Tax Freedom Day, the date on which Americans will have earned enough money to pay this year’s tax obligations at the federal, state, and local levels, will fall on April 12th for residents of Nebraska. The nationwide date for all Americans, as announced recently by the Tax Foundation, will be Thursday, April 18th.
In the new study, “Tax Freedom Day 2013,” economists Will McBride, Ph.D., Elizabeth Malm, and Kyle Pomerleau, also calculate how long Americans would have to work in order to close the budget deficit. In order to pay for all spending in the current year, the government would need to raise an additional $833 billion in taxes, pushing Tax Freedom Day to May 9.
“This year, Americans will pay $2.764 trillion in federal taxes and $1.459 trillion in state-local taxes out of $14.366 trillion in income, for a 29.4% tax bill,” said McBride. “That means taxpayers will pay more in taxes in 2013 than they will spend on food, clothing, and housing combined.”
Historically, the date for Tax Freedom Day has fluctuated significantly. The latest-ever Tax Freedom Day was May 1, 2000—meaning Americans paid 33.0% of their total income in taxes. A century earlier, in 1900, Americans paid only 5.9% of their income in taxes, meaning Tax Freedom Day came on January 22.
Five major categories of taxes dominate the tax burden. Individual income taxes – including federal, state and local – require 40 days of work. Payroll taxes take another 25 days of work. Sales and excise taxes, mostly state and local, take 13 days to pay off. Property taxes take 12 days, and corporate income taxes take another 9.
The total tax burden borne by residents of different states varies considerably, not only due to differing state tax policies, but also because of the steep progressivity of the federal tax system. This means higher-income states celebrate Tax Freedom Day later; Connecticut (May 13), New York (May 6), and New Jersey (May 4) residents face a significantly higher total federal tax burden than lower-income states. Residents of Louisiana and Mississippi will bear the lowest average tax burden in 2013, with Tax Freedom Day arriving for them on March 29. Also early are Tennessee (April 2), South Carolina (April 3), and New Mexico (April 3).
For more information, go to http://www.taxfoundation.org/taxfreedomday.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or email@example.com.