Lansing— Democratic U.S. Senate hopeful Gary Peters and his wife paid an effective federal income tax rate of 18 percent in the last three years, a contrast to the less than 3 percent tax Republican opponent Terri Lynn Land paid on her income after sizable deductions.
Peters released three years of income tax returns exclusively to The Detroit News that show he and his wife, Colleen, jointly earned $230,642 in 2011, $244,248 in 2012 and $253,889 last year. After deductions, the Bloomfield Township couple paid an effective tax rate of about 18 percent to 18.9 percent on their income, which includes Peters’ $174,000 salary as a member of Congress.
Land’s payments to the tax man are less clear. In July, Land released her 2012 and 2013 tax records to The News, showing she filed separately from her husband, Daniel Hibma — a wealthy west Michigan developer — and earned $44,726 in 2012 and $89,729 in 2013. Her effective tax rate was 2.7 percent and 2.2 percent, respectively.
On Monday, Land defended her low tax rate, saying it was due to her substantial contributions to charity.
The average Michigan taxpayer paid an effective tax rate of 12.9 percent of adjusted gross income in 2012, while the national average was 13.7 percent, according to the most recently available Internal Revenue Service data.
Land’s separate tax return disclosures have sparked questions about why Hibma doesn’t disclose his earnings, since Land has drawn on a joint marital bank account to pour $3 million into her Senate campaign.
“How does someone make $89,000 a year, yet has $3 million to spend on their campaign?” Peters asked. “Folks are right to ask questions. How does that happen?”
Land spokeswoman Heather Swift said Monday that Peters is “attacking Terri’s family,” after challenging Land to make family members off limits in the campaign.
“Gary Peters should be ashamed of his dirty campaign tactics; stop with the distractions and stick to the real issues,” Swift said.
But a national political observer said Land is trying to have it both ways with her husband’s wealth — using it to bankroll her Senate campaign while not disclosing how much the couple earns annually from a sprawling real estate portfolio tied to a family business, Land & Co.
“By far the most plausible explanation for filing separately is to try to suggest you’re not taking bundles of money from this company,” said Norman Ornstein, a congressional scholar at the conservative American Enterprise Institute and contributing editor and columnist for the National Journal and The Atlantic. “That you’re a salt of the earth person. … It certainly raises all kinds of suspicions,” said Ornstein, who helped draft key parts of the McCain-Feingold campaign reform act of 2002.
In an interview Monday, Land acknowledged she separated her income — largely capital gains from an apartment building she owns — from her husband’s for both political reasons and so she could file on time with the IRS.
“We file separately because when I ran for office I thought it was important that I did it in a timely matter,” Land said in a radio interview on “Michigan’s Big Show.” “My husband has many businesses, and a lot of time what happens is they have to file an extension. I wanted to make sure that my income was available there and that what I made personally was able to be, you know, released.”
Land cites charitable giving
Land touted her charitable giving as a reason why she pays such a low effective tax rate. In 2013, Land claimed $51,194 in deductions, $44,865 of which were for charitable donations, according to her tax return.
“I give a lot to charity,” said Land, a former two-term secretary of state. “Those are deductions that people can take, and I did take them.”
Peters said Land’s low tax rate is “what’s wrong with the system.”
“Terri Lynn Land is not the one to fix it,” Peters said. “She’s the one taking advantage of it.”
In releasing his tax returns, Peters sought to draw attention to the incomplete financial disclosure of his opponent.
“Just like every married couple I know, we file a joint income tax return,” Peters told The News. “But it’s hard for me to comment on the taxes for Ms. Land because we only have half the picture.”
Peters did not release his entire tax returns, just the first two summary pages from each year detailing his and his wife’s total marital income, deductions and taxes paid.
Unlike Land’s disclosure, itemized deductions were not included in the information Peters released to The News. But the records show Land took more deductions for less income than the Peters and his wife did in 2012 and 2013.
“Terri Lynn Land donated over half her income to charity; meanwhile, Gary Peters is still keeping a major portion of his taxes secret,” Land spokeswoman Heather Swift said Monday in a statement. “It’s hypocritical for him to call for more disclosure while he’s still hiding key aspects of his return.”
Filing separately no benefit
Tax policy experts say there is little financial advantage for Land to file separately from her husband.
“In general, for very large incomes, the value of the benefit to filing jointly versus filing separately becomes arbitrarily small relative to the huge size of the tax return,” said Alan M. Cole, economist at the Tax Foundation in Washington, D.C. “It may just be an administrative decision more than anything. The tax code is designed so you can’t get much of a benefit for married filing separately, so I wouldn’t read too much into it.”
On July 24, Land amended her personal financial disclosure forms filed with the U.S. Senate to clarify that the source of her personal campaign contributions is a joint bank account with her husband, as allowed under federal election law.
Previously, the bank account had been listed as solely Land’s, raising questions about where she got the cash to fuel her campaign.
Land’s campaign blamed an “administrative error” for marking the account as solely Land’s account on two personal financial disclosure forms in 2013 and 2014. Land produced a letter from her banker attesting that it was a longstanding joint bank account.
Ornstein, the congressional scholar, said Land’s explanation doesn’t add up.
“How can you inadvertently do something involving a multimillion (bank) account?” Ornstein said. “I think she’s got a headache. ... It’s like peeling layers of an onion. Each time you hear an explanation, it raises more questions.”