It’s that time of year again which by name alone sounds pretty great but in reality packs a pretty painful punch. This April 18th marks the unofficial Tax Freedom Day for the people of the US, meaning that until this date every penny you’ve earned since January 1st will technically be blown on taxes in one form or another by the time the year is out.
Quite the sting in the tail, isn’t it.
The annual Tax Freedom Day report is generated by the Tax Foundation, which is a non-governmental group based in Washington D.C and takes responsibility every year for letting us know when exactly we’ve met our tax obligations. For those preferring to dig deep for the silver lining, Tax Freedom Day can be seen as the day upon which you start actually earning money for yourself, rather than for Uncle Sam.
The report takes into account federal, state and local taxes when held alongside total national earnings for the year to date, meaning that if the country as a whole was to forfeit its entire income from the start of the year until April 18th, the national tax quota would be paid off in full. Last year’s Tax Freedom Day rolled around in April 13th, meaning that on average you’re looking at an extra full week of work in order to pay your contributions this time around.
According to the Tax Foundation, US citizens will fork out approximately $2.76 trillion in federal taxes this year, along with $1.45 trillion in local and state taxes to rack-up an overall bill of $4.22 billion. Speaking of this year’s report, the Tax Foundation’s chief economist William McBride once again stated that a rather lofty 29.4% of all US income now goes straight into the hands of the taxman – considerably higher than how much is spent on housing, clothing and food combined.
He also offered his own interpretation on the reasons behind what appears to be an every-growing tax bill faced by US citizens.
“The biggest one is the fiscal cliff deal that raised federal payroll and income taxes. Second, there is the Affordable Care Act taxes that go into effect this year,” said McBride this week. “Finally, despite these increases, the economy is continuing to grow. As incomes grow, people are boosted into higher tax brackets, so their tax rates go up.”
Tax Freedom Day differs considerably from state to state across the US, with Louisiana and Mississippi both coming out with the earliest dates on the 2013 calendar – March 29th. These are closely followed by Tennessee which will see its Tax Freedom Day on April 2nd, with all three of these states having average incomes that are lower than the US national average and thus lower overall state and local taxes, according to the report.
At the other end of the scale, Connecticut won’t have paid off its annual tax burden until May 13th, while New York and New Jersey take silver and bronze-medal positions at May 6th and May 4th respectively. Again, the reports states that comparatively high average incomes result in higher states and local taxes, hence the larger overall annual tax bill to foot by residents.