Tax Freedom Day was formulated by The Tax Foundation. What is Tax Freedom Day, you ask? This is the day that your salary finally starts going into your your own pockets instead of being grabbed by the government. Can you guess the date? Do you estimate the end of January, middle of February maybe? If that was the range you were guessing, you are sadly mistaken. April 9 was Tax Freedom Day in 2010.
As previously mentioned, Tax Freedom Day was started by The Tax Foundation. The foundation was founded in 1937 as a non-partisan tax research organization. It has been committed to informing American taxpayers about the United States tax system ever since its inception.
The Tax Foundation firmly believes that tax policy should be easy to understand by all taxpayers. They are against tax laws that consistently change each tax year, causing even more confusion. The Tax Foundation also supports the idea that the purpose of taxes is to raise only necessary funds for needed programs and to cause as little disruption to economic growth as possible.
The date of Tax Freedom Day changes each year depending upon tax cuts, economic growth and other factors. Usually, it arrives later each year. This year’s Tax Freedom Day was only one day later than last year.
The date of Tax Freedom Day in 2011 is expected to be much later than 2010. This is due to tax cuts running out, the death tax being reinstated, and the new health care reform bills being passed. The latest Tax Freedom Day so far has been in 2000. Tax Freedom Day didn’t arrive that year until May 3 due to the economic boom pushing tax rates to record highs.
Tax Freedom Day doesn’t take holidays or weekends into account. Tax Freedom Day is the date you would be able to start keeping your own money if you worked seven days a week, including holidays. So for 2010, you had to work 99 days straight before you could keep your money for yourself.
How is Tax Freedom Day calculated? Official records of taxes collected during the year is divided by all income earned throughout the tax year. This includes state and local taxes. All income brackets are also calculated. The final date is the true average across all Americans’ taxes.
So your own personal Tax Freedom Day may be different. Higher incomes will have a later date, and lower incomes will celebrate an earlier Tax Freedom Day. The state that you live in also determines when your personal Tax Freedom Day arrives.
If you live in Alaska or Louisiana, you’re in luck. Residents of these states have a Tax Freedom Day earlier than most other states. Maybe you want to think about relocating, though, if you live in Connecticut. Connecticut residents have the highest tax burden.
Most of the top ten states with the highest tax rates are in the northeast. Of course, these figures aren’t solely because of state tax rates. Connecticut has a disproportionate percentage of higher income families compared to other states. This also has an effect on the Tax Freedom Day for each state.
Some other interesting statistics from The Tax Foundation are that in 1900 the tax burden for American taxpayers was less than six percent. As of 2006, it is approximately thirty-two percent. This means that almost one-third of every dollar that you work for goes to the government.
Americans spend more on taxes than they spend on housing and food combined. We also spend almost as much on Social Security taxes and Medicare programs as we do on federal taxes- thirty days versus thirty-three days. What about sales taxes? More than two calendar weeks of our salaries are spent solely on sales tax. This translates into three actual work weeks.
If you don’t like what you’re reading, don’t shoot the messenger. Perhaps do some research on political parties and candidates that want real changes to the tax laws. Or send a quick email to your representatives in Washington to let them know how you feel. It’s time for American taxpayers to celebrate an earlier Tax Freedom Day!