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Friday, May 27, 2005

A Brief Study of Taxes

I was cleaning up my hard drive today when I came across a spreadsheet I put together last year regarding tax rates and how they work. Anyway, it is interesting to look at how the tax law changes has affected taxes. For my spreadsheet I used the "married filing jointly" classification. Then I set up two formulas side-by-side for easy comparison of two households: one household has $500,000 in taxable income and other has $60,000 in taxable income. Here's what I found out:
        $500,000    $60,000
$171,335 $11,295
2000 $170,389 $11,100
2001 $167,542 $10,850
2002 $163,758 $9,996
2003 $150,205 $8,620
2004 $149,642 $8,475
2005 $149,061 $8,330

The column on the left is the year. Notice there is no 1999 information because I couldn't find the info. The second and third columns are the amount of taxes that each income category would have paid. The family with the $500,000 in taxable income saw their taxes drop 13% from 1998 to 2005, while the family with the $60,000 in taxable income saw their taxes drop 26%.

It would be interesting to see how the cut in dividend taxes affected taxes. If anyone knows where to find information on who owns the dividend-paying stocks, please let me know.

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