Paul L. Caron
Dean


Tuesday, April 12, 2011

Today Is Tax Freedom Day -- Earlier in MS, TN & SC, Later in CT, NJ & NY

Tax Foundation logo Today is Tax Freedom Day, the day on which Americans will have earned enough money to pay all federal, state, and local taxes for the year:

Tax Freedom Day® will arrive on April 12 this year, the 102nd day of 2011. That means Americans will work well over three months of the year, from January 1 to April 12, before they have earned enough money to pay this year's tax obligations at the federal, state and local levels.

Tax Freedom Day arrives three day later in 2011 than it did in 2010, but nearly two weeks earlier than in 2007. This shift toward a lower tax burden since 2007 has been driven by three factors:

  • The Great Recession has reduced tax collec­tions even faster than it has reduced income.
  • President Obama and the Congress, after a long debate, extended the Bush-era tax cuts for two additional years.
  • As part of the extension agreement, the Making Work Pay tax credit was replaced with the 2% reduction in the payroll tax.

Despite these tax reductions, Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined.

Tax Freedom Day 
 
The total tax burdens borne by residents of different states vary considerably. ...This occurs not only because residents of different states pay different amounts of state and local taxes, but also because their federal tax payments can vary dramatically. Higher-income states like Connecticut face a significantly higher total federal tax rate than lower-income states, even before accounting for the fact that many high-income states also have high state and local tax burdens.

Residents of Mississippi will bear the lowest average tax burden in 2011. Because of their modest incomes and extremely low state and local tax burden, we estimate Mississippi’s Tax Freedom Day for 2011 to be March 26. After Mississippi, the four states where Tax Freedom Day will arrive the earliest in 2011 are Tennessee (March 27), South Carolina (March 29), Louisiana (March 30), and South Dakota (March 30).

At the other end of the tax burden spectrum are states with comparatively late Tax Freedom Days. The residents of Connecticut will celebrate last, as usual, working until the 122nd day of the year, from January 1 to May 2, before earning enough to pay all their taxes. Because Connecticut’s income per capita is higher than in any other state, its residents pay extraordinarily high federal income taxes. Nearby states New Jersey (April 29) and New York (April 24) are second and third, respectively. Maryland (April 17) and Washington (April 16) round out the top five.

 

Rank

 

State

Days Worked

to Pay Taxes

Tax Freedom Day

1

Connecticut

122

May 2

2

New Jersey

119

April 29

3

New York

114

April 24

4

Maryland

107

April 17

5

Washington

106

April 16

6

California

106

April 16

7

Wisconsin

106

April 16

8

Minnesota

106

April 16

9

Illinois

105

April 15

10

Massachusetts

104

April 14

Average

United States

102

April 12

41

Oklahoma

92

April 2

42

Kentucky

92

April 2

43

Alabama

92

April 2

44

West Virginia

90

March 31

45

New Mexico

90

March 31

46

South Dakota

90

March 30

47

Louisiana

90

March 30

48

South Carolina

88

March 29

49

Tennessee

86

March 26

50

Mississippi

85

March 26

The Center on Budget and Policy Priorities criticizes the Tax Foundation's methodology here.

https://taxprof.typepad.com/taxprof_blog/2011/04/today-is-.html

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Comments

The differing burdens mainly are on account of regional cost of living differences. $1 in CT is not equal to $1 in MS and vice versa. This is horizontally inequitable.

An example everyone seems to be acquianted with nowadays is horizonal inequity on account of failing to adjust for inflation/time. That is the AMT. The AMT was enacted as a fixed rate and never indexed for inflation. What once seemed to be a lage sum of money became, over time, a middle class income.

The same principles aplly to both: $1 in 1980 is not equal to a $1 in 2011 the same way. $1 in CT is not equal to $1 in MS. Although the Code accounts for inflation in some respects (e.g., IRC sec. 1) it does not account for cost of living differences at all.

Thus, those living in high cost states, who need each dollar more as it is worth less than a dollar in a low cost state, pay a greater amount of income tax. If the amount in CT was made equivalent to $1 in MS, CT's adjusted cost of living puts CT in a higher tax bracket, and creates a higher tax bill, because CT will be earing more than one MS dollar (and this does not account for phaseouts and the like).

Posted by: tax guy | Apr 12, 2011 6:20:13 AM

Of course, Americans and American business receive the benefits of republican government, political stability, and an economic infrastructure that supports the most freedom and one of the highest standards of living in history 365 days a year. Stop whining.

Posted by: Publius Novus | Apr 12, 2011 6:29:10 AM

Of course the American Gov't benefits from the economic growth (over the many decades) and political stability that American Business contributes through employment and more importantly access to amazingly advanced goods.
Political stability and lack of riots in the streets is in no small part due to the jobs and goods provided by the general world business community and specifically the American one.
IT can be described as a symbiotic relationship and yet some people wish to focus on the good that government provides without recognizing the good flowing the other way.

IN addition why can't business complain. Yes it is true that american business benefits from the current structure vs. a more oppresive regime. It is also true that the business community and most importantly the AMERICAN PEOPLE may benefit even more if our system was even better than it is now. This is a point that reasonable minds can debate.

Posted by: mf | Apr 12, 2011 8:46:39 AM

Yes, it would sound a lot better if you called it "The Price We Pay for Civilization" day wouldn't it?

Posted by: mike livingston | Apr 12, 2011 8:57:13 AM

The price we pay for civilization, eh?

So I worked 20 days to pay for social security, for civilization? What if I just kept those 20 days of pay each year, would I need social security when I am old?

I worked 20 days to pay for medicare and medicaid too. If we didn't have these, would civilization break down? Seemed fine before they existed! Between the 20 days for social security and the 20 days for these two, that's about 15% of my paid work days going directly to someone else.

What if I invested them instead? What if I gave businesses that actually create jobs and the products I want the chance to thrive? What if all I did was put the money in the bank, increasing my bank's ability to lend?

How much of this money went to corporate welfare, preventing the destruction of bad businesses and increasing the barrier to entry for new businesses?

I'll pay for roads, the military, and other services that benefit everyone equally. If you think entitlement spending is a part of civilization then you can keep it. I refuse to be held hostage by those that think they're entitled to my money, in the name of "civilization." If you don't like it, leave.

Posted by: JLN | Apr 12, 2011 10:18:24 AM

Mike Livingston: ..."The Price We Pay for Civilization" day

For what we're getting, I'm being overcharged. The price for our civilization was met sometime in February. Since then, it's been the markups and wasted money that have been killing me.

Remember the good ol' days when universities offered courses in Western Civilization and we didn't have to listen to professors and Democrats bash all that is good about western culture and waste all of our money preaching that?

Posted by: Woody | Apr 12, 2011 11:09:14 AM

"Despite these tax reductions, Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined."

Can you be any more disingenuous? You are adding up all taxes throughout the year, comparing them to our basic essentials, and then expecting the reader to feel shafted because they somehow differ. Congratulations, that makes you a partisan hack.

Don't be afraid to mention the few, sparse benefits paying taxes provides. I hear there's only a couple.

Posted by: J.R. | Apr 12, 2011 11:40:55 AM

A lot of anger over this post. I don't know the general context of this blog but based on Mr. Caron's actual post it appears to be only an observation rather than a commentary.

The expression of data should not be responded to with anger. The post itself while I concede may carry a "I don't like this" tone, in no way editorializes to the degree that most other comment posters seem to think.

Posted by: Joseph Colvin | Apr 12, 2011 4:12:07 PM

I agree with Joseph Colvin. Especially for such a polarizing subject as taxes, I thought Mr. Caron's tone was refreshingly neutral and informative.

I even, as a Connecticut man, smiled at the sentence "The residents of Connecticut will celebrate last, as usual..." to which I would only respond with "He who laughs last, laughs best." Overall, very well done sir.

Posted by: Jim Casy | Apr 13, 2011 12:59:17 PM

I guess some people, unlike myself, find it refreshing to know how long they work for the government every year before they start working for themselves.

Posted by: Woody | Apr 13, 2011 1:19:37 PM