The Festival of Tax Returns occurred as the vast majority of Presidential candidates released their personal tax returns. Much can be learned from them, including some glaring mistakes and issues that should be addressed. Not a single of these has been noted in the press, but they will be here.
Senator Kamala Harris released her returns first … or did she? They were released to limited members of the press perhaps to obtain a positive analysis. A logical question would be why are you releasing your tax returns if you don’t want the public to see them?
Many candidates like Senator Bernie Sanders, Robert (Beto) O’Rourke and Senator Kirsten Gillibrand have readily-accessible links for their returns on either their campaign website or another website. At least these candidates are being true to their ideals as expressed about being open about the returns. This is unlike Senator Harris who clearly has not released her returns to the public.
Since Senator Harris was the first to release, I went searching for those and read just about every analysis by a broad range of the press thinking I would find her actual returns. I finally did then I could not and contacted her Senatorial offices. They referred me to the campaign who, of course, never responded. But by a sheer stroke of luck I was able to find them once more and there is a lot to discuss which will be addressed later.
Here is the basic summary of the analysis by the press: The candidates released 10-15 years of tax returns which revealed some were skinflints and some were slightly more generous regarding charitable giving. The real issue is Trump never released his. After reading the same analysis by major news organization that included the same talking points repeatedly, it became quite apparent that this entire matter was a charade. The press was so ill-equipped to address the issue of tax returns that it defeated any benefits that we may derive from the returns being released.
Here is what I gleaned from reviewing the generally-available returns of some candidates:
- They make a very nice living compared to the people they serve. The low end of income is about $150,000.
- You have to wonder what business these people are in – being politicians or writing books about themselves and politics. Many of these candidates have significant income plying their thoughts in book form for substantially more income.
- Bernie Sanders and his wife actually prepared their own tax returns. The first one released, 2009, was done by hand — not using a computer program. It would seem he should be applauded for that, but on the other hand I tell clients all the time that if I were not in the business of doing tax returns, I would not do my own. You will see that it may be a shortcoming.
Then there are the matters that really stand out. For example:
- Senator Sanders revealed that he was a millionaire, but he has been for a long while. It was not just the proceeds of his successful book deal. He has multi-million-dollar government pensions which he does not have to declare as an asset like people who have private pensions. If he retired today, he would be getting a substantial sum each year. If he passed away his younger wife would receive those benefits until her own death.
- In 2010 Senator and Mrs. Sanders claimed $47,083 of mortgage interest and in 2011 they claimed $44,834. There is a very good probability at those levels the Sanders exceeded the debt limit of $1,000,000. They should at least be asked to show that they properly claimed the amount of deduction, but no one brought that up.
- Robert O’Rourke takes the cake for being non-charitable. Sure Ms. Harris gave nothing to charity for 2011, 2012 or 2013, but O’Rourke is the king. When called on his miserly giving he said there was charity he gave and did not claim. That line will sell well. More importantly, he said what we all know that some of these candidates’ think and never said going back to Vice-President Al Gore’s meager charity.
O’ Rourke said, “I’ve served in public office since 2005; I do my best to contribute to the success of my community, of my state, and now of my country.” Doing the job he gets paid a lot of money to do is a charitable contribution in his mind. Worse he is a very rich person – at least his wife is as they declare about $100,000 or more of passive/investment income annually. In 2015 they had $163,365 of investment-related income and gave $867 to charity. Remember though, in addition, he was a member of the House making $165,300 and that was a gift to all of us.
The tax returns of Senator Harris are a special case though. There are three areas of concern that if the press had a clue and/or were concerned with anything other than attacking Trump they would have noticed. As an overview, the person who prepared the returns until this was taken over by her new husband’s CPA in 2014 appears to have been questionable.
- Not only did she give meager charity, but she gave questionable non-cash contributions. You are required to keep a list of what you gave, when you acquired it and current value. For example, Ms. Harris gave exactly $8,000 to Goodwill of clothing. And her contribution was $1,550. Another year she gave exactly $10,000 and took a deduction for exactly $2,000. She should have been audited on these numbers which were quite excessive and obvious estimates.
- In 2009 Ms. Harris took a distribution from her pension of $3,750 and in 2010 she took $60,521. There is no reason for her to take this money out early. We can only speculate that she may have used it to seed her campaign for Attorney General of California. She paid the taxes on the distribution, but she did not pay a penalty for premature distribution. Unless these were distributions upon the death of her mother she should have paid a 10% penalty to the federal government and a 2.5% penalty to the state. But no one asked.
- Harris married in 2014 and her charity issues went away because she married a generous man, Douglas Emhoff, but there are income questions. Emhoff was Managing Director for the West Coast for Venable LLP. He made about $1,100,000 for the years 2014-2016. Then Harris was elected U.S. Senator and her husband changed firms and his income soared. In 2017 it went to $1.3 million and in 2018 it went to almost $1.4 million. It is not as if Venable isn’t a large and stable firm and he had a significant position there, but he left and made more money once his wife became a U.S. Senator.
It certainly could be a coincidence, but the question should have been asked and would have been of a Republican candidate.
There are plenty more candidates to go through. Some like Congressmen Swalwell and Moulton are a waste of time because they have no hope in the race. There are many potential questions, but they will not be asked because the people who have looked at this have no clue or real interest.
This is why this requirement for releasing tax returns is a charade. You are only good if you have a government job (elected official). Also fine is writing income that you profiteer off of your elected position.
If you earn income in our free enterprise system, somehow, some way it must be dirty.