Tax Freedom Day is on April 18
Every year, the Tax Foundation calculates when Tax Freedom Day arrives. This year, it’s April 18, five days later than in 2012:
Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. A vivid, calendar based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. In 2013, Americans will pay $2.76 trillion in federal taxes and $1.45 trillion in state taxes, for a total tax bill of $4.22 trillion, or 29.4 percent of income. April 18 is 29.4 percent, or 108 days, into the year.
The tax increases in the fiscal cliff deal are pushing back the date, among other factors:
Tax Freedom Day is five days later than last year, due mainly to the fiscal cliff deal that raised federal taxes on individual income and payroll. Additionally, the Affordable Care Act’s investment tax and excise tax went into effect. Finally, despite these tax increases, the economy is expected to continue its slow recovery, boosting profits, incomes, and tax revenues.
Surprisingly, this is the good news, comparatively speaking. If federal borrowing was accounted for, it would take 21 more days to match the federal government’s total expenditures.
Interestingly, the Tax Foundation found on Page 2 of this this PDF the length of time to pay taxes was much shorter prior to World War II. It was only during and after the war that more taxes were added at the state and local level, according to the Foundation, and massive economic growth combined with the Kennedy tax cut of 1964 “pushed personal income taxes into higher brackets.”
The report is short, and worth reading in full. Here are two points:
First, personal income taxes go up when the economy improves because of our progressive tax system. The more you make, the higher percentage you pay for the last “bracket” of your income. Making the system less progressive would lead to an earlier Tax Freedom Day – and, thus, individual freedom day, since more of your income is yours.
Second, Tax Freedom Day would come a lot earlier if the federal government engaged only in constitutionally-valid spending. With less spending would come fewer claims by politicians that they need more of our money, and thus our tax rates, including the number and types of taxes, would be lower.