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The Tax Foundation has released its summary on Tax Freedom Day. It reveals that April 24th is the day this year that marks theoretically how long all Americans must work to earn enough income to pay the nation’s total tax bill.
A Wikipedia entry describes how Tax Freedom Day is calculated; “Every dollar that is officially considered income by the government is counted, and every payment to the government that is officially considered a tax is counted.” The specific date is determined by adding up all federal, state, and local taxes and then dividing that number by the nation’s income.
The Tax Foundation summary reports Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes. That’s a total tax bill of nearly $5 trillion adding up to 31% of the nation’s income. The reports says, “Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.”
This year’s April 24th Tax Freedom Day is 114 days into the year (excluding Leap Day). It is one day earlier than last year, due to slightly lower federal tax collections.
If you add annual federal borrowing into the mix, that is, future taxes owed, Tax Freedom Day would occur 16 days later on May 10.
States have different State Tax Freedom Days because they each have different tax policies. The taxation and income variances translate into higher-income and higher-tax states celebrating the date later while lower-income and lower-tax states hit the mark sooner. For example, Mississippi has the lowest average tax burden and the tax freedom day for its residents is April 5th this year. Connecticut and New Jersey’s tax freedom days are much later on May 21 and May 12, respectively.
McRuer CPAs clients in the central Midwest see the following State Tax Freedom Days: April 12 for Missouri, April 14 for Iowa and Nebraska, April 13 for Arkansas, and April 19 for Kansas.
To find out more about Tax Freedom Day click here to read the Tax Foundation’s Summary Report.
