http://www.contracostatimes.com/mld/...a/14350017.htm
hes doing good. no money probs for arnie
Governor's investments pay off
By Aaron C. Davis
The Contra Costa Times
Apr. 15, 2006
SACRAMENTO - Even as he has traded the Hollywood limelight for the political spotlight, Gov. Arnold Schwarzenegger continues to rake in a multimillion-dollar annual income -- nearly $55 million from 2002 to 2004 -- according to tax returns his campaign released Friday.
But Schwarzenegger's source of income has changed as much as he has. Less and less the beneficiary of box-office blockbusters, he's a man who now makes much of his money the way most rich investors do.
Schwarzenegger has amassed a financial empire that stretches from millions of dollars worth of European stock holdings to real estate interests from Ohio to Santa Monica, and even a jumbo jet that he leases to Singapore Airlines. In 2004, nearly $10 million of his $16.8 million in income came from capital gains on those investments.
That's quite a contrast from just two years earlier, his last in Hollywood, when he received an $18 million paycheck from his production company, mostly wages from Terminator 3: Rise of the Machines.
"It is true he still has a lot of money; he's built up a net worth and still has back-ends from movies, but you can't compare that to what he could be still making," said Paul Wachter, Schwarzenegger's accountant. "Sometimes it just amazes me how uninterested he is about it."
Wachter said these days he probably has a better chance getting in to see Schwarzenegger to talk about a skiing trip than to talk about his portfolio. "There was a time in his life that he was really interested in making money and his business -- and he had fun with it," Wachter said. "But now it just doesn't seem to hold his interest."
Still, Schwarzenegger's returns -- which lists an occupational transformation from "actor" to "actor-governor," to "governor-actor" in 2004 -- make clear his successes have left him with far different financial concerns than most of those he governs.
Schwarzenegger, for example, spent at least $390,000 each year from 2002 to 2004 in wages for maids and other household help -- and that doesn't include what his wife, Maria Shriver, a multimillionaire in her own right, may have spent because the two file separately.
It may be Schwarzenegger's 747 that best illustrates the depth of his wealth. Schwarzenegger bought the jet in 1997 as an investment and leased it, Wachter said, hoping that by the time the contract was up in 2008, he'd be able to sell the plane for more than he owed the bank on it.
Since Sept. 11, 2001, however, the investment has gone sour. Schwarzenegger has recorded losses totaling $11.9 million, and it's uncertain he will ever be able to recoup the costs. Some have questioned the deal, saying it looks like an unscrupulous tax shelter. But Wachter said tax laws prevent the governor from counting the losses toward other income, and for Schwarzenegger the loss is just a slice of the big picture.
Schwarzenegger's adjusted earnings in 2004 were nearly $16.8 million. In 2003, he made almost $13.9 million and in 2002, his last year in Hollywood, he pulled in $24.1 million. Over those three years, he also paid nearly $16 million in federal and state income taxes. Though it's impossible to determine the governor's net worth, he has not disputed published reports that put it upward of $800 million.
The governor released his tax records Friday, following repeated requests by the media and a challenge from his Democratic opponents, Treasurer Phil Angelides and Controller Steve Westly, who both have previously made their tax returns open for inspection.
Claudia Hill, owner of Tax Mam Inc., a tax-services firm in Cupertino, and editor in chief of the Journal of Tax Practices and Procedures, reviewed the governor's returns for Knight Ridder late Friday.
After calculating the governor's effective tax rate, Hill said it appeared Schwarzenegger has been paying his fair share.
"I wouldn't look at this and say the guy is shirking at all," Hill said. "He could be taking advantage of more tax-exempt interest but he's not." Schwarzenegger paid almost the highest rate allowed in California, Hill calculated, between 8.96 and 9.19 percent in state taxes, while the limit is 9.3 percent.
The governor also paid a surprisingly high federal tax rate, 36 percent, in 2002, for income from the Terminator movie, and settled in at 18 percent to 19 percent the following two years.
While the maximum regular tax bracket on some types of income for earners in Schwarzenegger's position is 35 percent, Hill, a renowned tax preparer for high-income earners, said it was much more common for millionaires to pay less than 20 percent.
Schwarzenegger's campaign released only three years of returns -- and granted reporters only six hours' access to them -- which drew criticism Friday from Westly.
Bob Stern, president of the center for governmental studies in Los Angeles, said the latest revelations of Schwarzenegger's wealth likely wouldn't have an effect on the coming race.
"Everybody knew when he was elected that he was wealthy," Stern said. "It wasn't a factor then and it's not going to be a factor this time because all three candidates are wealthy.
"The more important question is not how much he's worth but have there been any conflicts of interest, and clearly there have been," Stern said. "That's the problem."
Stern was referring to a $1 million deal Schwarzenegger had with the publisher of fitness magazines that are supported by nutritional supplement advertising. The deal raised ethical questions when Schwarzenegger vetoed a bill that would have regulated the supplements.
