The Campaign Spot

Why Does Obama Think Palin Should Pay Taxes on Accountable Per Diems?

Politico: “News reports from Alaska have said that Palin collected per diem travel payments even when she was at home, and the Obama-Biden campaign wants reporters to see if she paid taxes on it.”

A reader notes:

I’m no tax expert but it seems to me that a per diem reimbursement is designed to compensate the employee for expenses he/she incurs on behalf of the employer.  In this case, the employer is the state of Alaska.
If the reimbursements were included in her W2, then she would have reported the income and would have to itemize the unreimbursed business expenses (or take the standard deduction).  If not included in the W2, then it seems logical that the “per diem” is designed to be a proxy for actual expense incurred on behalf of the employer and, much like the case of a mileage reimbursement from an employer, an employee isn’t required to add into income “per diem” reimbursements.  

I spoke to a former CPA and he agrees. It comes down to the employer’s plan — if it is “accountable,” an employee has to turn in, as this site describes it, “detailed expense reports are required to track the actual expenses incurred while working.” From the precision of the numbers we have for Palin’s per diem reimbursements,  it seems likely that this is the type of plan the State of Alaska has for its employees. Payments from an accountable plan are in fact reimbursements for expenses incurred and are not taxable.
In an non-accountable plan, a per diem amount is paid as part of income and the recipient is not required to account for his expenses. In those cases, the per diem is counted as taxable income.
With a traditional accountable-plan per diem, employees aren’t making money; they’re being reimbursed by the employer for money they have spent out of their own pocket to perform their jobs. Doesn’t the Obama campaign have something like this? They’re acting like they’ve never seen the practice before.
Beyond that, Obama wants Sarah Palin to release her tax records going back 10 years. I’d note you can find online her financial disclosure forms filed with the state going back to at least 2001. (Some have handwritten answers.)
The forms are strikingly detailed in income and assets, with specific numbers for items like Todd Palin’s IRA holdings.
On the most recent one we can learn that her eldest son Track Palin made $714.42 at $8.50 an hour working at Bruce’s Snowboard Shop as a part-time summer hire. There’s also his earnings from working construction and Army Boot Camp salary, as well as Bristol Palin’s earnings from working at a Barisa at Nordstrom Coffee Shop.
Senate disclosure forms, by contrast, only require lawmakers to disclose their assets within a range, from $50,001 to $100,000 or $100,001 to $250,000.
Hat tip, Michael Petrelis.
UPDATE: The argument from the other side is here — the per diem for the family members appears to be taxable (there’s going to be a big argument about whether the travel costs of Todd Palin and the children are business expenses, and I think Palin will have a tough time winning that argument), and the per diem isn’t supposed to cover standard commuting costs. Was she doing state business in Wasilla? Or was she just living there? Reimbursed travel costs between two work sites would be untaxed; reimbursed travel costs between home and work are. More discussion here and here.