Tax Freedom Day to be Announced March 31

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Permalink Reply by Dan Hunt on March 30, 2009 at 9:24pm

There is no such thing as tax freedom day. We are paying income taxes everyday when you factor in the embedded corporate income taxes passed onto the consumer in the price of all goods and services.

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Permalink Reply by John Gaver on March 31, 2009 at 5:51am

Dan, Tax Freedom Day shows us just how much we pay in all kinds of taxes, by theoretically rolling them all up into the first part of the year.

If you had taken the time to check it out, before reacting, you would have learned that the Tax Freedom Day calculations not only include personal federal income tax, but all forms of tax collected at all levels of government, including corporate income taxes, payroll taxes, sales taxes and taxes on property, cigarettes, gasoline, etc. If it is a tax and it is collected in the USA, then it is included in the Tax Freedom Day calculation. The income portion of the calculation includes earned income, interest income and realized capital gains, as well as non-taxable income, such as income from municipal bonds.

Tax Freedom Day exposes the fact that even those of us, who manage to legally shelter a decent portion of our income from the federal income tax, still have to work for more than a quarter of each year, just to pay all of our taxes.

One of the advantages to the FairTax is that it exposes some of those hidden taxes and will make people realize just how much they pay in federal taxes, every time they go to the cash register. It's all about making people wake up and realize how much they pay in taxes. By theoretically rolling up our tax burden into the first part of the year, Tax Freedom Day has become very effective at making otherwise oblivious people stop and think about how much they pay for the largely mediocre government services that they receive. It makes people wonder if they couldn't get some of those services at a better quality and lower cost, if the government was not involved.

Whether you think of it as more than a quarter of every year, more than a quarter of every day or more than a quarter of every hour, it still means that more than a quarter of our work life is spent paying taxes, of one form or the other and that's the message of Tax Freedom Day.

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Permalink Reply by Dan Hunt on March 31, 2009 at 7:41am

John, I understand The Fair Tax exposes the hidden taxes. I expound on that point frequently to people who either want to learn about The Fair Tax or those who make erroneous statements. However something doesn't wash with the assumption tax freedom day occurs on the same day for everyone. People spend based on how much they earn. Those that earn more money tend to spend more and therefore will, theoretically, have a later tax freedom day than those who earn and consequently spend less based on your line of reasoning. The important point is this just a theory and not fact.

We do know for a fact people must make purchases throughout the year and therefore will be paying those embedded taxes year round. Consequently the theory/assumption tax freedom day even occurs, let alone on the same, day is nothing more than a myth.

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Permalink Reply by John Gaver on April 1, 2009 at 3:51am

Dan, neither the Tax Foundation nor Tax Freedom Day originator, Florida businessman Dallas Hostetler, have never even suggested that Tax Freedom Day was the same for everyone. In fact, not only do they always refer to Tax Freedom Day as "the day on which the 'average' American has worked long enough to earn enough to pay his taxes for the year", but since 1990, they have even announced different Tax Freedom Days for each state.

The point is that the announced Tax Freedom Day does represent the tax ratio of the average, middle-class American, which is the bulk of Americans. A person who is lower-middle-class or upper-middle-class may have a personal Tax Freedom Day that is two or three days earlier or later than the announced Tax Freedom Day. But in general, if you work for a living and own a car and a house, then it's a pretty safe bet that you will work for around a quarter of the year or more, before you will earn enough money to pay your taxes for the year.

The message of Tax Freedom Day is aimed at the teeming middle-class. After all, it's that large demographic that gets hit the hardest, every time taxes go up and that gets the least relief, whenever taxes are cut. They are also the people who are working so hard to get ahead that they don't usually stop to figure out how much tax they really pay. As the Tax Foundation points out, by theoretically rolling up all of the years taxes into the beginning of the year, "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.

Of course, the more people who realize that, the more supporters the FairTax will get. If all working-class Americans realized just how much taxes they really pay, the FairTax would become law in no time. Tax Freedom Day has become a very effective tool at waking people up to that fact.

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Permalink Reply by John Gaver on April 1, 2009 at 4:05am

Well, I sure missed that one. Tax Freedom Day for 2009 falls on April 13. It turns out that the recession has hit taxes harder than it has hit earnings. Also, the calculations to determine Tax Freedom Day don't include the sky-rocketing deficit. If it did, then Tax Freedom Day would fall on May 29 - the latest ever for the deficit-inclusive date.

As the effect of all these bailouts hit and taxes eventually have to be adjusted to buy down the deficit, we can expect see Tax Freedom Day move further into the calendar.

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