Joe Biden is rich, but his taxes tell us more
That’s a lot more than most middle-class Joes earn in America, where the median household income is about $60,000. And it is certainly fair to question Biden’s wealth and its sources — as the media and others do — and what it all means for him as a candidate. That is why disclosure is so important, after all — so that citizens can have facts and be informed voters.
But the Bidens’ tax returns are actually quite ordinary in one important way. Like almost all middle-class Americans, the Bidens paid tax at the “ordinary income” tax rate, which applies to “ordinary” things like wages. The Bidens’ recent income has come mainly from their salaries (Joe briefly held down a well-paid post as the Benjamin Franklin Presidential Practice Professor at the University of Pennsylvania), speaking fees and royalties from books, especially Biden’s best-selling “Promise Me, Dad,” about the last year of his son Beau’s life.
These sources of income are all classified as “ordinary,” subject to the highest marginal rates under the income tax.
Thus the Bidens paid an overall average federal tax rate of 23.5% in 2016 on income of just under $400,000, and then tax rates of 33.9% and 33.4%, respectively, on the million-plus incomes in 2017 and 2018. That’s pretty close to the top marginal income tax rate of 37%, after the Trump tax cuts of 2017.
Who does not pay ordinary income tax rates? Well, the rich, for one. Billionaire Warren Buffett helped inspire a proposal, the so-called Buffett Rule, to make the super-rich pay effective tax rates of 30% after he discovered his average tax rate was lower than his secretary’s. Buffett’s friend Bill Gates was candid about the ease of tax avoidance among people like him: “In terms of revenue collection, you wouldn’t want to just focus on the ordinary income rate, because people who are wealthy have a rounding error of ordinary income.”
In other words, real billionaires do not pay ordinary taxes. Of course President Trump, who has acknowledged not paying any taxes at all in many years, and his son-in-law Jared Kushner, whom reporting suggests is a proud member of the no-tax club, already knew this. Nothing ordinary there.
It should not surprise us that people running for president have above-average incomes, or that powerful politicians can make large sums in speaker fees, book deals and so forth. It is fair to ask about these sources of income. But we run the risk of overdoing it and punishing the politicians who do the right thing and put the information out.
A similar pattern seems to apply to campaign financing: disclose modest campaign contributions, and opposition research will label you an “angry Democrat” or other partisan slur. But simply hide “dark money” behind rules that do not even require disclosure, and there are no questions to ask.
Which brings us back to our anything-but-ordinary President, who most certainly does not pay ordinary taxes, and whose returns are being kept in extraordinary secrecy. In this regard, at least, by sharing his tax soul with us all the President should be more like ordinary Joe.