my effective tax rates

The federal income tax is often debated. You seem to be able to twist the data to make whatever point you want. Yes, in gross dollars and as a percentage of their incomes the rich pay most of the federal income tax, but they also make a disproportionate share of all income. But really, who of us are willing to change our deeply held beliefs when presented with opposing data?

It should also be noted that the poor and middle class still pay federal taxes, just not the federal income taxes. I'm began writing this post specifically to demonstrate that point, but I'll let the data speak and let you decide if my family is a leech or not (turns out I pay some, but still not a lot). These federal taxes all earners pay are Medicare, taking 1.45% of all paychecks, and Social Security, normally taking 6.2% (4.2% in 2011) of paychecks up to $106,800. So it's actually regressive, since income about $106,800 is not taxed. Go figure.

I recently put all my tax returns from 2005-2010 into an Excel sheet. Please don't ask me why (it's 1:28AM as I write this on Dec. 3). This is what I get for being sent to Math Camp in 5th grade. And it would be cool if I actually did advanced math, but my obsession doesn't even extend beyond algebra. Anyway, I generally consider myself savvy and OCD with the tax code, exploiting the things I (legally) can. Then again, I had to file an amended return the other year after I forgot to report some interest, so I'm probably fooling myself.

The tax breaks I've used include educator expenses deduction (IN), health savings account, tuition deduction, foreign tax credit, retirement savings credit (which is a really great deal when you are low-moderate income, if you can force yourself to save), earned income credit, federal phone excise credit, Making Word Pay credit, the recovery credit (stimulus check), and renter's deduction (IN).

Anyway, I thought I'd post here my three effective tax rates (%). The first is my effective federal tax rate (tax owed divided by total income). The second we might call "total income tax" where I add in state and county income taxes (which have far fewer goodies for me). The third number is "all taxes" which adds in the payroll taxes previously mentioned. I suppose I could figure in sales tax as well, but... it's late. [A negative number means I actually got a net gov't payment. This  was the gov't stimulus at work.]

For reference, in 2005, 2006, and 2010 I would have be considered low-income. In 2007-2009, I made about a middle-class wage (for Indiana). For 2011, I'll add a $1,000 refundable child credit to my low income (it's semi-luxurious in Bolivia, but less than minimum wage in the U.S).


And if the IRS is watching... well, you already knew all this :)

Fun tax fact of the day for MI and IN residents (among others) is the Use Tax. Yes, you are legally required to pay sales tax on items you order through the internet tax-free. Not joking. Seems fair enough though.

And for fun, more math (I totally understand his frustration):