The annual announcement from the Tax Foundation tells us how many days we have to work each year in order to pay federal taxes. Tax Freedom Day 2008 will fall on April 23, three days earlier than 2007's Tax Freedom Day, which fell on April 26.
Stimulus rebates and a projection of slow growth in 2008 are the principal reasons for the earlier celebration, according to the nonpartisan Tax Foundation.
Tax Freedom Day is calculated by dividing the official government tally of all taxes collected in each year by the official government tally of all income earned in each year. Governments â federal, state and local â took 29.6 percent of income in 1970, 30.4 percent of income in 1980, 33.6 percent in 2000, and so on. This percentage is the nation's total tax burden. The Foundation then uses the historical trend and the most recent economic data to make a projection of what the tax burden will be in the current year and converts that burden into a date â a percentage of the year â on which Americans will have earned enough income to pay their total tax bill for the year.
The new study, Tax Foundation Special Report No. 160, "America Celebrates Tax Freedom Day," by Tax Foundation senior economist Gerald Prante and Tax Foundation president Scott Hodge, also compares tax payments to other major consumer expenditures, traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, and calculates a Tax Freedom Day for each state.
âGovernment continues to dominate the American taxpayer's budget,â said Tax Foundation president Scott Hodge. âAmericans will still spend more on taxes in 2008 than they will spend on food, clothing and housing combined.â
In 2008, Americans will work 74 days to afford their federal taxes and 39 more days to pay state and local taxes, the Tax Foundation reports. Meanwhile, buying food requires 35 days of work, clothing 13 days, and housing 60 days. Other major categories are health and medical care (50 days), transportation (29 days), and recreation (21 days).
Bush era has seen Tax Freedom Day fluctuate substantially
"Tax freedom has been a see-saw affair in recent years," said Tax Foundation senior economist Gerald Prante. "In 2000, Tax Freedom Day was celebrated May 3, the latest date ever. Then a string of tax cuts between 2001 and 2003 pushed Tax Freedom Day up by more than two weeks, so that it fell on April 16 in 2003 and April 17 in 2004. For the next three years, incomes and tax collections soared, pushing Tax Freedom Day back to April 26 in 2007."
You can read the Tax Freedom Day report including Tax Freedom Day by State.