TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, September 20, 2008

NY Times on Sarah Palin's Tax Problem

I previously blogged Sarah Palin's Tax Problem surrounding the tax treatment of the per diem reimbursement she received for travel, meals, and lodging expenses as governor of Alaska.  The New York Times picks up the story in Are Palin’s Per Diem Payments Taxable?, by Leslie Wayne:

The McCain campaign has said it will release Sarah Palin’s tax returns and when it does, tax attorneys will have their pencils sharp and ready to go over the numbers.

Several tax accounting blogs have raised the question: should Sarah Palin pay federal income taxes on the per-diem payments that she received from the state of Alaska for nights spent in her Wasilla, Alaska, home?

Anthony C. Infanti, a professor of tax law at the University of Pittsburg law school, raised the issue in a blog called “Feminist Law Professors.” Mr. Infanti writes that if Governor Palin was not engaging in business while in Wasilla, but simply preferring to spend the nights there, then the per diem payments would be taxable income. ...

Ms. Palin received around $17,000 in per diem payments from the state for 312 nights she spent in her Wasilla home rather than the Governor’s mansion in her first 19 months in office. ...  Kim Garnero, the Alaska director of finance, has said that the state does not consider the payments to Ms. Palin to be taxable income at the federal level. But others, besides Mr. Infanti, differ.

One of them is Robert S. McIntyre, director of the Citizens for Tax Justice, a labor-backed group whose calculations are widely respected by tax experts. “It’s obvious that the per diems are taxable income. There’s no question it is taxable,’’ Mr. McIntyre said.

See also Daily Kos, Is Sarah Palin a Tax Cheat?

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Citing to DailyKos is telling. You might as well cite David Duke on race relations.

Posted by: daniel | Sep 20, 2008 7:32:57 PM

The Daily Kos? You can't be serious.

Posted by: Peter | Sep 20, 2008 9:52:40 PM

Before I saw the DailyKos cited here, I thought this was an objective tax site.

But let me help Prof Caron on this subject.

I, like Palin, was a State employee who traveled and was paid per diem for decades.

When such travels would take me to a city where I had relatives or friends I would often stay at their residences and eat their food, etc.

None of those times were subject to any state or federal income tax.

To take it one step further, such an employee could sleep in his/her car and eat peanut butter sandwiches--and would still received the tax free per diem.

On the other hand, if the employee desired to stay at a $2,000 a night hotel, that's ok too.

State and Federal employees receive set amounts for such travels, no matter where they stay or eat.

In the case of the $2,000 room, the employee pays the difference in per diem ie ($100) ie $1900 out of personal funds.

I bet the NY Times loved this free shot at Palin.

Kind of replaces the story on Tax Cheat Charlie Rangel--which they forgot to write.

Posted by: xtax | Sep 30, 2008 12:32:19 AM

I beg to differ with Peter. I have been a federal contractor for years, and understand the per diem laws somewhat. (I have received a nice per diem for sleeping in a tent more than a few times)

Palin was not going home to Wasilla on state business. Basically she was commuting home, and misusing the state's per diem rules. Alaska may not have a problem with that, but the money is fully taxable.

Look at it this way. You company wants you to do permanent work in a town (Juno) away from your home. And, to keep you happy they rent you and your family a house there (Governor's mansion). But instead of using the house you decide you would rather just commute back to your home town every day. How would your company feel if you billed for a per diem every night even though they had already been nice and rented you a house? If by some miracle they were OK with it, the IRS would view it as income and want their cut.

I had to start paying taxes on my per diem because I lived in my duty location for over one year. Very sad but true. The tax laws on this subject are complicated and I think this is as good of a place as any to discuss them and if Palin cheated or not.

Posted by: Stonewall | Oct 3, 2008 2:53:25 PM


Posted by: tina | Oct 3, 2008 3:38:18 PM

What about the taxability of any free labor and/or materials regarding the construction of Palin's personal residence, either income tax or gift tax issues ??

Posted by: stamp out political hypocrites | Oct 14, 2008 12:07:38 AM