.
Obama and his wife, Michelle, paid an effective tax rate of 20.5 percent on income of $789,674 last year, the White House said. Romney has estimated he will pay a 15.4 percent tax rate on income of $20.9 million.
Obama and his fellow Democrats have spent much of the week touting the "Buffett Rule," a plan to ensure that millionaires like Romney pay at least 30 percent income tax. The rule is named after Warren Buffett, the billionaire investor who has noted that he pays a lower tax rate than his secretary.
Obama's return shows that he pays a lower effective rate than the 35.8 percent rate that Buffett's longtime secretary, Debbie Bosanek, has said she pays. Obama also pays a slightly lower rate than his own secretary, the White House said.
"The tax code should not (be) written in a way that allows for the wealthiest Americans to pay taxes at a lower rate than middle-class Americans," White House spokesman Jay Carney said.
The Democratic-controlled Senate plans a Monday vote on the Buffett rule, one day before the U.S. tax-filing deadline.
Americans favor the rule by 60 percent to 37 percent, according to a Gallup poll released on Friday.
The proposal has almost no chance of overcoming Republican opposition in Congress, but it will provide ammunition for the November 6 presidential and congressional elections as Democrats say their rivals are more concerned with protecting the wealthy than addressing the concerns of less-affluent Americans.
Romney's campaign released forms on Friday showing that he had requested an extension to file his taxes, but estimated his tax liability at $3.2 million but paid $3.4 million.
Romney also made a payment of $887,000 on his expected 2012 tax liability.
Obama's campaign also aims to cast attention on the fortune Romney earned over decades as a private-equity executive, valued at up to $250 million.
Campaign manager Jim Messina highlighted the tax shelters and offshore accounts Romney has used to manage his money, and challenged him to release tax returns from the years he headed investment firm Bain Capital.
"What does he have to hide?" Messina said in a statement. "Why did he open a Swiss bank account instead of an American bank account and establish a corporation in Bermuda instead of on our shores?"
Romney pays a lower tax rate than Obama because the Byzantine U.S. tax code favors investment income over wage income, and his lawyers say he fully complies with the law.
A Romney spokeswoman called the tax debate an attempt by Obama to distract attention from the slow pace of job creation on his watch.
Romney himself said the Buffett rule and other tax increases proposed by the White House were an "assault on economic freedom."
"Congress does not need more money to spend, Congress needs to learn to spend less," Romney told members of the National Rifle Association.
Romney's anticipated 15.4 percent income tax rate is roughly in line with that paid by most Americans, but it is far below the top income rate of 35 percent.
For 2011, about 46 percent of Americans will pay no federal income taxes, according to the Tax Policy Center, a think tank, largely because their incomes are too low or they benefit from deductions aimed at the working poor, the elderly and parents. Many in that group, however, pay federal payroll taxes.
Counting all taxpayers, the average rate is 11 percent, according to the Tax Foundation, another think tank.
Effective tax rates vary wildly from person to person due to the maze of deductions, exemptions and credits that have been carved out since the last overhaul 25 years ago.
The Obamas paid $162,074 in federal tax, the White House said. They earned about half of their income from his presidential salary of $395,000, while the rest came from book sales. They reported $11,000 in interest income.
"His returns look pretty straightforward," said Daniel Berman, a tax law professor at Boston University.
The Obamas paid a rate of roughly 33 percent on their taxable income, which factors out charitable donations and other deductions, Berman noted.
In 2011, the Obamas donated $172,130, about 22 percent of their adjusted gross income, to 39 different charities, the White House said. The biggest beneficiary was the Fisher House Foundation, a scholarship fund for children of soldiers who have been killed or disabled, which received the after-tax proceeds from the sales of a children's book Obama published after he took office - a total of $117,130.
Their income has dropped sharply in recent years, largely due to declining book sales. They reported income of $1.7 million in 2010 and $5.5 million in 2009.
The Obamas paid an effective tax rate of 25 percent in 2010.
Vice President Joe Biden and his wife, Jill, paid a 23 percent effective tax rate on income of $379,035 in 2011.