Huffington Paid Little Income Tax
TV commentator and author Arianna Huffington, who launched her campaign for governor with criticism of “fat cats” who fail to shoulder a fair share of taxes, paid no individual state income tax and just $771 in federal taxes during the last two years, her tax returns show.
Huffington, who released her tax returns for the last two years to The Times, lives in an 8,000-square-foot home in Brentwood above Sunset Boulevard that is valued at about $7 million. She socializes with many wealthy and prominent people.
But the returns show that at least for the last two years, her income was far outweighed by losses that she reported were incurred by Christabella Inc., the private corporation she owns and uses to manage her writing and lecturing business.
In announcing her candidacy last week, Huffington blamed California’s fiscal crisis, in part, on the corrupting influence of special interest groups that have helped “corporate fat cats get away with not paying their fair share of taxes.”
Failing to close corporate tax loopholes, she argued, would “be a slap in the face of all the hard-working taxpayers being forced to dig deeper and deeper in their pockets so the well-connected can pad their bottom line.”
In an interview Wednesday, Huffington said there was no inconsistency between her campaign message and income tax record. She characterized her deductions as “very conservative” and said that any comparison between her and those whom she has criticized would be unfair.
“There isn’t any loophole here. There isn’t any dodging here,” she said. “This is basically putting your income against your expenses.”
Nonetheless, tax experts said Wednesday that Huffington’s tax profile is not one that the typical working family in California can duplicate.
“The average guy isn’t able to wipe out the taxes on his wage income because he doesn’t have millions of dollars in losses” from a private corporation, said Phil Holthouse, a partner in a Los Angeles certified public accounting firm.
An author of nine books with a 10th on the way, Huffington, 53, said her tax returns provide only a partial view of her finances over the last two years. Her expenses were high and income low during the last two years because of the cyclical nature of the publishing business, she said.
“I’m not the rich candidate that popular perception might have presumed just because I was married to a wealthy man,” Huffington said, referring to her ex-husband, Michael Huffington, a former Republican congressman who is a multimillionaire.
“I’m a working woman,” she said, “and my income fluctuates.”
In addition to the fluctuations in her publishing income, Huffington said, her tax returns show an incomplete picture because they do not reflect the large monthly child support payments she receives from Michael Huffington. The couple have two children.
Child support payments are not considered taxable income for the recipient. Michael Huffington pays taxes on the money, she said.
She declined to say how much she receives, citing a confidentiality agreement signed when they divorced in 1997.
Reached late Wednesday, Michael Huffington said only that his child-support payments were “very substantially above” what Christabella Inc. reported as its gross receipts in 2002. That figure was $183,000.
“It’s clear to me that much of her tax-free child support is going toward her business,” he said. “A lot of businesses would like to have tax-free income.”
Arianna Huffington said she does not use her child support to cover the expenses of the company.
Huffington said her expenses exceeded her income over the last two years because much of the period was spent researching book and television projects.
She said 2003 will be much different, thanks to the publication of her bestselling “Pigs at the Trough,” which criticizes corporate greed and political corruption. In addition, she recently signed a contract to write a book about what she said is fanatical leadership in the Democratic and Republican parties. Under the contract she will receive at least $700,000 and could earn as much as $1 million.
Given the losses on Huffington’s returns, however, Holthouse said she is unlikely to pay any significant taxes in the next few years even if her income increases substantially.
On her 2002 tax returns, Huffington reported Christabella’s gross receipts of $183,000. But the corporation also reported expenses of $410,363, which the corporation was allowed to take as a deduction. The corporate tax returns show payments of $800 in state taxes in each of the last two years and no federal taxes during the same period.
The corporate expenses include the costs of research for Huffington’s books and speeches as well as for travel, entertainment and rent. The corporation lists the Brentwood house as its address.
Huffington said the corporation employs a varying number of workers to assist her and handle her schedule.
The net loss from the corporation -- $259,549 -- appears as an offset on Huffington’s personal tax return. In addition, she carried over corporate losses from previous years of $2.49 million.
Beyond the losses generated by Christabella, the personal tax return for 2002 also shows wages and salary income of $79,866 and dividends and interest of $189. Set against that are deductions of $120,832. About half of that is for mortgage interest payments. Also included are $19,209 in medical expenses.
The net result was an adjusted gross income of negative $2.67 million last year, the returns show. She owed no federal income tax beyond the self-employment tax paid to Social Security -- $771 over the two-year period.
Huffington’s tax form lists $46,763 in contributions to charity in 2002. Those were not deductible because she had no taxable income.
The contributions include payments to three prominent private schools on Los Angeles’ Westside -- the Archer School, Crossroads and New Roads. They also include payments of $6,675 to the Church of the Movement of Spiritual Inner Awareness and a related foundation.
The church, founded by John-Roger, describes itself as designed to “teach Soul Transcendence, which is becoming aware of yourself as a Soul and as one with God, not as a theory but as a living reality.”
“I’ve been involved with John-Roger and the church for many years now,” Huffington said. “He’s a good friend, and I’ve gotten a lot of value from the work he has done.”