Tax Freedom Day Continues to Come Later

The non-partisan Tax Foundation has just released its annual report that reveals how many days Americans must work to pay their federal, state and local taxes for the year. The day when Americans will have finally earned enough to pay all their taxes is called “Tax Freedom Day.”

Tax Freedom Day 2007 will arrive on April 30, the 120th day of the year—two days after it occurred in 2006, four days later than 2005 and 11 days later than 2004.

According to the Tax Foundation, “Tax Freedom Day has arrived later each year for four years running.” The Bush Administration’s biggest tax cuts were enacted in 2003, and that year Tax Freedom Day arrived April 18. Since then, no major federal tax relief has been passed, but the nation’s economy has been growing rapidly. The tax burden has risen largely because successful taxpayers have been pushed into higher income tax brackets.

Tax Freedom Day is calculated by dividing the nation’s total tax payments by the nation’s income. That yields the total effective rate, which for 2007 is 32.7%. On April 30, 32.7% of the year will have been consumed, meaning that politicians will seize the equivalent of every penny every American earns up to that day just to pay for government. Each state has a different total tax burden, so each state has a different Tax Freedom Day, as shown at right in the “Tax Freedom Day State-by-State” table.

The pie chart below shows where the income Americans will earn this year will go. We will work longer to pay taxes this year (120 days) than to buy food, clothing and housing  combined (105 days). In fact, we will work longer to pay federal taxes (79 days) than we will to pay housing (62 days.)

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