Kerry and his ketchup-fortune-heiress spouse file separate tax returns, and they release only his to to the public. Under the tax laws, items pass so easily between spouses that it's very difficult to judge either one's wealth by looking at just his or her return. Thus, it's hard to get too excited about anything on JFK Lite's return, since his wife obviously wears the money belt in the family.
Why do the Kerrys file separately? Surely it must be for privacy. It seems unlikely that this arrangement saves the couple any taxes.
In any case, the Democratic candidate for President is no slouch in the income department. He lists $147,818 in salary, $89,220 in royalties, and a $145,805 capital gain for the year. He received $11,141 in dividends on stocks, $1,250 in taxable interest, and $871 of tax-exempt interest. Throw in a $104 tax refund that he got from Massachusetts, and his gross for the year was $395,338.
On the deduction side, John Boy looks as though he led a pretty typical American life. He paid $8,381 in state income taxes, and $3,326 in interest on a home mortgage. Most significantly, he shows a $43,650 deduction for gifts to charity. After his deductions take a "haircut" on account of his high level of gross income, he's left with a taxable income of $346,664. Like Dick Cheney, he falls into the ever-widening alternative minimum tax (AMT) trap. And so his tax for the year (before a foreign tax credit of $84 for taxes paid to the U.K.) winds up to be $90,659 (not including interest, which he very well may owe because he had too little taken out during the year and wound up having to write a check for $63,298 to Uncle Sam).
As reported on his original return, Kerry's tax was 22.93% of adjusted gross; 22.88% of gross including tax-exempt interest; and 26.15% of taxable income. However, after correction by his accountants (see below), Kerry's tax was 25.86% of adjusted gross; 25.8% of gross including tax-exempt interest; and 29.49% of taxable income. The comparable percentages for President Bush and Vice President Cheney were as follows:
Bush: Tax was 27.67% of adjusted gross; 27.67% of gross including tax-exempt interest; 31.29% of taxable income.Based on a comparison of those first two percentages, it's interesting to note that the wealthiest of the three, Dick Cheney, had by far the lowest tax rates. He certainly didn't get that rich by being dumb! (Bush and Kerry, on the other hand, weren't far apart.)
Cheney: Tax was 19.59% of adjusted gross; 12.5% of gross including tax-exempt interest; 30.54% of taxable income.
Kerry: Tax was 25.86% of adjusted gross; 25.8% of gross including tax-exempt interest; 29.49% of taxable income.
Anyway, getting back to Kerry, he's a trust fund baby, being the beneficiary of no fewer than four trusts. These are what produced most of his $12,000 or so of investment income. One of the trusts also produced run-of-the-mill capital gains for him of about $2,600. But his big capital gain was his $175,000 profit on the sale in March 2003 of a one-half interest in a painting by Dutch baroque era painter Adam Willaerts. The sale price of Kerry's half was $675,000, and his tax "basis" in it was $500,000. That's a $1,350,000 painting, folks. (Apparently it was purchased in May of 1996 for $1 million.) It's not clear from the return who owned the other half of the painting, or whether their share was sold. Anyway, it must be nice.
Kerry's accountants miscalculated the tax on the gain on the sale of the painting. It should have been taxed at 28 percent, instead of the 20 percent rate that they used. Kerry has already filed an amended return and paid another $11,577 in tax to clean up this blooper, for a revised federal tax bill (before foreign tax credit) of $102,236.
Kerry received a $89,220 royalty during the year (on his book, apparently) via the Helen Reese Agency in Boston. Unlike Lynne Cheney, who paid Medicare tax on her book royalties, Kerry took the position that his author activities are sufficiently limited that the royalties do not rise to the level of "net earnings from self-employment." Very interesting. If Kerry had reported the royalties the way Cheney had, he would have paid well over $2,000 in additional tax on them.
We're told that Kerry intends to donate the after-tax proceeds from the book to charity. By waiting until 2004 to make the donation, however, he has insured that the charity winds up with less than it would have gotten had he either (a) donated the copyright and let the charity collect the royalties, or (b) donated the royalties in the same year that they were received, thus negating the income tax on them entirely. Not good planning, John! (I recall that Hillary bungled her book royalty donation in a similar fashion a few years back.)
Unlike the Cheneys, Kerry lists his tax return preparation fee as a miscellaneous itemized deduction, which means he got no deduction for it. Also unlike his Republican rivals, Kerry has disclosed all of the statements attached to his return. From them we get some additional juicy tidbits of information. He gave $85 worth of junk to Goodwill; $15,000 cash to the NE Shelter for Homeless Veterans; and $10,000 cash to something called Liberty House. Another $18,650 went in cash gifts to unnamed "miscellaneous" charities.
The outfit that prepares Kerry's return, Federal Street Capital Partners (fee: $620), adopts the practice of listing a number of items that might have been deductible, but in fact weren't, based on Kerry's relatively high level of income. For one, there's a $9,025 medical expense listed. Tongues will wag: Botox or cancer treatment? There's a $610 item for "union and professional dues." I assume the Senate isn't a collective bargaining unit (although there's an idea), and so this must be some kind of professional dues. Trustees picked up $1,886 in fees and expenses, which is fairly modest compared to the monster "miscellaneous" expenses that show up on the Bush and Cheney tax returns.
Then Kerry pops onto the return a $3,000 deduction identified only as a "sec. 162(a) bus. exp." -- a "miscellaneous" business expense. There's no explanation of what this is, and the IRS instructions for this form don't list business expenses as one of the types to be deducted on this line. Kerry didn't file as the sole proprietor of a business, and so one wonders what this expense could have been. If it related to his job as a senator, it should have been thrown in with the dues, and it would not have been deductible.
To sum up, If I were an IRS agent, I'd have three questions for the candidates: For Kerry, I'd see if Medicare tax wasn't owed on those book royalties, and I'd want to know what that $3,000 business deduction was all about. And I'd definitely need to see more about Cheney's tax return prep fees.
But those are all chump change items, ladies and gentlemen. Bottom line: These guys are loaded! (As is John Edwards, were he to join this group.)