Tuesday, March 31, 2009

Tax Freedom Day 2009 Announced

Today, the Tax Foundation announced that Tax Freedom Day 2009 will occur on April 13. This is a full eight days earlier than last year, primarily due to the fact that the recession has reduced tax collections even faster than it has reduced income and the fact that the bailouts include large temporary tax cuts for 2009 and 2010.

However, this earlier date is not good news, going forward. That's because the Tax Freedom Day calculation only considers this year's taxes and income and does not consider the sky-rocketing deficit, caused by the various bailouts. In fact, the Tax Foundation reports that the "deficit-included" date would be May 29 - by far the latest for the "deficit-included" date. This certainly does not bode well for future Tax Freedom Days, as the bill for that deficit eventually comes due.

The ActionAmerica web-based Tax Freedom Day Clock and its companion Tax Freedom Clock widget for Macintosh Dashboard have both been updated to use the newly announced date. (Note: The Tax Freedom Clock widget automatically updates its data from the web, so users need not download a new version, just to get the new date.) These are both live clocks. By that, I mean that each will continue to count down or up, second by second, as long as the web page or widget is open.

Over the years, Tax Freedom Day has become so effective at making people realize how much they pay in taxes that the "Big-Government", tax and spend folks have tried several ways to undermine it. They tried to claim that the date was exaggerated since the Tax Foundation didn't use "unrealized" capital gains in their calculations. Of course, most people didn't buy into that and the Tax Foundation educated many more on that subject. Interestingly, now that the mortgage crisis has turned many of those unrealized capital gains into unrealized capital losses, the tax and spend crowd has become curiously silent on that subject. Hmmm???

The big-government folks also try to say that Tax Freedom Day is heavily skewed later into the year than it should be, since the top 1% of income earners pay most of the tax. But that myth is easily shot down by two other facts. 1) That same top 1% of income earners (about 1.4 million taxpayers) make a disproportionally high amount of the money earned, which tends to reduce the skew. 2) Add to that the fact that more than 120 million Americans pay no federal income tax and few other taxes and any remaining skew towards the rich goes away. In fact, all things considered, Tax Freedom Day is probably fairly representative of the tax load of the average middle-class American, plus or minus a day or two either way.

Actually, the greatest skew is that between states. Low-tax Alaska's Tax Freedom Day occurs on March 23, while high-tax Connecticut's Tax Freedom Day occurs on April 30.

The question that you should be asking yourself is, "Are the services that I receive from all levels of government worth more than a quarter of my labor, each year?"

Or to put it another way, you might ask yourself, "Couldn't I provide a lot of the services that I receive from the government at a much higher quality and much lower cost, than what I am getting from the government?"

In actuality, we pay our taxes all year. But, as the Tax Foundation points out, "Tax Freedom Day is a vivid, calendar-based illustration of government’s cost, and it gives Americans an easy way to gauge the overall tax take." It gives people a way to relate to a concept that they might not otherwise comprehend and makes them realize just how high their taxes really are.

1 comment:

Douglas said...

This site helps calculate a personal tax freedom day based on your personal taxes and bracket information: http://www.mytaxfreedomday.com