Tax Freedom Day
Each year, the Tax Foundation releases a report projecting “Tax Freedom Day,” which it describes as the day when “Americans will finally have earned enough money to pay off their total tax bill for the year.”
Tax Freedom Day is calculated by taking taxes paid in the current year divided by the nation's income for that year, which is derived from BEA statistics, and then projected by Tax Foundation economists using economic and budget projections from various sources, most notably the Congressional Budget Office (CBO).
Tax Freedom Day is the day on which Americans have earned enough money to pay all their federal, state and local taxes for the year. On Tax Freedom Day, we have earned enough to pay the government and we can finally start keeping our paychecks for ourselves and our families. It's a great way to illustrate how much the nation as a whole pays in taxes.
Tax Freedom Day 2008 is today, April 23, which means Americans must work from January 1 until April 23--nearly a third of the year--just to pay taxes. That's more than we spend on food, clothing and housing combined.
However the The Center on Budget and Policy Priorities a policy organization which works at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals disagrees with the Tax Foundation.
In a press release the Center on Budget and Policy Priorities said "Over the years, many pundits and policymakers have misinterpreted the Tax Foundation’s report as reflecting the tax burdens that the broad swath of middle-income families must shoulder.
In fact, however, according to data from authoritative sources such as the nonpartisan Congressional Budget Office, middle-income Americans pay significantly less in taxes as a share of their income than the Tax Foundation’s report implies. The flaws in the Tax Foundation’s report include the following:
In computing the nation’s tax burden, the Tax Foundation simply divides what it says are total tax receipts by what it says is the total amount of income in the nation. It then presents the resulting figure in a manner that leads (and practically invites) journalists and policymakers to present it as the average American’s tax burden — the number of days the average or typical American must work to pay his or her taxes. Such a use of the tax burden figure that the Tax Foundation generates is, however, highly misleading.
Under the progressive U.S. tax system, high-income taxpayers pay significantly larger percentages of their income in federal income taxes than middle-income families do. Under the Tax Foundation methodology, the higher taxes that high-income taxpayers pay make the taxes that average, or typical, Americans pay look considerably higher than they actually are.
The Tax Foundation reports that Americans paid an average of 18.6 percent of their income in federal taxes in 2004. But the Congressional Budget Office reports that taxpayers in the middle fifth of the income distribution actually paid an average of 13.9 percent of their income in taxes that year. (2004 is the latest year for which these CBO data are available.)
In every year the CBO data cover — 1979-2004 — households in the middle of the income distribution have faced tax burdens considerably lower than those the Tax Foundation lists in its historical table."
Tax Freedom Day by State, 2008 StateDays Worked to Pay TaxesTax Freedom DayRank United States113April 23 Alabama99April 946Alaska88March 2950Arizona110April 2020Arkansas107April 1730California120April 304Colorado113April 2315Connecticut128May 81Delaware104April 1437Florida116April 269Georgia109April 1923Hawaii116April 2610Idaho110April 2019Illinois113April 2316Indiana107April 1729Iowa106April 1634Kansas108April 1826Kentucky100April 1045Louisiana103April 1338Maine110April 2022Maryland118April 287Massachusetts118April 286Michigan106April 1631Minnesota117April 278Mississippi97April 749Missouri104April 1436Montana98April 848Nebraska109April 1925Nevada116April 2611New Hampshire105April 1535New Jersey127May 72New Mexico102April 1242New York125May 53North Carolina107April 1727North Dakota102April 1239Ohio107April 1728