I think responding honestly with your contracting hourly was a good idea. After all, if this was a good economy and you could find the work at that price, then you would still be worth that hourly wage and could make $XXk per year. And it’s honest, because I always worry that making something up in a cover letter could come back to bite me.

The question is a bit of a pain because whoever says a number first is always the one who is at the disadvantage.