By Dr. Vance Ginn & Kiara Pillay
April 15th is the day few of us look forward to: Federal Individual Income Tax Day.
Fortunately, there is a day we can reluctantly look forward to: Tax Freedom Day.
Tax Freedom Day is the day when the nation has worked long enough to pay for federal, state, and local taxes for the year, according to the Tax Foundation.
This year, Americans will spend 31 percent of the nation’s income on all taxes, including $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes. This means that Americans will not pay almost $5 trillion until the Tax Freedom Day of April 24th. To put it bluntly, we work for governments for the first 114 days of the year—one day earlier than last year, due to lower federal tax collections.
Texas’ more friendly tax code keeps Texans working only until April 17th to pay all taxes. Although Texans lost four work days compared with last year when the Tax Freedom Day was April 13th, Chart 1 shows that Texas ranks 20th for having the shortest period of work days to pay federal, state, and local taxes. Mississippi has the earliest Tax Freedom Day of April 5th and Connecticut has the latest day of May 21st.
Chart 1: The Average American Works 114 Days to Pay for All Taxes—Tax Freedom Day is April
Source: Tax Foundation
The report notes the following: “The latest ever Tax Freedom Day was May 1, 2000, meaning Americans paid 33.0 percent of their total income in taxes. A century earlier, in 1900, Americans paid only 5.9 percent of their income in taxes, meaning Tax Freedom Day came on January 22.”
The more time we work for the taxman (as noted by the Beatles), the less time we have to do productive activities.
The 85th Texas Legislature should pass fiscal reforms that reduce the bottom line of the budget, such as the STaR Fund, so that less revenue is needed to fund government expenditures. If this is done effectively, then the Legislature can improve the tax system by eliminating the business margin tax and providing meaningful property tax relief. These reforms and more are supported by the Conservative Texas Budget Coalition comprised of 13 member organizations.
In addition, the U.S. Congress must reform the complex, bloated federal tax code to free us from paying too much taxes.
By collectively limiting the size and scope of federal, state, and local governments, Texans and all Americans will have a reason to celebrate an earlier Tax Freedom Day!