Obama's tax rate is 18.4 percent. Is that too low for a millionaire?(Read article summary)
The release of President Obama's tax returns last week showed that his tax rate has gone down. Of course, his income went down and he gave a lot to charity, but critics are still chirping.
Months after attacking Mr. Romney for his low tax rate, some critics are now turning the tables on the president, saying his 2012 tax rate is too low.
The president paid $112,214 in federal income taxes on an adjusted gross income of $608,611 in 2012, making his effective federal tax rate 18.4 percent. (The Obamas also paid $29,450 in Illinois income tax.)
“The president was talking about how shameful it is that Mitt Romney paid less in taxes than teachers paid in taxes, and yet Barack Obama, reportedly worth $14 million, paid less in taxes than teachers or Warren Buffet’s poor, overworked secretary,” “Morning Joe” host Joe Scarborough said on Monday's show.
Is Obama’s tax rate too low?
Well, for starters, it’s still higher than Romney’s 2011 rate of 14.1 percent – though that’s not saying much.
It’s also higher than US taxpayers’ average income tax rate of about 11.8 percent in 2011, according to the Tax Foundation, a tax research group in Washington. And it’s higher than the rate some 46 percent of Americans, mostly poor or elderly, pay – that is, no federal income taxes, according to the Tax Policy Center, a tax think tank.
Then again, Mr. Obama is not your average taxpayer, nor is he poor or elderly (though those gray hairs may fool you).
In fact, the Obamas’ 2012 tax rate is 2 percentage points lower than last year’s, when their rate was 20.5 percent.
There are a few reasons for this. Most obviously, the Obamas made less money in 2012 than they did the previous year – $608,611 in 2012 compared with $789,674 in 2011. That’s largely due to a drop in sales of the president’s two bestsellers, “Dreams From My Father,” and “The Audacity of Hope,” both of which made Obama a millionaire. (Both years Obama made $400,000 from his presidential salary.)
And as the White House likes to point out, they also donated almost a quarter of their income, some $150,034, to 33 different charities, lowering their tax rate.
Nonetheless, almost all of the Obamas’ income was subject to the top tax rate of 39.6 percent in 2012, according to Reuters.
Still, even the president himself appears to think his tax rate is too low, and he’s using his own tax return to promote the Buffett Rule, a minimum tax rate for the wealthy.
The White House’s 2014 budget proposal includes a proposed Buffett Rule, named for billionaire investor Warren Buffett, who has publicly complained that his tax rate is lower than that of his secretary.
"The president believes we must reform our tax system which is why he has proposed policies like the Buffett Rule that would ask the wealthiest Americans to pay their fair share while protecting families making under $250,000 from seeing their taxes go up," White House press secretary Jay Carney said in a blog post. "Under the President’s own tax proposals … he would pay more in taxes while ensuring we cut taxes for the middle class and those trying to get in it."
If it’s an effort to make those who shoveled vast swaths of their paychecks to Uncle Sam feel better on this most grim of Mondays (à la Obama’s plan to give back 5 percent of his pay in solidarity with government workers affected by the sequester), it’s probably not working.