Happy Tax Freedom Day!
Each year, the Tax Foundation releases a report on Tax Freedom Day – the day when the annual tax burden is paid off and people are able to keep their income. This year, that day is April 18.
The calculation is a measurement of the total amount Americans earn in a year, divided by the total tax burden Americans must pay. This year’s Tax Freedom Day, April 18, is five days later than last year because of tax increases related to the fiscal cliff and the Affordable Care Act. Americans work for 32 days to pay the federal income tax—by far the largest tax on Americans. Next comes federal social insurance (social security, Medicare, Medicaid, etc.) taxes which take Americans an additional 24 days to pay off. State/local sales and excise taxes are tied with property taxes for the third largest tax burden on Americans, costing another 12 days each. The remaining tax burden comes from a mixture of state and local income taxes, federal corporate income taxes, state and local corporate income taxes, social insurance taxes, and others.
In addition to calculating Tax Freedom Day for the nation, the Tax Foundation also calculates Tax Freedom Day on a state by state basis. Louisiana and Mississippi enjoy the first state Tax Freedom Day on March 29. And, Connecticut has the latest state Tax Freedom Day on May 13, closely followed by New York on May 6, and New Jersey on May 4.
If all federal borrowing for deficit spending, which represents a future tax burden, is taken into account, then the national Tax Freedom Day would be 21 days later on May 9. As the Ten Golden Rules of Effective Taxation in Rich States, Poor States indicates: When you tax something more, you get less of it. In this case, the increased tax burden on Americans yields lower productivity and less opportunity for personal prosperity.