US Taxpayers To Celebrate Tax Freedom Day On April 30

by Mike Godfrey, Tax-News.com, Washington

18 April 2007

Tax Freedom Day for taxpayers in the United States will fall on April 30 in 2007, according to the Tax Foundation's annual calculation, using the latest government data on income and taxes.

"Tax freedom will come two days later in 2007 than it did in 2006," announced Tax Foundation President Scott A. Hodge, "and fully 12 days later than in 2003, when tax cuts caused Tax Freedom Day to arrive comparatively early, on April 18".

However, 2007's Tax Freedom Day is still slightly earlier than it was in 2000, when the economic boom, the tech bubble and higher tax rates pushed tax burdens to a record high, and Tax Freedom Day was postponed until May 5.

"The economy has been growing at a good clip since mid-2003," said Hodge, "and those growing incomes are pushing people into higher tax brackets. When that happens, tax collections grow faster than incomes".

The annual report by Hodge, and Tax Foundation economist Curtis Dubay, traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, calculates a Tax Freedom Day for each state, and compares tax payments to other typical consumer expenditures.

The report compares the number of days Americans work to pay taxes to the number of days they work to support themselves.

"Americans will work longer to pay for government (120 days) than they will for food, clothing and housing combined (105 days)," observed Hodge. "Since 1986 taxes have cost more than these basic necessities. In fact, Americans will work longer to afford federal taxes alone (79 days) than they will to afford housing (62 days)."

In 2007, Americans will work another 41 days to afford their state and local taxes, according to the report. That makes taxation a bigger financial burden than housing and household operation (62 days), health and medical care (52 days), food (30 days), transportation (30 days), recreation (22 days), or clothing and accessories (13 days).

Six out of the ten states with the heaviest tax burdens and the latest Tax Freedom Days are in the Northeast: Connecticut (May 20), New York (May 16), New Jersey (May 10), Vermont (May 09), Rhode Island (May 09), and Massachusetts (May 06). The other four are Nevada (May 08), California (May 07), Washington (May 06), and Minnesota (May 04).

Many of these states are taxed the heaviest and celebrate Tax Freedom Day later because of the progressive federal income tax. States with large metropolitan areas offer higher-paying jobs, and as a result, many of the citizens earn enough to pay income tax at the highest rates--currently 25%, 28%, 33% and 35%. As a result, they must work longer to pay their disproportionate share of the tax burden.

The ten states with the lightest total tax burdens celebrate Tax Freedom Day the earliest. Oklahoma's April 12 is the earliest of all. The next nine are Alabama (April 12), Mississippi (April 13), Alaska (April 13), Tennessee (April 15), New Mexico (April 15), Louisiana (April 16), South Dakota (April 16), Texas (April 19), and Idaho (April 19).

In most of these states, Tax Freedom Day is early because of a large number of low-income taxpayers who pay most of their federal income taxes at the lower rates, 10% and 15%.

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