Over the weekend Representative Paul Ryan released two year's worth of tax returns. The possible Republican vice presidential candidate's tax returns for 2010 and 2011 can be found on the Tax History Project web site, along with the tax returns of other presidential candidates and Presidents and Vice Presidents, both past and present. In looking over Representative Ryan's tax returns, I find myself agreeing with the remarks of the Wandering Tax Pro Robert Flach, who wrote, "Nothing particularly questionable or controversial that I could find." Kay Bell also took a look at the Ryan returns over at Don't Mess with Taxes. Bell also didn't find "any big surprises in Ryan's returns."
In looking at Ryan's tax returns, and at the tax returns of other candidates posted at the Tax History Project, I noticed that candidates for the presidential office tend to make some tax decisions that are fairly infrequent compared to the general population. Here are three things that taxpayer-politicians do a little differently:
Presidential Election Campaign. Presidents, VPs and candidates often check the box at the top of their Form 1040 to allow $3 of their tax dollars to be allocated to the Presidential Election Campaign Fund. This is the only way (that I know of) for a taxpayer to tell the Treasury where to spend some of the taxpayer's tax dollars. By checking the box, the Treasury will direct $3 of a person's income tax towards the Presidential Election Campaign Fund, which is the source of the public funding for presidential candidates.
- Obama opted yes,
- Biden opted yes,
- Romney opted yes (so far, based on his preliminary return),
- Ryan opted no.
Checking the yes box for campaign financing is pretty rare. The Federal Election Commission notes, "participation in the tax checkoff program has declined each year, from a high of 28.7% for 1980 returns, to 6.6% for returns filed with the Internal Revenue Service (IRS) in 2010." How much money does the check-box allocate? The IRS reports that Presidential Election Campaign Fund received "contributions of $40.8 million in Fiscal Year 2010 and $39.6 million in Fiscal Year 2011." (Source: 2011 IRS Data Book.)
Applying Refunds to Next Year's Estimated Tax. Persons running for the Oval Office tend to forgo getting an immediate refund and instead prefer to apply the refund as a payment towards next year's taxes. This is indicated at the very end of the Form 1040 (line 75 on the year 2011 forms). Taxpayers can designate that some or all of their refund be kept by the Treasury and applied as a payment toward the following year.
- Obama applied all his 2011 refund towards his 2012 taxes,
- Biden had a small tax amount due, no he had no refund to apply to next year,
- Romney plans to rollover all his refund (based on his preliminary return),
- Ryan applied most of his refund to next year's estimates.
Applying refunds towards next year's is not a particularly widespread phenomena. Typically I find that the self-employed, retirees, and other persons who routinely remit estimated taxes are more willing to let their refund "roll over" as a payment towards next year's taxes. IRS estimates that in 2009, 4.6 million tax returns indicated that some or all of a refund should be applied as an estimated tax payment, about 3% of all tax returns. (Source: IRS, Estimated Data Line Counts, 2009.)
Alternative Minimum Tax. Presidential candidates often have incomes and deductions that trigger the AMT. Every taxpayer is required to pay the higher of the alternative minimum tax or the regular income tax, and for most people the regular income tax calculations do come out higher than the AMT.
- Obama paid 12,491 of AMT in 2011
- Biden paid 6,805 of AMT in 2011
- Romney estimates his AMT bill will be 224,425 for 2011
- Ryan paid 11,684 of AMT in 2011
The IRS collected some $27.46 billion in AMT from 4 billion tax returns in 2010, representing about 2.8% of total tax returns filed. (Source: Publication 1304 for 2010.)