Posted by: Heinz Brisske
Tax Freedom Day is ostensibly the day on which we have collectively earned enough income to pay off all our federal and state taxes; all the income earned after Tax Freedom Day is ours to keep, free of any further taxes. This year, Tax Freedom Day, as published by the nonpartisan Tax Foundation, is April 21, 3 days later than last year.
Tax Freedom Day is actually an average date for all states and for citizens of all income classes. Because a larger percentage of taxes is paid by upper-income taxpayers, Tax Freedom Day for such taxpayers is later than April 21, and Tax Freedom Day for middle and lower income taxpayers is earlier.
Tax Freedom Day is also different for different states. For instance, the date for Louisiana is March 30, for Mississippi it is April 2, and for South Dakota, Tax Freedom Day is April 4. States with larger numbers of upper-income persons typically have a later Tax Freedom Day. For instance, in New York it is May 4, and both New Jersey and Connecticut will have a May 9 Tax Freedom Day. In Illinois, Tax Freedom Day will come on April 28.
Tax Freedom Day is calculated by adding total expenditure for federal taxes ($3 trillion) to the total expenditure for state taxes ($1.5 trillion). The total ($4.5 trillion) represents 30.2% of the U.S. economy. Dividing this into the entire year results in the first 111 days being required to support federal and state taxes.
The Tax Foundation also compares total expenditures for food, shelter and clothing with expenditures for taxes. For 2014, the projected expenditure by Americans for food, shelter and clothing will be $4.25 trillion, which is less than the $4.5 trillion we will spend on federal and state taxes this year.