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Tax Freedom Day® 2012

Tax Freedom Day® 2012. William McBride, PhD Economist Tax Foundation 202-464-5107 mcbride@taxfoundation.org. What is Tax Freedom Day?. Calendar based measure of cost of government. Total of all taxes paid to federal, state, and local governments, divided by national income.

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Tax Freedom Day® 2012

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  1. Tax Freedom Day® 2012 William McBride, PhD Economist Tax Foundation 202-464-5107 mcbride@taxfoundation.org

  2. What is Tax Freedom Day? • Calendar based measure of cost of government. • Total of all taxes paid to federal, state, and local governments, divided by national income. • Includes personal income taxes, payroll taxes, corporate incomes taxes, property and sales taxes, etc. • This year, Americans will pay $2.62 trillion in federal taxes and $1.42 trillion in state-local taxes, or 29.2% of total income. • On the calendar, that’s 107 out of 365 days, or …

  3. Tax Freedom Day is April 17th • Four days later than last year, due mainly to increased federal personal and corporate income tax collections. • Would be later still (April 20th) if not for extension of the payroll tax holiday. • More spent on taxes than food, clothing, and housing combined.

  4. Deficit-inclusive Tax Freedom Day is May 14. • Adds deficit-financed spending. • This year’s federal budget deficit is $1.014 trillion, adding 27 days to Tax Freedom Day. • Three days earlier than last year. • Tax collections up, spending largely flat since 2009. • One week shy of all-time latest date: May 21, 1945.

  5. Deficit-inclusive Tax Freedom Day: May 14 • Now one week shy of WWII record. • Tax Freedom Day: April 17 • Now close to average since 1970. • Latest date on record was May 1, 2000, due to booming economy. • Exceptionally volatile since then, due to volatile economy.

  6. 69 days 10 days 46 days 38 days

  7. Extremely volatile, but has remained roughly at the same level since WWII despite dramatic changes in the top marginal rate.

  8. 2011 and 2012 Holidays took about 3 days off the burden.

  9. Property Taxes Sales and Excise Taxes Individual Income Taxes

  10. Grew in 1950s and 1960s, but stable since 1970.

  11. Collapsed during the Depression and WWII but stable since 1980.

  12. Increasingly volatile, due to increasing progressivity.

  13. State Tax Freedom Day • Includes all federal, state, and local taxes paid by the residents of each state, as opposed to who collects it. • Accounts for tax shifting across borders, as well as economic incidence. • For example, Alaska’s huge severance taxes on oil and gas are ultimately paid for by consumers throughout the 50 states in the form of higher prices at the pump.

  14. Earliest and Latest State Tax Freedom Days Earliest • Residents of these states tend to have middle or lower-than-average incomes and thus lower federal income tax burdens. • State and local taxes are below average in all these states. • TN and SD have no state personal income tax. Latest • Residents of these states tend to be higher income, which increases their federal income tax burden. • Residents of CT, NJ, and NY also pay higher-than-average state and local taxes. • Both WA and WY have no state individual income tax, but they make up the revenue in other taxes such as property or sales tax. WY has a lot of investors.

  15. More Information • Much more on website. • Includes details on important historical tax events, as well as data going back to 1900. • Questions?

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