Tax Freedom Day is April 23, marking the day when the United States has earned enough to pay its total tax bill for the year, minus future tax debt to cover the federal deficit.
Tax Freedom Day is derived by computing federal, state, and local taxes – individual and payroll, sales, excise, corporate, and property taxes – and dividing that total by the national income.
This year, Americans will pay $3.5 trillion in federal taxes and $1.6 trillion in state and local taxes. The total hit? More than $5.1 trillion, or 31 percent of national income, according to a report by the Tax Foundation.
With 113 days into 2017, Americans will work 46 days to pay federal, state, and local individual taxes. It’ll take another 26 days to pay payroll taxes, 15 days to pay sales and excise taxes, 10 days each to pay corporate income and property taxes, and six days to pay estate and inheritance taxes, customs duties, and other taxes.
And here’s one to ponder: Overall, Americans will spend more on taxes than on food, clothing, and housing combined, the report states.
The latest-ever Tax Freedom Day was May 1, 2000, when American paid 33 percent of their total income in taxes. In 1900, Tax Freedom Day was Jan. 22 when Americans paid 5.9 percent of their income in taxes.
But Tax Freedom Day would actually come later if annual federal borrowing was included. That borrowing covers the deficit – $612 billion this year – or future tax debt. Calculated that way, Tax Freedom Day this year would be May 7.
The longest time Americans had to work to include the deficit was in 1945 during World War II, when May 25 was Tax Freedom Day.
Here’s another caveat about the date. While April 23 is the federal Tax Freedom Day, it comes at different times for each state. Tax Freedom Day is later for states with higher incomes and higher taxes.
Connecticut has the latest Tax Freedom Day, celebrated on May 21. For Mississippians, with the lowest average tax burden this year, Tax Freedom Day was April 5.
Today is Tax Freedom Day in Hawaii, while Michigan, Nevada, Pennsylvania, Virginia, and Wyoming also celebrate Tax Freedom Day on April 23.
About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.