The Clinton Tax Returns

I said in an earlier post that I mostly avoided the disclosures of politician's tax returns but since I did Obama's returns when he released them, I thought it would be interesting to look at the other two candidates for president when they released theirs. Today the Clintons released their returns.

There are a couple of differences with the Obama family. First and foremost the Clintons made a combined income that was much larger than the Obamas. Second, partially as a result of the amount of income both Clintons have generated (Bill's book sold much more than Hillary's) they have established a family foundation and a substantial portion of their charitable donations have gone into that. That is a fine tax planning device, which among other things reduces estate taxes (one wonders how candidate Clinton who has been opposed to the Bush tax cuts, which include elimination of the estate tax would reconcile with citizen Clinton who established this family foundation). In 2006, the Clinton Foundation had Total Assets of $4,383,401 and Total Giving of $1,274,900.

Ultimately the tax system should be a way for the government to collect the money it needs to operate. But Clinton, and I suspect Obama, see it as a tool of social policy. In the case of her use of a family foundation it is probably done for two reasons, tax planning and as a way to shield, at least a bit, where their donations go. Both are legitimate within the existing tax law. But for someone who has advocated increasing the capital gains rate (like her democrat opponent) and ending the "Bush tax cuts" one might expect a higher standard of behavior.

In order to discover how the Clinton's funded charitable institutions you need to go to their tax return (990) for the Foundation. I would make two comments about their charitable activities. First, the Clintons have been generous to their alma maters (Georgetown, Wellesley and Yale) and to other institutions of higher education including Bennett College in North Carolina (The current president is Dr. Julianne Malveaux but one former one worked with Mrs. Clinton in the Children's Defense Fund) and Dakota Wesleyan (to help fund the McGovern library) and the University of Arkansas Foundation. There are also donations to Baptist churches and even one to a United Church of Christ parish. The Clintons have also been generous with things like the Peres Center (in honor of Shimon Peres) and a center in honor of Bishop Tutu. Also, the Clintons put funding behind Bill's (with GHW Bush's) exhortations to encourage giving for the victims of Hurricane Katrina and the Tsunami Relief project.

Second, there are some gifts that I might raise questions about including significant ones to the Wellstone Action Fund. Which is a charity that looks a lot like a political action committee. The Fund describes itself in these terms - the Fund "supports the strictly educational and charitable work of Wellstone Action, including all activities of the Sheila Wellstone Institute, Voter Engagement Schools, Campus Camp Wellstone, and activities that provide education and information about the life and work of Paul and Sheila Wellstone, including the archiving of speeches and writings." Undoubtedly all of those activities are legitimate charitable activities albeit with a strong political purpose.

One should not be surprised that the returns of the candidates are done with some care. It is pretty clear that the Clintons, like the Obamas (and undoubtedly when the McCains release their return on April 15), prepared their return with the expectation that others would review their calculations with a fine tooth comb.

I was also struck by some of the macro numbers for the release. The average federal tax burden over the period amounts to 31.28% but it ranges from a low of 13.95% to a high of 38.17%. On $108 million in income they paid just under $34 million in federal taxes. Last year's 25% rate is certainly lower than the level advocated by Mrs. Clinton as appropriate for a wealthy family. That does not imply anything but the certain knowledge that tax policy is a lot more complex than most political candidates would make it.