This coming week will mark an Independence Day of sorts for Americans. Thursday April 18 will mark the day that the country as a whole has officially earned enough money to pay its total tax bill freedom from the mounting tax burdens of the year. Although taxes aren’t officially paid in one lump sum at this point the money earned by April 18 is officially enough to pay the bill.
Tax Freedom day comes five days later than last year due to the fiscal cliff deal that raised taxes on income and payroll which resulted in a 2% pay decrease for the average American. On top of that the Affordable Care Act investment tax and excise tax also went into effect earlier this year.
In order to arrive at this date the Tax Foundation divides all federal state and local taxes by the nation’s income using federal projections data from the U.S. Census Bureau and the Bureau of Economic Analysis and projections of state and local taxes.
If Federal borrowing was included (Federal tax owed) the official Tax Freedom day wouldn’t arrive until May 9. The latest inclusive day ever recorded was May 12 1945 during World War II.
The total tax burden varies state to state with higher income states declaring Tax Freedom day later in the year. The latest calculated Tax Freedom day was for Connecticut coming in on May 13 and the earliest recorded freedom day goes to Louisiana-March 29.
The Tax Foundation estimates that Americans will spend more in taxes in 2013 than they will on food clothing and housing combined. Nearly half of American income goes to the government for taxes and fees.
If all the fees property taxes sales taxes and hidden taxes were calculated in this equation it is estimated that Tax Freedom day wouldn’t officially come until June or July.