Governor to Withhold Tax Returns

Ending a practice of his recent predecessors, Gov. Arnold Schwarzenegger will not release his tax returns showing what he earned the previous year, aides said Wednesday.

Schwarzenegger made public two years of returns when he was a candidate for governor in 2003, but has decided he does not want to disclose his holdings now lest he compromise a blind trust set up last year to avoid conflicts of interest.

Schwarzenegger’s office instead released only three figures involving his 2003 finances: the taxes he paid to the federal government ($2,048,037); taxes paid to state government ($843,590), and charitable contributions ($1,091,324). The tax payments are a fraction of what the governor paid in prior years.

The governor would not reveal his income from 2003. In July of that year, his movie “Terminator 3” was released, grossing more than $400 million. An aide to the governor said he received about $30 million for making the film, breaking movie industry records. Schwarzenegger opened his campaign for governor in August 2003 and held office for the last six weeks of that year.

There is no law requiring that a state official’s tax return be made public, though former Govs. Gray Davis, Pete Wilson and George Deukmejian did it routinely.

In two other large states, New York and Florida, governors also make available their tax returns. It is a step often taken to assure the public that government decisions are not influenced by an official’s personal holdings.

“At least in recent modern history, there was not a governor who had as significant and complicated, probably, a portfolio as this one,” said Rob Stutzman, Schwarzenegger’s communications director.

He added, “How much he earns may be an issue of curiosity to the public, but what the public has more of an interest to know would be that he’s paying taxes.”

Schwarzenegger’s income over a two-year period in 2001-02 topped $57 million, most of it coming from two movies: “Collateral Damage” and “The 6th Day.”

In 2000, Schwarzenegger paid $11.2 million in taxes; the following year, $9.3 million, according to returns examined by The Times.

Schwarzenegger has not made public his 2002 returns. On Wednesday, the governor’s press office said he paid $8.8 million in combined federal and state taxes in 2002.

Schwarzenegger’s decision means the public will not get a full, detailed breakdown of his most recent financial interests. The governor must file a financial disclosure form in March, but the holdings that make up his blind trust will be lumped together and presented as a single entry corresponding to a broad dollar range, aides said.

The form lists the sources of income an official receives, but in ranges that make it difficult to determine what he earned from different sources. For example, the form’s highest income category is “over $100,000.”

Peter Scheer, executive director of the California First Amendment Coalition, said, “There is good reason that his predecessors in the job have felt an obligation to disclose their tax returns. If anything, the public interest in seeing his income is even greater because he has made the point, repeatedly, that his personal wealth insulates him from political influence in a way that other governors have not been insulated.”

In announcing his candidacy on “The Tonight Show” last year, Schwarzenegger told host Jay Leno: “I have plenty of money. No one can pay me off. Trust me. No one.”

The idea behind the blind trust is that if an official doesn’t know exactly how his holdings are being invested, he cannot deliberately make decisions that might boost his wealth. To that end, Schwarzenegger did not review or sign his own tax return, ceding that responsibility through the power of attorney, Stutzman said. Schwarzenegger got an extension from the Internal Revenue Service and submitted his return Oct. 15, the last filing deadline.

The governor’s financial advisor, Paul Wachter, said in an interview, “Obviously, we’ve had a number of investments, and things change, and you try to keep it sheltered.”

Wachter also said, “My role is to manage his investments and to keep it as blind as possible, and I feel the best way to do it is not to release any tax returns which have information that may compromise the blind trust.”

A governor’s tax history can be a political embarrassment.

Former California Gov. Ronald Reagan was angered by a well-publicized leak in 1971 that he had paid no state taxes the previous year, a result, he said, of “business reverses.” Not wanting to make the same mistake twice, Reagan later vowed that he would pay at least some state taxes in the future even if none was owed.

“After the clouts on the head that I took, I said I was going to tell my lawyer that if I was Simon Pure and didn’t owe a dime, I was going to invent something,” Reagan told reporters in November 1971, several months after the disclosure.

Reagan, though, also found reporters’ questions about his finances intrusive.

And he said the public would forgive him for not paying state taxes -- a prediction that proved accurate, given that he was elected president.

“I think the overwhelming majority of the people understand that there was nothing wrong,” Reagan said at the time.