President Obama, like many wealthy Americans, is paying more of his income to the IRS.
The White House released the president’s tax return last week. It shows he and the first lady paid $98,169 in taxes for 2013 on income of $481,098. That’s an effective tax rate of 20.4 percent.
In 2012, the Obamas paid just 18.4 percent of their income in taxes. The tax bite was bigger in 2013 because of the president’s own policies, including a higher income tax rate for top earners, limits on tax breaks for the wealthy, and two new taxes on the rich that help to finance the Affordable Care Act, known as Obamacare.
The top income tax rate — for individuals making more than $400,000 or couples making more than $450,000 — climbed to 39.6 percent as part of the fiscal cliff deal the president struck with Republicans last year.
People making more than $250,000 (or $300,000 for couples) also see a gradual decrease in tax deductions and the personal tax exemption as their incomes climb. Finally, the Obamacare taxes add an extra 3.8 percent levy on investment income and a 0.9 percent levy on ordinary income for individuals making more than $200,000 or couples making more $250,000.
The Tax Policy Center estimates that with these changes, the wealthiest 1 percent of taxpayers will now pay 27 percent of all federal taxes, while collecting about 15 percent of pretax income.
Citizens for Tax Justice — a group that advocates for a more progressive federal tax code — prefers a different measure that includes state and local taxes as well. Under that measure, the share of taxes paid by the wealthiest 1 percent, 23.7 percent, is not much different from their share of overall income.
While Obama’s effective tax rate rose last year, his income shrank, mostly because of declining book sales. His adjusted gross income in 2013 was nearly $128,000 lower than the year before. The first family is entitled to a tax refund this year of more than $19,000. The Obamas asked to have that money applied to their 2014 tax bill.