If 100 percent of your wages were used to pay all your annual local, state and federal taxes before you were allowed to keep anything for yourself, you would be working for government until April 21 this year.
And if you added in the cost of federal borrowing, which is only right considering the large deficits accumulated each year represent obligations you, the taxpayer, will have to pay, it would be May 6. Those are dates worth pondering.
Each year, the Tax Foundation, a Washington-based tax policy research group, calculates these dates under the clever label of Tax Freedom Day. Using figures from the Census and the Bureau of Economic Analysis, together with projections for tax rates in each locality, economists at the foundation calculate these dates, as well as specific “tax freedom” dates for each state.
In Utah, average workers will have retired their 2014 obligations to government, minus federal borrowing, on April 17, which is the 21st latest date in the country. Connecticut and New York share the latest dates with May 9. At the other end of the spectrum is Mississippi, where freedom day came last week, on April 2.
Because the marginal rates for federal income tax increase with a person’s income, a later tax freedom date can be a sign that the state has higher than average incomes. That could be considered relatively good news, but working for government one-third of the year really isn’t good, no matter how you view it.
However clever or cute the Tax Foundation may be in calculating these dates, we appreciate that this method easily brings home both the real burden of taxes and the historical trends that have brought Americans to this point.
The Tax Foundation also publishes a chart of tax freedom days all the way back to 1900, which was more than a decade before the Constitution was amended to allow for a federal income tax. Back then, Americans had to work only until Jan. 22 to pay their taxes, and those obligations consumed only 5.9 percent of their income. Today, 30.2 percent of average income goes to government.41 comments on this story
The date increased dramatically after the income tax came around, but it has ebbed and flowed during the decades since. In the early days, this was most often because of war. If you include federal borrowing, the latest freedom date ever was May 21, 1945, when WWII was nearing its crescendo.
It is sobering, however, to consider how close we are reaching that historic date during a time of relative peace.
Various special interests and politicians often agitate for higher taxes, trying to justify one or another expense for the good of society. While their causes may seem attractive, Americans should not lose sight of overall tax burdens, nor of how prosperity depends on a disposable income high enough to encourage investment and innovation.
It is true that these burdens include the annual difference between revenues and expenditures in Washington, which is why we prefer to view tax freedom day in light of total borrowing obligations. As the economy begins at last to slowly recover from the Great Recession, politicians at all levels need to redouble efforts to reduce taxes and ease the burdens on all.