Tax Freedom Day
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Tax Freedom Day is the first day of the year in which a nation as a whole has earned enough money to pay for its annual tax burden or cost of government. The concept was introduced by the Tax Foundation—a Washington D.C.-based tax research group—as a tool for illustrating the proportion of national income that goes to pay the annual cost of government.
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Canada
In 2003 Tax Freedom Day in Canada was reported as June 28 by the pro-market think tank the Frasier Institute. Tax Freedom Day in Canada reached its latest date in 2000 when it fell on July 2 after a rapid plunge to June 25 in 2001 it has steadily increased since then. The changes in the date of Tax Freedom Day generally have little to do with government policy and instead are a reflection of the state of the economy. When the nation is prosperous more Canadians are paying taxes and paying them at a higher rate, pushing Tax Freedom Day forward.
Denmark
In Denmark, Tax Freedom Day for 2001 was August 14.
United Kingdom
In the United Kingdom, Tax Freedom Day for 2005 fell on May 31, according to think tank the Adam Smith Institute. The institute calculate Tax Freedom Day as having fallen on the following dates historically:
1963 24-Apr 1984 11-Jun
1964 23-Apr 1985 11-Jun
1965 27-Apr 1986 07-Jun
1966 02-May 1987 04-Jun
1967 11-May 1988 04-Jun
1968 17-May 1989 02-Jun
1969 22-May 1990 01-Jun
1970 26-May 1991 02-Jun
1971 20-May 1992 28-May
1972 13-May 1993 21-May
1973 12-May 1994 22-May
1974 28-May 1995 26-May
1975 02-Jun 1996 24-May
1976 30-May 1997 25-May
1977 28-May 1998 28-May
1978 23-May 1999 03-Jun
1979 25-May 2000 03-Jun
1980 05-Jun 2001 04-Jun
1981 14-Jun 2002 26-May
1982 15-Jun 2003 25-May
1983 12-Jun 2004 27-May
2005 31-May
United States
In the United States, Tax Freedom Day for 2003 was April 19, the earliest since 1992. The latest that Tax Freedom Day has occurred is April 30 in 2000. In the 20th century, Tax Freedom Day came as early as January 18 (in 1912). It has steadily moved later into the year, which means that the average net tax burden has increased.
Tax Freedom Day differs from state to state, as American states charge a variety of state taxes and charges. In 2001, Alaskans had the slightest tax burden, earning enough to pay all their tax obligations by April 16. Connecticut had by far the heaviest tax burden—Tax Freedom Day there came on May 25. New Yorkers had the second heaviest tax burden, having to work until May 14 to pay their taxes.
According to the Tax Foundation, here is the list of Tax Freedom Days in the U.S. since 1990:
- 1990 20-Apr
- 1991 19-Apr
- 1992 19-Apr
- 1993 20-Apr
- 1994 21-Apr
- 1995 23-Apr
- 1996 24-Apr
- 1997 26-Apr
- 1998 27-Apr
- 1999 28-Apr
- 2000 30-Apr
- 2001 27-Apr
- 2002 19-Apr
- 2003 19-Apr
Criticisms
Critics of the concept argue that the methodology used exaggerates the amount of tax paid by middle-income taxpayers, as it is calculated, essentially, by dividing total tax collections by net national product, which is skewed upward by the inclusion of very wealthy taxpayers. Another criticism is that the calculation includes capital gains taxes but not capital gains income, thus overstating the tax burden. However, the Tax Foundation defends its methodology by pointing out that (1) Tax Freedom Day is the nation's average tax burden, and if high-income taxpayers were excluded it would no longer be the mathematical average burden, and (2) the Tax Freedom Day calculation employs income and tax data directly from the Bureau of Economic Analysis (BEA) and the National Income and Product Accounts (NIPA) which have never counted capital gains as income since they don't represent current production that's available to pay taxes, but instead represent the re-valuing and shifting-around of existing assets. Additionally, the latter criticism is irrelevant in most years since including capital gains taxes typically shifts Tax Freedom Day by roughly 1 percent.
See also: income tax
External links
- Tax Foundation's Tax Freedom Day (http://www.taxfoundation.org/taxfreedomday.html)
- Tax Freedom Day (UK) (http://www.adamsmith.org/tax/) calculated by the Adam Smith Institute (http://www.adamsmith.org/)