Ready to party? It's Tax Freedom Day
Most Americans have earned enough this year to pay federal, state and local taxes. Some states celebrated early, but residents of others will be working for taxes until next month.
You might still be working on your 2010 tax return, but your earnings so far this year have been going to pay your 2011 tax bill.
So put down your Form 1040 instruction book and take a minute to celebrate. Today is America's Tax Freedom Day.
That means, according to the Tax Foundation, that U.S. taxpayers on average will have earned enough by today to pay off their 2011 federal, state and local taxes.
The Washington, D.C.-based nonpartisan research and policy group has been tracking Tax Freedom Day for 40 years.
This year's Tax Freedom Day is three days later than last year, largely because of income changes rather than statutory tax law changes, said Kail Padgitt, the Tax Foundation's staff economist.
"As the economic recovery continues," said Padgitt, "individuals' rising income pushes them into higher tax brackets. Also, corporate tax revenue has also seen a resurgence."
The 2011 "celebration" also is nearly two weeks earlier than in 2007. The Tax Foundation says this shift toward a lower tax burden since 2007 has been driven by three factors:
- The recession has reduced tax collections even faster than it has reduced income.
- The Bush-era tax cuts were extended in December 2010 for two additional years.
- As part of the tax-cuts extension, the Making Work Pay tax credit was replaced with the 2 percent reduction in the payroll tax.
But even with today's tax reductions, the Tax Foundation says Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined.
The days of our taxes
Five major categories of taxes dominate the American tax burden used to calculate Tax Freedom Day:
- Individual income taxes, including federal, state and local levies, require 36 days of work.
- Payroll taxes take another 22 days of work.
- Sales and excise taxes, mostly state and local, take 15 days to pay off.
- Corporate income taxes take 12 days to pay.
- Property taxes take another 12 days of work.
Americans will log four more days to pay other miscellaneous taxes, most notably including motor vehicle license taxes and severance taxes, and about 18 hours for estate and gift taxes.
State tax days vary
In addition to the overall U.S. Tax Day calculation, the group each year takes a state-by-state (plus D.C.) look at Tax Freedom Days.
The various days at which states and the District of Columbia reach their Tax Freedom Day happens not simply because of different amounts of state and local taxes, but also because states' federal tax payments can vary dramatically.
Because of lower incomes and low state and local tax burdens, Mississippi was the first to celebrate its Tax Freedom Day. That party was held on March 26, only 85 days into 2011.
Other early state Tax Freedom Days came in Tennessee on March 27, South Carolina on March 29, Louisiana and South Dakota on March 30 and New Mexico and West Virginia on March 31.
High-income states pay much more in federal taxes and they often also have higher state and local taxes. That means residents of those states have to wait longer for their Tax Freedom Day.
Connecticut is the last to observe Tax Freedom Day, waiting 122 days, or until May 2, to earn enough to cover all their 2011 tax obligations.
Other belated Tax Freedom Day celebrations will be held in New Jersey on April 29,
New York on April 24, Maryland on April 17 and Washington (both the state and the District of Columbia), California, Wisconsin and Minnesota on April 16.
The Tax Foundation provides the state Tax Freedom Days in an alphabetical list on page 7 of its full report (PDF).
Mark your calendars and get ready to party!
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.