Observations from my tax returns

By Stew

I have been filing with Turbo Tax since the 2001 tax year. The nice thing about the service is that I can see all of my prior year returns anytime. It is kind of interesting to see summary of the information over the years. Incidentally, 2001 is the year that Mrs. Stew and I were married, so all of this data was filed under the “married, filing jointly” classification. I posted all of this data as percentages with 2001 as our baseline number. For instance, our Adjusted Gross Income in 2005 was 101% of our 2001 AGI. None of the data is adjusted for inflation or cost of living, just the raw amounts or percentages. I also do not know much about formatting tables in WordPress, so please bear with me . . . if I were really good, I would have made bar or line graphs out of all this stuff. :)

Adjusted Gross Income

2001 100%
2002 123%
2003 70%
2004 92%
2005 101%
2006 89%
2007 104%
2008 72%

As you can see, our AGI has fluctuated a good amount over the years. In fact, the drop from 123% to 70% in 2003 was the catalyst for our major financial difficulties in 2004 and 2005. We made 30% less money than 2001, but continued to spend at 2002 level in 2003. This budget deficit was masked by our use of credit cards, home refinancing and a lack of a budget. I did not realize that we were in huge financial trouble until 2006, when I actually laid out a budget for the first time and saw the information in black and white.

Taxable Income

2001 100%
2002 125%
2003 29%
2004 50%
2005 50%
2006 12%
2007 12%
2008 0%

Our taxable income has been most impacted by our qualification for deductions. Three children plus our move plus renting a house at a loss resulted in no taxable income in 2008.

Total Tax

2001 2,560.00
2002 2,527.00
2003 447.00
2004 2,703.00
2005 0-
2006 0 -
2007 0 -
2008 235.00

I used real numbers for this one. I think that the total tax number includes payroll taxes like Social Security and Medicare. I have always had several part-time or self-employment type streams of income on which I did not figure the self-employment tax until it came time to file. The amount of free-lance work that I did in a given year constitutes the fairly wide disparities in these numbers.

Amount of Refund

2001 100%
2002 160%
2003 496%
2004 1086%
2005 841%
2006 1416%
2007 1506%
2008 1459%

Once again, I used percentages of our first refund as a married couple in 2001. This refund has grown considerably over the years as our deductions have increased and as our government continues to give handouts to lower income families like us. I am not a fan of government wealth redistribution, but it is what it is. I have not complete filing for 2009, however, our refund might be in the neighborhood of 2,000% of our 2001 tax refund.

Effective Tax Rate

2001 7.36%
2002 5.65%
2003 -3.15%
2004 -2.07%
2005 -1.01%
2006 -4.64%
2007 -2.04%
2008 -3.47%

Our family’s effective tax rate shows how we benefit from our country’s progressive tax system, however, I would support a flat tax or even a national sales tax where everyone pays the same percentage of their income with no deductions even though it would greatly reduce our tax refund every year. I think that the extra money in the economy would cause greater job creation through investment and higher wages. I could be wrong . . . but that is what I think.

Article by Stew

Photo by rick


9 Responses (including trackbacks) to “Observations from my tax returns”

  1. Steven Says:

    Thank you for your comments in support of a “flat tax” (or as I prefer, http://www.fairtax.org ). Usually folks who end up on the “winning” end of our progressive tax system are those who are against changing it. And with over half of the American people paying no taxes, it’s a hard thing to change.

    I enjoy your blog – keep up the good work!

    – Steven

  2. Infinion Says:

    (In Jest) If you really don’t want my tax dollars, I’d be glad to take them back. I’ll take a personal check if that helps.

  3. castocreations Says:

    At least you recognize the rigged system. :) I’d much prefer a flat tax. Everyone should have some investment in the system.

  4. Family Finance Says:

    Hey Stew,

    I’m not quite sure I understand the percentages in “Amount of Refund” category but that’s insane that you had ZERO taxable income for 2008. Hope all is well in the family…

    Love the articles, keep them coming.

    Family Finance

  5. Stew Says:

    Family Finance, we had a pretty bad year. :) Most years, we simply take the standard deduction, but 2008, we had more than enough to itemize. However, that number does seem a little funny to me . . . I might check over that again.

    Infinion, I would gladly send you a check if the richer employers and investors did not have to pay the money in to the government in the first place, if that happens, I am sure to see my income increase a lot. The rich employ us, pay our taxes and purchase our products.

  6. D Says:

    Here Here! I am so for a flat tax! I was a huge fan of Huckabees idea of getting rid of the IRS all together and everyone pays a flat tax. It would be the fairest system.

  7. Steven Says:

    The problem is, the current IRS tax structure allows politicians to wield so much power that even if the people overwhelmingly want the fair/flat tax, the pols will never enact it.

    Here in MA the people had a referendum a few years ago to lower the sales tax from 5.5% to 5%. Passed with a large majority, but the state legislature simply ignored it. Flat out. Now last year they raised the sales tax to 6.25%, and opened the door to let localities tack on their own sales tax. Some places it is over 7%.

    So unfortunately, I don’t see it happening…

  8. Stew Says:

    Steven, it is definitely “pie in the sky”. My worst fears is that our current paradigm is unsustainable and we will eventually descend into a situation where we have a tax revolt (non-violent) that will cause the whole system to come crashing down . . . after that, who knows?

  9. Gina Says:

    Great article! I might do this w/my taxes – I have also used TT since 2001 (we got married in 2000). The social security statement I get has a chart similar in it – showing the taxable income over the years.

    And you are SO RIGHT about going into the red w/o knowing it b/c you are using credit cards. I promised myself that I wouldn’t be one of those ppl that spend more as I make more but it happened. Luckily I am smarter now (thanks to this blog) and have more self control, as well as a goal to “change my family tree”.

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