Jim Dey: Rauner's taxes? Devil's in details

Jim Dey: Rauner's taxes? Devil's in details

Quinn camp claims GOP hopeful isn't disclosing enough

To hear Gov. Pat Quinn tell it, his Republican opponent in the fall election is a really rich man — rich, rich and more rich.

"I'm running against someone who has more money than King Midas ..." Quinn told his fellow Democrats last week at the Illinois State Fair.

Get more politics talk Wednesday at 10 a.m. on WDWS with Tom Kacich.

He's right about that — Bruce Rauner is a self-made multi-gazillionaire who reported in 2012 an adjusted gross income of $53 million.

Quinn also asserts that the Chicago businessman doesn't pay enough in taxes. Rauner counters that he pays what the government says he owes and that it's a fortune — nearly $13 million in 2012 state and federal taxes alone.

Their disagreement, of course, is strictly business, not personal. Quinn's attacks on Rauner's wealth and business background are based on his assessment that he can win a tough re-election fight by transforming many people's resentment of those who are financially successful into votes.

Hence, the stream of barbs that Quinn hurls Rauner's way — like "Billionaire Bruce" and "Mitt Rauner."

Actually, some of it is pretty clever — in a sophomoric kind of way. Quinn, who made his political bones by launching populist attacks on the establishment, knows how to score rhetorical points in a way that amuses his audience.

But emotional appeals aside, is there merit to the Quinn campaign's assertion that Rauner is not just rich but somehow pulling a fast one by not paying more taxes than he does?

The devil is in the details, and Democratic operatives are constantly hectoring Rauner to release more details. The Rauner campaign has released federal and state summaries of his 2010, 2011 and 2012 tax returns, and promise to release details about 2013 soon.

But Quinn's people say it's not enough. They say he must release more records, and wonder aloud what he's hiding.

Tax returns are complicated, and the tax returns of the ultra-rich are other-worldly.

Still, there are obvious conclusions one can draw about the information Rauner has released.

His income fluctuates dramatically from year to year. Much of it is generated based on assets he holds that generate interest, dividends and capital gains. He pays huge sums in taxes and gives generously to charity. He does not draw a salary in the sense that most people do. He holds a substantial portfolio in tax-free bonds.

None of those investments, however, carries with them special tax treatment not afforded to Americans of ordinary means.

At the same time, however, Rauner's investments in the hedge fund he owns allow him to benefit from tax incentives like "carried interest," which permits what could be interpreted as ordinary income that would be taxed at the 35 percent rate to be taxed at the 15 percent capital gains rate. Proposals to repeal the carried interest provision have been discussed on Capitol Hill, but no action has been taken.

In 2010, Rauner reported a total income of $27 million. In 2011, it was $28 million. And in 2012, it was $53 million.

A review of his 2012 federal summary shows that he reported:

— No wages subject to a traditional tax rate, in his case 35 percent.

— $7.6 million in interest taxed at the rate of ordinary income, in his case 35 percent.

— $2 million in tax-free income.

— $9 million in dividends, $6.5 million of which was in qualified dividends taxed at the 15 percent rate. The balance of $2.5 million is taxed at the rate of ordinary income, in his case 35 percent.

— $25 million in capital gains, taxed at the 15 percent rate if reported as long-term.

— $11 million in "other gains (or losses)," a provision used to report gains made from the sale or exchange of business property, like real estate or oil, gas, geothermal or mineral properties. The 15 percent capital gains rate would apply if reported as long-term.

— $249,000 in rental, royalties, partnership or corporate properties. Tax treatments here vary depending on the nature of how the revenue-generating entity is established.

— A $664,000 loss in farm income.

In 2012, Rauner paid $10.1 million in federal taxes and $2.6 million in state taxes.

The numbers were similar, but smaller, for 2010 and '11. Rauner reported a taxable income of $27.1 million in 2010 and $28.1 million in 2011.

But in 2010, Rauner also reported a $12.7 million loss in rental, royalties, partnership or corporate properties, followed by a $3.1 million loss in the same category in 2011.

He paid $4.5 million in federal taxes and nearly $900,000 in state taxes in 2010. In 2011, Rauner paid $6 million in federal taxes and $1.5 million in state taxes.

Over the three-year period covering his tax records, the Rauner campaign reports he gave $13 million to various charities.

Is that a portrait of what the Quinn campaign calls a "moneyed insider" who should be disqualified for office solely on the basis of his wealth? That's what the Democrats are arguing to the public.

Rauner, of course, disagrees. He describes himself as a first-time election candidate who's horrified by Illinois' sorry state and wants to lend his considerable management skills to fixing it. Rauner constantly tells voters he doesn't need a job and doesn't intend to make a career out of holding public office.

Of those two pictures, voters will have to decide which appeals more. Whichever one they choose, one thing is clear — Rauner has made so much money over the course of his business career that he makes Richie Rich look like a piker.

Jim Dey, a member of The News-Gazette staff, can be reached by email at jdey@news-gazette.com.

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jthartke wrote on August 19, 2014 at 7:08 am

I often find the NG's word choices fascinating. Democrats are always "operatives" or "partisan hacks" while Republicans are "local activists".

jdmac44 wrote on August 20, 2014 at 8:08 am

Terms like operatives and activists are nearly interchangeable, it all depends on the cultural load you choose to put on them.  Activist often has a negative connotation when applied to courts of law, at least in conservative circles and activists can also be seen in a negative light among conservatives because it's used to refer to agitators for change.  Operative may have some sinister connotations from its use in the Cold-War days in conjunction with spying, but it has many positive uses as well.  In any case, every news source has its biases, get over it.  Or recognize that they're at least giving you flags to recognize their bias and be thankful.  ;)

rsp wrote on August 19, 2014 at 11:08 am

What kinds of conflicts of interest are hiding in there, who is he doing business with? No special tax treatment not afforded the average American? One in five is visiting a food bank, maybe a better tone would be to talk about his good fortune.

jdmac44 wrote on August 20, 2014 at 8:08 am

America: the land of opportunity.  Come here to make your fortune, so everyone else who doesn't can hate you.