On Monday, we blogged Michael Kinsley’s defense of Teresa Heinz Kerry’s 2003 federal tax return in the Washington Post. Richard Schmalbeck (Duke) shared with the TaxProf Discussion Group his criticism of the Wall Street Journal’s coverage of this issue. Here is an excerpt of the full post (reprinted here with Prof. Schmalbeck’s permission):

[Y]our paper is making some mistakes in the way they’re handling the story about Teresa Heinz Kerry’s tax rates:…First, they seem to be using a percentage in her case that has explicit federal taxes in the numerator, and total income in the denominator. But the way these calculations are usually done is to put only adjusted gross income in the denominator. AGI does not include income from tax-exempt bonds. The SOI (the IRS Statistics of Income series) in particular uses AGI numbers that do not include tax-exempt interest. So your editors simply aren’t using comparable methods to do their comparisons.. If you look at the tax paid by Mrs. Kerry–$627,150–as a percentage of her actual adjusted gross income–$2.29 million–you get about 27%, roughly the same as other taxpayers in the top 1% of earners.

And there’s a problem with that numerator, too….Without a thorough study of the rates of return on taxable and tax-exempt securities in 2003, I would be loathe to estimate the “implicit” tax rate Mrs. Kerry faced on her municipal bond investments. But I do know that 0%, which essentially presumes that underwriters of municipal bonds are stupid, and manage to capture no part of the tax advantages available to investors in the instruments they offer, is flatly wrong. But 0% is indeed what your editors have assumed as the tax burden on her municipal bonds investments.