As most have likely read by now, one of the more damning aspects of all the different queries into just exactly how many houses the McCains did own is that it prompted another look at John's 2007 tax return, which revealed that he and Cindy McCain paid in excess of $273,000 for household help in 2007.
A further review of the candidates' returns raises several related tax, economic and class issues that need to be brought to light. The rest of the diary discusses these issues, ones that more clearly focus the relative wealth issue and bear on broader issues such as McCain's (and the Republicans') sincerity, openness, and economic/tax knowledge and policies.
McCains' household employee costs are even higher than previously reported.
As Atrios noted, the amount the McCains pay for servants might be a little more problematic for him than the elusive number of houses he owns, especially when the amount they paid in 2007 was more than five times the median household income and .25% higher than the median sales price of a house in the United States.
First of all, the $273,000 figure is low. It does not include the approximately $21,000 in employment taxes that the McCains paid on their household help (same as the FICA/Medicare withholdings that employers must match for those who get W-2's at the end of the year), which brings the amount they pay in excess of $294,000 or six times median household income.
Btw, the Obamas household employee expenses were about $14,000, including employment taxes, in 2007.
Look who's household income the McCain servants' pay exceeded.
Since the Republicans' charges of elitism have been hurled at Barack Obama, an even more revealing comparison of McCain's exponentially greater wealth is to note that in no year between 2000 and 2004 did the joint income of Barack and Michelle Obama exceed the amount that the McCains' paid for their servants in 2007. From TaxProf Blog:
| Obama |
| Gross |
Year | Income |
2000 | $240,505 |
2001 | 272,759 |
2002 | 259,394 |
2003 | 238,327 |
2004 | 207,647 |
The Republicans' selectively used the Obamas' tax returns for their propaganda.
The increases in Obamas' adjusted gross income amounts to $1,655,106 for 2005 and $983,826 for 2006 came almost entirely from sales of Barack's book - undoubtedly spurred by his 2004 convention speech. While not chump change, the Obamas' income with the spike from the book sales likely was still not in the same universe as the McCains for the period.
Which is why the Republicans only mentioned the Obamas' 2007 return showing adjusted gross income of $4,139,965. Again, almost all of the increase came from sales of Obama's book, which exploded after he declared his candidacy. Though the Obama's income for 2007 was still considerably less than John and Cindy McCain's combined income of $6,405,240 for 2006, it was at least in the same league for Republican propaganda purposes.
McCains' disclosure of tax returns has been limited and selective.
While the Obamas have released their returns in entirety since 2000, John McCain has released only his 2006 and 2007 returns and Cindy McCain has released only the first two pages of her 2006 return - after some political pressure was brought to bear and probably not coincidentally the day after John McCain's controlled disclosure of his medical records. Cindy McCain also has not released her 2007 return, which is on extension and can be filed as late as October 15 under extension rules.
Even though the McCains are just as legally married as the Obamas and John McCain clearly has had broad access to Cindy's assets (viewing from a G-rated political or economic standpoint only) and thus has benefited from the lavish lifestyle and political advantages such wealth enables, the McCains are hiding behind these ownership issues and the fact they file separate tax returns (the Obamas file jointly) to justify the extremely limited disclosure of Cindy McCain's returns.
So what we've got is the Republicans bashing Obama by selectively using one return from the last eight years he dutifully disclosed while their own candidate has made no disclosures for the first six of those years and only limited, controlled disclosure of the last two. The Democrats need to apply constant pressure for both the McCains to provide the same full disclosure of each of their last eight years tax returns, including Cindy McCain's 2007 return when it is filed. What better way to prove the McCains are not elitist than to disclose their forms like everybody else! I guarantee the Republicans don't want to go there, so I would throw this back at them twice as hard as their Rezko bluffs and bluster.
The McCain's controlled disclosures of their medical records and personal finances also speak to a continuation of the Bush/Cheney policy of manipulation of evidence within their broader policy of complete non-accountability.
McCain trusts, etc. enable them to mask and otherwise control reportable income.
Although we don't know the details of their relationships, or even the names and natures of all the entities the McCains control, we do know that there is a network of family trusts and other entities that allow the McCains a certain flexibility, shall we say, to control what shows up on their personal tax returns. (It should be emphasized that such maneuvering is likely perfectly legal.) Ezra Klein:
Given the various numbers floating about, it might be useful to have a clear description of what we know McCain owns. This is trickier than it looks: The McCains have a variety of limited liability companies and family trusts (just like normal people!), including the Dream Catcher Family LLC, Wild River LLC, The Cindy Hensley McCain Trust, and the Marguerite Hensley Survivors Trust, which are all officially controlled by McCain’s wife and children. Someone should ask McCain if he knows how many holding companies he has.
Businesses and investments can be set up in such a way that the income and taxes thereon always stay within the entity or go into the trusts and do not ever show up on the McCain's personal returns. Trusts are often set up so the income that winds up on one's personal returns can be controlled through the amount of distributions made from the trusts to the beneficiaries (the McCains), and I would be surprised if this flexibility is not built into the McCains' array of trusts. Also, those such as the McCains with vast business and personal holdings generally can control their reportable income much more easily than most through the buying and selling of assets.
If, for instance, the McCain's need additional funding to continue their lavish lifestyle in a year such as 2006 where they may also see a political need to limit their distributions - and therefore personal income - from their trusts, they can sell an asset at a loss or with little or no reportable gain. (The difference between the current asking price of $12 million for that property and the McCains' 2006 sale price of $3.75 million is very interesting in itself, particularly in light of the current dip in the housing market, but that's a matter for another diary.)
This is why the Democrats need to press hard to make sure the McCains include all the tax forms for all the years under discussion, in order to better disclose the nature of their income. Also, I would be willing to bet the McCains' $6.4 million figure for 2006 was a lower than average year for their combined personal income during the period.
A comparison of the Obamas' and McCains' 2006 returns speaks to broader tax issues.
Since Cindy McCain has only released her 2006 return (in limited fashion) and, as stated before, 2007 is the only year in which the Obamas income is even worth doing an analysis in vis a vis with the McCains. However, the comparison reveals some broader issues which should become part of the discussion of tax policies and who benefits. Although the years are different, the tax rates were generally the same for both years. Actually the rates were lower in 2007 (favoring the Obamas), but the differences were marginal and would not affect their respective taxes any more than a few tenths of a percentage point.
Since the McCains' 2007 income of $6.4 million was still 50% higher than the Obamas' 2006 income of $4.1 million, one would expect the McCains' tax rate as a percentage of income to be higher, possibly by as much as several percentage points.
(Two other factors need to be raised here, but imo this paragraph can be skipped by most because they don't materially affect the results beneath; they are mainly for the benefit of tax wonks who might raise these points: (1) the Obamas file jointly while the McCains file separately and joint filers generally enjoy lower tax rates, and (2) the Obamas' itemized deductions as a percentage of income were marginally higher, 11% versus 9% for the McCains, and this could have made a big difference in the result had the spread been wider.)
However, if one thought that the Obamas' tax rates would lower, even significantly lower, one would be wrong. The following chart compares their taxes:
| Obama | McCain |
| 2007 | 2006 |
| Return | Return |
Earned income | $4,139,965 | $ 678,421 |
Unearned income | 0 | 5,726,819 |
Total income | 4,139,965 | 6,405,240 |
Federal tax due | 1,394,806 | 1,794,954 |
Tax rate on income | 33.7% | 28.0% |
NOTE: Earned income is compensation on which employment taxes are paid, including work (W-2 income) and book sales. Unearned income is pretty much the rest, income from ownership of investments and businesses.
Why are the Obamas paying almost a 6% higher rate on his taxes with less than 2/3 the income of the McCains?
You are seeing in the two major candidates Exhibit A of how the tax laws favor the rich, in particular, the already rich; in other words, the tax benefits of the Republicans' (and too many Democrats') ownership society, baby. The Obamas, whose income was derived entirely of their own labors, including Barack's book, get to pay higher tax rates because they worked for all of their income. The McCains, who derive most of their income from Cindy's inheritances, get to pay much lesser rates by virtue of tax laws favoring ownership over hard work by allowing much lower rates for dividend and capital gain income.
A final thought on John McCain and economics.
Many have gone after McCain on the basis of elitism, but imo it goes much deeper than that. The issue here is that we need a President with some ability to plow through economic issues with the experts, enough to come to some sound conclusions on prudent courses we should take in troubled economic times.
John McCain has never demonstrated even the slightest of interest in economic issues beyond platitudes and generalities he repeats for political sound bites. The contrast of his $5 million dollar answer versus Obama's well-thought-out response is telling. Cindy evidently controls the family's riches, so money and meeting budgets is not a worry for him personally, if ever as the son of an Admiral. I would not be afraid to bet that McCain has never balanced a checkbook.
McCain has admitted publicly in the past that he just doesn't know that much about economics, and he never mentions it in any detail in connection to other important issues such as Iraq. Although he denies this shortcoming now, I don't think he was kidding a bit, which makes him similar to Reagan and Bush II imo. It's simply not a prime consideration for him. Both Reagan and Bush II just passed it along to the Supply-Siders, who always talk a good fight. I see McCain doing the same with Phil Gramm, or one of Gramm's allies if Gramm is too hot politically. McCain lacks the heft to even care about Gramm's policies, much less analyze or criticize them.
There are a lot of people walking around that have no talent or taste for budgeting money or dealing with economic policies and there is nothing wrong with that; we all have different strengths and weaknesses. That's how economists and accountants make a living. But such a person should not be President.