Tax Freedom Day Comes on April 11 in 2004, Earliest Since 1967

http://www.taxfoundation.org/taxfreedomday.html ^ | 4/7/04 | Tax Foundation

[MNJohnnie]

Washington, D.C., April 7, 2004 — According to Tax Foundation calculations using the latest government data on income and taxes, Tax Freedom Day® in 2004 will be celebrated on April 11th, the earliest Tax Freedom Day for 37 years.

April 11th is three days earlier than 2003’s Tax Freedom Day of April 14 and an amazing 21 days earlier than in 2000, when the boom and bubble pushed tax burdens to a record high, and Tax Freedom Day was postponed until May 2 (see Figure 1).

"Federal tax cuts have made the average American tax burden lighter in 2004," said Tax Foundation President Scott Hodge. "Because the bubble in 1999 and 2000 boosted tax collections to artificially high levels, the drop since then is all the more dramatic. In fact, it is the biggest drop in America's tax burden for at least a century."

The report is Tax Foundation Special Report No. 129, "America Celebrates Tax Freedom Day®," by Hodge and Foundation Senior Economist Scott Moody. The report traces the course of America’s tax burden since 1900, examines the composition of today’s tax burden by type of tax, projects the future course of Tax Freedom Day and compares tax payments to other typical consumer expenditures.

What is Tax Freedom Day? Tax Freedom Day is the day when Americans will finally have earned enough money to pay off their total tax bill for the year. Every dollar that’s officially called income by the government is counted, and every payment to the government that is officially considered a tax is counted. Taxes at all levels of government are included, whether levied by Uncle Sam or state and local governments.

Tax Freedom Day gives Americans an easy way to gauge the overall tax take, a task that can be quite daunting due to the multiplicity of taxes at each level of government, especially the "hidden" taxes and fees that are often buried in the cost of living. In effect, Tax Freedom Day provides taxpayers with a tax barometer that measures the total tax burden over time and by state.

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Figure 1: Tax Freedom Day, 1963 – 2004

(This link will take you to the original article)for graphic

http://www.taxfoundation.org/taxfreedomday.html

The Projected Course of Tax Freedom Day Tax legislation being debated right now will affect the course of future Tax Freedom Days. The President wants to keep such popular tax cuts as the child tax credit, the 10% bracket, and the marriage penalty relief at their most generous levels, which they have reached in 2004, rather than let them dip as they are scheduled to do under current law. Senator Kerry also speaks out in favor of those tax cuts but promises repeal of tax cuts for higher-income taxpayers.

If current law prevails, the tax burden will start growing again, and Tax Freedom Day will fall later in April (see Figure 2).

Figure 2: Tax Freedom Day Forecast, 2004 - 2014 (See Link above to see graphic)

Taxes and Other Expenses The report also compares the number of days Americans work to pay taxes to the number of days they work to support themselves.

"Despite the dramatically lower tax burden in 2004, Americans will still spend more on taxes than they spend on food, clothing and medical care combined," said Hodge.

In 2004, Americans will work 65 days to afford their federal taxes and 36 more days to afford state and local taxes. Other categories of spending that require many days of labor to afford are housing and household operation (66 days), health and medical care (51 days), food (31 days), transportation (31 days), recreation (22 days), clothing and accessories (14 days), saving (5 days) and all other (44 days). See Figure 3.

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Figure 3: How Many Days America Works to Pay Taxes Compared to Major Spending Categories, Calendar Year 2004

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Tax Freedom by Type of Tax As most taxpayers are aware, income taxes are the type of tax that we work longest for — 36 days, with 28 of those days worked for Uncle Sam and 8 more days to pay off state and local income taxes. Social insurance taxes which along with income taxes are deducted directly from most people’s paychecks, require 28 days’ worth of work to pay for. Sales and excise taxes require 16 days of work, property taxes 11 days and business taxes 9 days. See Figure 4.

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Figure 4: How Many Days America Will Work to Pay Each Type of Tax, Calendar Year 2004

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Tax Freedom Day by State Tax burdens vary considerably from state to state, not only because of different state and local taxes, but because of divergent federal tax payments. Therefore, the report includes a separate calculation of Tax Freedom Day for each state.

The five states with the heaviest tax burdens and who therefore wait the longest for Tax Freedom Day are all in the northeast: Connecticut (April 28), New York (April 27), New Jersey (April 19), Massachusetts (April 18) and Rhode Island (April 16). Because the cost of living and salaries are higher in these states, taxpayers must work longer to pay their disproportionate share of progressive federal income taxes. The next five most-taxed states in 2004 are Maine (April 15), Washington (April 15), Wyoming (April 14), Nevada (April 13) and California (April 13).

The five states with the lightest total tax burdens celebrate Tax Freedom Day the earliest. March 26 is the earliest of all. That’s when Alaskans will celebrate. Alabama, Tennessee and South Carolina have the second, third and fourth lightest total tax burdens, and they were all done working for government on April 1. Oklahoma, Mississippi, Louisiana, and South Dakota all celebrated Tax Freedom day on April 2 while North Dakota and Iowa celebrated April 3. See Table 1, columns 4 and 5 for this year's data.

Table 1: Tax Freedom Day by State and Rank, Selected Calendar Years, 1990 – 2004 1990 Tax Freedom Day 1995 Tax Freedom Day 2000 Tax Freedom Day 2004 Tax Freedom Day Rank in 2004 U.S. April 21 April 24 May 02 April 11 -

Alabama April 12 April 13 April 20 April 01 49

Alaska April 22 April 11 April 18 March 26 50

Arizona April 23 April 26 April 30 April 09 22

Arkansas April 13 April 17 April 24 April 04 39

California April 19 April 23 May 08 April 13 10

Colorado April 21 April 22 May 01 April 11 14

Connecticut April 23 May 06 May 21 April 28 1

Delaware April 14 April 18 April 25 April 05 33

Florida April 17 April 24 May 01 April 08 25

Georgia April 20 April 23 April 29 April 09 21

Hawaii April 27 April 21 April 30 April 08 23

Idaho April 17 April 20 April 26 April 05 35

Illinois April 24 April 25 May 02 April 11 13

Indiana April 18 April 20 April 25 April 07 28

Iowa April 22 April 24 April 24 April 03 41

Kansas April 21 April 22 April 28 April 06 30

Kentucky April 16 April 20 April 23 April 05 36

Louisiana April 14 April 11 April 23 April 02 44

Maine April 19 April 26 May 07 April 15 6

Maryland April 21 April 23 May 03 April 11 15

Massachusetts April 20 April 27 May 10 April 18 4

Michigan April 22 April 21 April 29 April 10 20

Minnesota April 25 May 02 May 05 April 12 12

Mississippi April 13 April 16 April 21 April 02 45

Missouri April 15 April 19 April 24 April 04 40

Montana April 19 April 20 April 24 April 04 37

Nebraska April 20 April 24 April 27 April 05 34

Nevada April 26 May 01 May 05 April 13 9

New Hampshire April 16 April 21 April 29 April 07 27

New Jersey April 27 May 02 May 12 April 19 3

New Mexico April 19 April 19 April 30 April 10 18

New York May 02 May 04 May 14 April 27 2

North Carolina April 16 April 18 April 24 April 06 32

North Dakota April 16 April 23 April 23 April 03 42

Ohio April 16 April 20 April 26 April 10 17

Oklahoma April 14 April 14 April 20 April 02 46

Oregon April 24 April 22 April 26 April 06 31

Pennsylvania April 16 April 21 April 27 April 06 29

Rhode Island April 20 April 24 May 07 April 16 5

South Carolina April 16 April 18 April 23 April 01 47

South Dakota April 15 April 20 April 22 April 02 43

Tennessee April 13 April 14 April 18 April 01 48

Texas April 21 April 21 April 27 April 07 26

Utah April 21 April 24 April 28 April 08 24

Vermont April 24 April 27 May 04 April 10 16

Virginia April 18 April 20 May 02 April 10 19

Washington May 01 May 03 May 09 April 15 7

West Virginia April 15 April 14 April 22 April 04 38

Wisconsin April 26 April 30 May 05 April 13 11

Wyoming April 26 April 27 May 10 April 14 8

District of Columbia May 04 May 02 May 18 April 27 -

Comparing State/Local Tax Burdens To facilitate comparisons of state/local tax burdens, the report includes a state-by-state ranking of tax burdens with federal taxes excluded. This year, the nation’s average state-local tax burden is 10.0 percent of residents’ income, with the highest being New York’s 12.9 percent and the lowest being Alaska’s 6.3 percent.

For historical comparison, the Tax Foundation will post on April 7 new estimates of combined state-local tax burdens on its website that cover the years 1970-2004.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

[MNJohnnie]

THANK you President Bush!

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[Cedar]

Tax relief we all need!

[Torie]

Somehow I suspect that this study ignores the alternative minimum tax. In high tax states, it wipes out the latest round of Bush tax cuts for those earning say, over maybe 100k.

[MNJohnnie]

Somehow I suspect that this study ignores the alternative minimum tax. In high tax states, it wipes out the latest round of Bush tax cuts for those earning say, over maybe 100k.

I doubt it since they are the pros on Tax facts. From the article,

Tax Freedom Day is the day when Americans will finally have earned enough money to pay off their total tax bill for the year. Every dollar that’s officially called income by the government is counted, and every payment to the government that is officially considered a tax is counted. Taxes at all levels of government are included, whether levied by Uncle Sam or state and local governments.

However, what is your source for the claim about the Alternative Minimum tax. After all the DNC directed News Media and Kerry have been spending hours telling us how the Bush tax cuts "only help the wealthy"?

[Torie]

My source is turbo tax, and my own tax return. Millions of taxpayers are being hit by the alternative miniumum tax in high tax states for the first time (both of my partners are too), and it does indeed largely wipe out the fall in federal tax rates that occurred in 2003 for those earning somewhat over 100K, in high state income tax states.

[MNJohnnie]

My source is turbo tax, and my own tax return. Millions of taxpayers are being hit by the alternative miniumum tax in high tax states for the first time (both of my partners are too

OK because YOUR personal situation involves the Alternative Minimum tax you KNOW "Millions" are being effected?

Also, as noted in the article ALL taxes FEDERAL, STATE and LOCAL are counted in this report

[Torie]

Ya, counting all, my taxes have not gone down, except indiscernably. And its "affected" rather than "effected" per the context of your sentence. Maybe you don't think I know much about taxes or tax policy. You are free to believe whatever you want.

[MNJohnnie]

Ya, counting all, my taxes have not gone down, except indiscernably. And its "affected" rather than "effected" per the context of your sentence. Maybe you don't think I know much about taxes or tax policy. You are free to believe whatever you want


You misunderstood my point. I am saying YOUR personal picture does NOT translate into "millions of taxpayers" or a refutation of the validity of the article. What you know about taxes is irrelevant to the point of the article. Saying because your personal situation is different the article is wrong does not logically follow.

BTW, My sympathies for your tax burden. It it were up to me, I would dump the A.M.T. tomorrow.

[NC28203]

Yes, but what would tax freedom day be if we actually paid for all the governement services we are receiving this year? I could move tax freedom day back to January 1 and finance the governement with debt, but I would not consider that a great accomplishment.

[maica]

For the record, Tax Freedom day in British Columbia - where I lived for many years, comes sometime in July.

[reed_inthe_wind]

Can somebody tell me if this will be reported by ABC or CNN ?