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At least one presidential candidate pays a lower tax rate than the average American

Rick Newman
Senior Columnist

Bernie Sanders is a pauper compared with the other presidential candidates. But he’s got one thing going for him: A very low effective tax rate.

With a family income of roughly $205,000 in 2014, Sanders and his wife Jane, who file their taxes jointly, are in the 28% tax bracket. But they claim deductions that lower their tax rate as a percentage of their adjusted gross income to 13.5%. The average filer, with an income of $65,021, pays an effective rate of 14.7%, according to the IRS.

Here are the 2014 income and tax numbers for four of the five presidential candidates (Donald Trump hasn’t released his returns). All of these figures are for husband and wife filing jointly:

Source: Candidate web sites, IRS. Note: National averages are preliminary data for 2014.

Many taxpayers lower their payments to Uncle Sam through a variety of deductions, which is why almost everybody pays a lower effective tax rate than the tax bracket they fall into based on their gross income. The most popular deductions are the ones for mortgage interest, real-estate taxes, state and local income taxes and charitable donations. Those are listed on Schedule A of the candidates' tax returns as itemized deductions; we've provided the overall total in the table above. There are lots of other types of possible deductions as well. Bill and Hillary Clinton operate at least two incorporated entities that are included on their personal returns, with many business expenses that are deductible. It's harder to tell what deductions Ted Cruz and John Kasich claim, since they've only released the first two summary pages of their returns and not a breakout of the details.

On the Sanders return, virtually all of the $56,000 in itemized deductions comes from the traditional writedowns on Schedule A. But the total amount of deductions is a relatively large 27% of their adjusted gross income. The average amount of deductions for the typical taxpayer is $7,766, or 12% of AGI. The Sanders deductions do appear to be legit, however. The couple deducted $9,666 in state and local income taxes and another $14,843 in real-estate taxes, presumably on their residence in Burlington, Vt. They also claimed $22,946 in mortgage interest paid in 2014, along with charitable gifts of $8,350. While the amounts are larger than for most Americans, those types of deductions are typical for middle-income families that own a home.

Mortgage interest payments of $22,946, or $1,912 per month, might correspond to a mortgage of $500,000 or so, under typical terms such as a 4.5% interest rate on a 30-year loan. Whatever the Sanderses' lifestyle, however, it clearly doesn’t come close to matching that of Hillary Clinton or Donald Trump. The Clinton money comes from speeches made by both Hillary and Bill Clinton, typically for more than $200,000 a pop, and a few other lines of business. Here’s a breakdown of the Clintons’ gross income, not counting deductions, in 2014:

Hillary Clinton speeches: $10.5 million

Bill Clinton speeches: $9.7 million

Bill Clinton consulting: $6.4 million

Hillary Clinton book royalties: $5.6 million

Various adjustments bring the Clintons’ total AGI lower, and then there are nearly $5.2 million in itemized deductions. Those deductions include $2.8 million for state and local income taxes, $104,000 in real-estate taxes and $42,000 in mortgage interest – the amount of annual interest you might pay on a $1 million mortgage. The couple also donated $3 million to the Clinton Foundation, which is a nonprofit, so the gift counts as a charitable donation. Because of a limit on the value of deductions they could claim, the Clintons’ exemptions topped out just under $5.2 million.

Billionaire Donald Trump presumably earns multiples of what the Clintons earn, but he hasn’t released his tax returns because, he says, the IRS is auditing them. Nothing prevents Trump from releasing pre-audited returns, but some analysts think he may not want to do so because he benefits from a tax break for building owners that could actually give him negative income, on paper—with no income taxes paid.

Ted and Heidi Cruz are wealthy, though not in the neighborhood of the Trumps or Clintons. The couple earned $1.2 million in 2014, when Heidi Cruz was still working as a Goldman Sachs money manager. She took leave starting last year, while her husband was campaigning, so the family’s income will probably be lower for 2015. The couple paid the highest effective tax rate of any presidential candidate, at 36.7%, because their amount of itemized deductions were relatively small. With only two pages from the return, it’s hard to tell why there weren't more deductions.

John Kasich and his wife Karen claimed nearly the same amount of deductions as the Cruzes, on one-third the income. That puts Kasich's effective tax rate at 18.4%, on family income of nearly $403,000. The Kasichs still earned twice as much as Bernie and Jane Sanders in 2014, while paying nearly three times as much in federal taxes. Bernie Sanders isn't only the most frugal candidate. He's also the least generous to Uncle Sam. Maybe he's a good tipper.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.