The impact of political party on personal tax rates

by @PaulFiarkoski

The Washington Post headline for January 1, 2012 read “Senate overwhelmingly passes ‘fiscal cliff’ deal.” This after President Obama cut short his Christmas vacation with the family in Hawaii to fly back to Washington negotiate a deal with Speaker Boehner.

With all the talk recently about the fiscal cliff and how President Obama’s plan would surely send the U.S. into a double-dip recession (the first dip having occurred 2008-09), I got to wondering about how my own tax situation had been impacted by the decisions of Washington in recent years.

It’s hard to know what the truth is with all the sound bites we hear in the news, so I did what made the most sense to me and looked back at the tax returns I have filed jointly with my wife for the past several years.

Our effective tax rates for 2004 through 2011

Year     Rate       Pres         Senate control
2004    6.68%     Bush        Republicans
2005    5.43%     Bush        Republicans
2006    9.37%     Bush        Republicans
2007    8.02%     Bush        Republicans
2008    6.46%     Bush        Democrats
2009    6.46%    Obama        Democrats
2010    7.46%    Obama        Democrats
2011    8.45%    Obama        Democrats

I was a little surprised by what I found. Our highest effective tax rate (9.37%) was in 2006. I did a little more digging found that the Republican Party not only occupied the Whitehouse (George W. Bush) but also controlled the Senate at that time.

During this time period our gross income increased by 16%. Neither my wife nor I changed employers or moved. Our dependent (children) count remained constant too.

The takeaway for me is that Republicans aren’t as true to their claims of being the tax reduction party as they would like the American public to believe. During the Bush presidency, our effective tax rate rose nearly 3% from 2004 to 2006 before it began to drop in 2008 in response to all of the stimuli designed to head off a recession. (Note: we went into a recession anyway.)

During the Obama years, our tax rate increased from Bush’s last year in office; however, as of our 2011 tax return we’re still not back to the peak rate of 9.37% tax rate we were paying in 2006 under Bush and a Republican controlled Senate.

Don’t take my word for it. Look up your own tax returns and see what the impact has been for you.