Not So Boring: Behind Bernie's Massive Mortgage Deduction
Bernie Sanders warned everyone that when he releases his tax returns, it was going to be "very boring".
He was being modest at best.
According to the tax returns Bernie Sanders released on Friday - which are his and his wife's returns from 2014 (not 2015, as he promised) - from an income of over $205,000, Sen. and Mrs. Sanders paid roughly $27,000 in federal income taxes. That's a roughly 13% federal income tax rate, about a full point below Mitt Romney's tax rate of 14% that everyone went crazy over.
But the Sanders made a lot less than Mitt Romney! Sure, but for a progressive who pines for people to pay more taxes, Sen. and Mrs. Sanders aren't shy about taking all the deductions they possibly can, just as Gov. and Mrs. Romney did to get their tax rates down to an abysmally low level. The average effective income tax rate for people in Bernie's tax bracket is a full 2-percentage point higher than what Bernie and Jane Sanders paid, and this average includes people whose main income is capital gains, which is taxed lower than regular income, as well as those who are paying highs student loan payments for professional degrees (the Sanderses are not). The marginal federal earned income tax rate in his income bracket is was 28% in 2014.
A more interesting observation is how Bernie and Jane Sanders lowered their tax rates so much, besides for being able to report a smaller wage income of roughly $156,000 even though Sen. Sanders' senate salary of $174,000 due to an array of excellent pre-tax putaways courtesy of the US taxpayer.
There are two primary breaks the Sanderses take advantage of: deductions for state and property taxes, and the home mortgage interest deduction. Bernie Sanders and his wife claim nearly $23,000 in mortgage interest deduction, and another $15,000 in property tax deductions.
So what? You say. Everyone who can takes advantage of these! Here's the problem: Bernie's deductions are much, much higher than the average person - both for the home mortgage interest deduction as well as his property tax deduction. For example, the average home mortgage deduction claimed by filers in Vermont is about $8,500. Bernie and Jane Sanders claimed almost 3 times this amount.
To see why, look at the line above. Jane and Bernie Sanders claimed almost $15,000 in property taxes. Given the average home value of $258,000 in Burlington, VT (the Sanders' residence), and a property tax rate of at best 2.5%, this would yield an expected property tax of ... $6,569, less than half the amount Sanders claimed.
But he owns property in DC too! According his 2012 financial disclosures, the mortgage for his DC condo is a 30 year loan for less than $100,000. Even at a high interest rate of 3.9%, Bernie could claim his entire payment as interest (which would of course be illegal) and he'd still not make up the $14,500 gap in mortgage deduction.
To put all this another way, Sanders' property value would have to be almost $600,000 to meet his claimed property tax deduction, and the size of his mortgage would have to be three times higher than average (or, he'd have to have pretty terrible credit).
So, whether this is because the couple owns multiple real estate properties (they do own rental properties, Politico reported last year, but rental income is not shown on the 2014 tax return), only in a privileged fanboy world can Bernie Sanders be described as every-man.
Bernie and Jane have certainly done well for themselves on largely government salaries. And there's nothing wrong with that, unless you are running for president on the ground that the rich pay too little in taxes while yourself taking advantage of tax breaks that massively skew toward the wealthy to the tune of two-to-three times the what the average homeowner can claim. There's nothing wrong with that, unless you are running a campaign centered around billionaires taking advantage of tax breaks too much while it turns out that, despite being in the top 4% of income earners, you pay a lower federal income tax rate than the candidate of the billionaires. There's nothing wrong with having done well for yourself, unless you are running for president on the primary basis that others who have done better than you (and pay more than twice your tax rate) are by definition corrupt.
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