Friday, May 14, 2004

John Kerry’s presidential campaign finally began releasing information about his wife’s taxes this week. What drips were made available have raised more questions than they have answered. And it is clear that the senator’s wife, who has ably served as his indispensable political sugar momma ever since he came within a whisker of being drubbed out of the Senate in 1996, is going to have to share a lot more information. Yes, we know that Teresa Heinz Kerry has received an extension until Oct. 15 for filing her tax return on 2003 income. So, releasing her return for 2002 income will be a good first step.

Mrs. Heinz Kerry, whose net worth Forbes magazine estimated to be $550 million in 2002, reportedly earned $5.115 million last year in interest and dividend income. Now, that comes to less than 1 percent of her 2002 net worth. She paid $587,000 in estimated federal income taxes. That amounts to 11.5 percent of her reported income and one-tenth of 1 percent of her estimated net worth.

One reason her federal income tax bill was so low was due to the keen foresight she demonstrated by investing in tax-free state and local bonds. Those bonds generated $2.777 million in nontaxable interest income in 2003. Overall, state and local bonds yielded a tax-exempt 4.75 percent last year, a return that actually exceeded the 4 percent taxable yield on 10-year Treasuries. Thus, Mrs. Heinz Kerry’s investment in state and local bonds approximated $60 million, leaving nearly $490 million of her net worth for other investments. The balance of her 2003 income — $2.338 million — was earned from dividends and taxable interest income. This would represent a return of less than half of a percentage point on the $490 million balance of her Forbes-estimated wealth. That is astonishingly low, and would get any portfolio manager the boot in a heartbeat.

Another reason her income-tax bill was so low was due to President Bush’s 2003 tax cut, which reduced Mrs. Heinz Kerry’s dividend tax rate from 38.6 percent to 15 percent. (It’s worth noting that a month before Mr. Bush proposed his dividend tax cut, Mr. Kerry in a Cleveland speech called for eliminating the personal income tax on dividend income altogether. He has, of course, flip-flopped on that proposal since then.)

Interestingly, the Kerry campaign’s statement about his wife’s taxes mentioned nothing about capital gains, from which taxes are due after they are realized following the sale of assets. The Kerrys are known to be avid stock traders. Roll Call reported in 2001 that the senator’s financial disclosure form included “no less than 24 pages for Kerry to list all the stock and other financial transactions he and his spouse made [in 2000] as they bought and sold shares in companies ranging from AT&T and Carnival Corp. to Bristol Myers Squibb and Corning.”

Why are Americans entitled to know much more about Mrs. Heinz Kerry’s wealth? Because she has twice deployed her immense financial assets to rescue her husband’s faltering political career and she continues to threaten to bankroll an “independent” issue-ads campaign this year.

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