April 9th Is Tax Freedom Day®

April 9th Is Tax Freedom Day®

by Kail Padgitt

Introduction

Tax Freedom Day® will arrive on April 9 this year, the 99th day of 2010. That means Ameri­cans will work well over three months of the year, from January 1 to April 9, before they have earned enough money to pay this year's tax obli­gations at the federal, state and local levels.

Tax Freedom Day arrives a day later in 2010 than it did in 2009, but more than two weeks earlier than in 2007. 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;
• President Obama and the Congress have enacted large but temporary income tax cuts for 2009 and 2010, just as President Bush did in 2008; and
• Two significant taxes were repealed for 2010 as part of previous legislation, the estate tax and the so-called PEP and Pease provisions of the income tax.

Despite all these tax reductions, Americans will pay more taxes in 2010 than they will spend on food, clothing and shelter combined.

Key Findings
• Tax Freedom Day falls on April 9th this year, which means Americans will spend over three months working before they earn enough to pay their federal, state and local taxes.

• In 2010, the slow economy combines with the tenth and final year of the Bush tax cuts and some one-year tax cuts signed by President Obama to keep this year's tax burden low, though not quite as low as in 2009.

• Tax Freedom Day does not count the deficit even though deficits must eventually be financed. Since 1948, when Tax Freedom Day was first calculated, the difference between what governments are spending and what they're collecting has never been as great as during 2009 and 2010. If Americans were required to pay for all government spending this year, they would be working until May 17 before they had earned enough to pay their taxes.

• Each state has its own Tax Freedom Day. Alaska's is earliest on March 26, and Connecticut celebrates last on April 27. High-income states pay much more in federal taxes, and they often have higher state-local taxes as well. Joining Connecticut in the latest celebrations are New Jersey, New York, Maryland and Washington. Alaska is joined in early celebration by Louisiana, South Dakota, Mississippi and West Virginia.