Bill Clinton's tax problem

On March 28, a web site called Cayman Net News Online published a story about former President Bill Clinton's "substantial financial stake in three Cayman Islands-registered investment entities."

They were referring to President Clinton's investments with Yucaipa Companies, a Los Angeles-based holding company founded in 1986 by billionaire Ron Burkle. The investments, according to the report, "are believed to offer the former president a fairly risk-free potential yield in the order of tens of millions of dollars."

The Cayman Islands have no domestic taxation system, but President Clinton is still liable for U.S. taxes on income earned through Yucaipa's investment funds.

"The crucial, and as yet unanswered question," said Cayman Net News, "is whether the money in the funds represents a salary, taxed at a potential high of 35 percent, or equity compensation, which could only attract 15 percent taxation."

Yesterday afternoon the Clintons released their tax returns, perhaps answering the crucial question.

We say "perhaps," because we have no expertise in tax law.

But a cursory look at the Clintons' 2005 return finds a $5,000,000 payment from "Yucaipa Global Opportunities Fund I" reported on Schedule E, "Income or Loss from Partnerships and S Corporations."

Bloomberg News dug through the tax returns and found $15.4 million in income from Yucaipa since 2003. Reporter Ryan J. Donmoyer calculates that it was twenty percent of Mr. Clinton's income during that period.

Mr. Donmoyer got some tax lawyers on the phone and reports that they think "the Yucaipa partnership income for Bill Clinton looks to be a form of salary because it was in round numbers for most years."

Yucaipa paid the big guy $1 million in 2003, $4 million in 2004, and $5 million in 2005.

Tom Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants, told Bloomberg News that "the flat amounts received from Yucaipa are odd" and agreed with other experts that it indicated Bill Clinton was paid for performing a service.

Apparently, if that money was a salary, President Clinton owed 35 percent of it in income taxes.

Apparently that's not what he paid.

Apparently, the whole time that Hillary Clinton and her husband have been telling anyone who'll listen that they didn't want George W. Bush's tax cut and they don't need it and they should be asked to pay more, they've been evading taxes with a sketchy partnership in the Cayman Islands.

If the usual pattern holds, Bill Clinton will spend the next week thunderously denying that he did any favors for Dubai or any of Ron Burkle's other interesting partners. He'll point his finger and turn red and accuse the Republicans and the media of trying to destroy him, HIM, the most generous and charitable ex-president that he's ever seen in his lifetime.

If he thunders loudly enough, maybe everyone will be distracted from the question about the tax rate.

Everyone except NBC's David Shuster. You can't get anything by David Shuster.

Now we know why the Clintons tried to get him fired.

There's always a reason.


Copyright 2008

Editor's note: You might be interested in the earlier posts, "A Principled Walkout?" and "The Clintons play smashmouth."

UPDATE ON 4-5-08: ABC News reports on its web site, "The [Clintons' tax] returns also show that the 31 percent tax rate was applied to the $15 million in supplementary income the former president earned from his partnership in an international investment fund based in the Cayman Islands."

This only goes to prove once again that I'm not as good as David Shuster.

But if the Clintons benefited from investment returns enhanced by the tax-free shelter of the Cayman Islands, I still think they should stop calling for their taxes to be raised.


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