President Obama released his 2011 tax returns last week, and there’s been lots of scrutiny of his effective tax rate (20.5 percent), whether that’s higher or lower than Mitt Romney’s (higher), what that means for the presidential election, and so forth. But when reading Mr. Obama’s forms on Tuesday in honor of tax day, we noticed something else we found interesting: The US chief executive is getting a humongous refund, by our standards.
Photo by: Pete Souza
President Barack Obama
That’s right, the Internal Revenue Serviceowes Barack and Michelle Obama a whopping $24,515. And let’s be honest: Isn’t the state of the refund, or lack thereof, how most of us rate tax day?
When all you have is salary, you get used to your tax payments being withheld, so what really hurts is being forced to write a big check to the government in early April. Conversely, if you're getting cash back, the season suddenly gets all bright and sparkly. As it appears to be in the Obama household.
Yes, we know that it’s better to keep as much of your money as long as possible and that overpaying so as to get a refund isn’t economically optimal. Yes, Obama’s refund is actually a small slice of his family income – only about 3 percent. Spoilsport.
Still, it got us wondering. Is it usual for US presidents to get tax refunds? So we looked it up, via the Tax History Project, which groups the tax returns released by presidents and presidential candidates in one place.
The answer is that the vast majority of known presidential tax returns did indeed result in refunds, with the interesting exception that most recent presidents had to pay the IRS in the year just after or just prior to the start of their terms.
Obama got a $12,334 refund last year and an $8,287 refund the year before that. But in tax year 2007, he got hammered, as he owed the IRS $1,059,826. It was all that book income he earned prior to the election.
George W. Bush owed the IRS in his last year in office, but from 2002 to 2006 he got refunds. In 2003, he got more than $61,451.
In 2001, at the start of his term, Mr. Bush had to pay the man, though not to the extent Obama did. Bush’s April payment that year was only $4,030.
Bill Clinton? All refunds, except for 1992, the year of his election, when he owed $4,085. George H.W. Bush? All refunds, except for 1989, the year after his election, when he owed $3,228.
Same for Ronald Reagan. The only year he had to pay the IRS was 1982, in the middle of his first term, when he coughed up $124,582 for tax day.
There’s a pattern developing here, and if we were suspicious, we’d say that presidential advisers tell new chief executives that it’s better to receive than give, in terms of their taxes. They don’t want to look like they’re not willing to pay their fair share.
Given the size of his finances, Mr. Romney already has good tax advisers, in case you’re wondering. According to the preliminary data he released earlier this year, he’s going to get a refund of about $207,818 for tax year 2011. That would be more than three times larger than any refund check ever sent to an occupant of 1600 Pennsylvania Avenue, since presidents began releasing their personal tax data.