The key to successful leadership is influence, not authority.
– Kenneth Blanchard
I suppose that intense public scrutiny from hundreds of million people is what you sign up for when you run for President.
Do you think YOUR life could withstand that kind of minute attention? I’m not sure mine would…but regardless, it IS the system we have.
Well, this week I’m going to turn my attention to the publicly-released Presidential Tax Return, for a bit of hypothetical planning. In point of fact, this actually affects YOU, which is why I’m taking the time to do this.
How? Simple…as you’ll see, there is a power in pro-active planning, and the right advice.
Now, far be it from me to say that my particular expertise is the final word–I’m sure the President had very expensive and authoritative advice–but frankly…I believe I might have saved our President a little bit of bottom line income.
Read on…and I’ll show you how. Feel free to comment!
“Real World” Personal Strategy
Obama ‘Spreading the Wealth Around’–Through Tax Overpayment
This is not a political treatise–I’m deeply aware that my group of clients are split in their opinions regarding our President, and I don’t take sides in my professional life. It’s my job, instead, to take what *is* and help my clients keep the maximum amount legally and ethically allowable under (every) applicable tax law.
But first of all, the Obama family tax return is publicly available here:
I applaud the President (and the VP) for their transparency in this endeavor.
However, if I had been President Obama’s tax advisor, I might have suggested some changes…
The Obama household earned more than $5 million and paid approximately 32 percent in federal income taxes. But when you compare this to other households in a similar bracket, they paid too much. Indeed, per the most recent IRS statistics, most households with adjusted gross incomes of at least $5 million paid only 23 percent in federal income taxes.
So–was this an act of leader-ly charity? No, it comes down to how they earned their income.
First of all, most households in their bracket are typically earning their income via capital gains–which is taxed at a lower rate ‘ (15%). The Obama’s earned the vast majority of their income through book sales. They had a negligible amount (less than $2,500) of income subject to the 15 percent rate, with the rest of their income subject to the maximum 35 percent rate. That is why their tax rate was 32 percent.
So…I’m not going to get into the particular strategy–but there are things which we could have done on that front.
Second, unreported on President Obama’s income is the $1.4 million prize money from his Nobel Peace Prize award. The reason he didn’t report this is that (likely for wise political reasons) he instructed the Nobel Committee to directly contribute this money to 10 different charities–rather than having it be received as income, and then distributing it himself.
President Obama (and his wife, Michelle) were generous in their giving (approx. 6% of their AGI to charity), but if they had taken this as income and THEN donated all of it…that figure would have been quite higher, and his deductions would have also been higher.
But I’m not a political advisor, so I assume that he had his reasons.
So, what does this mean for you?
Simple. Like President Obama, you are making decisions every day about how you use and distribute your income. Sometimes, we can use “after the fact” adjustments to ensure you’re saving the most on your taxes.
But what’s better than this “Monday Morning Tax Quarterbacking”? Pro-active planning NOW.
Be sure you are making the BEST decisions for your bottom line…before it’s too late.
I’m truly dedicated to the success of your family. Can other tax professionals say that?