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Tax (Disappearing) Freedom Day

"We Finally Have Our Lives Back" Day will come in July. (More at PJTV: The IRS/Tax Time Pop Quiz. Are 56FF Breast Implants Deductible?)

by
Tom Blumer

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April 17, 2012 - 12:00 am
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The Tax Foundation tells us that “Tax Freedom Day®” (TFD), representing how long it will take the average American “to earn enough money to pay this year’s combined 29.2% federal, state, and local tax bill,” will arrive at about noon on April 17, the same day as this year’s federal and state income tax filing deadline, and four days later than last year.

While useful as a starting point, the foundation’s “average American” is not the same as “a typical American.”

Take the 32 days the foundation tells us is required for paying all federal income taxes. In 2009, almost half of the U.S. population was either in a household which didn’t need to file a federal income tax return, or was in one which filed a return with no federal income tax liability. This half of America didn’t have to work any of those 32 days to be free of federal income tax. Additionally, thanks to items like the Earned Income Tax Credit, the IRS handed out billions of dollars tax-free to millions in this group. To make up for all of this, the other half of the U.S. population had to work far more than 32 days to pay their federal income tax bills. Somehow, we have allowed such an arrangement to be called “progressive.”

It’s also quite instructive to see how results differ by state. The latest-occurring TFDs in 2012 are in Connecticut (May 5), New York (May 1), and New Jersey (May 1). In 2011, Nutmeg State Governor Dannel Malloy raised or created over 75 taxes and promised in return to get spending under control. As usual, the latter hardly happened. This year, collections will probably trail projections, and the state continues to face a budget deficit. In the Empire State, Governor Andrew Cuomo’s predictable answer to last year’s budget problems was “more revenue, more spending.” New Jersey Governor Chris Christie may be fighting the good fight against the Garden State’s tax-and-spend culture, but it hasn’t shown up yet on the TFD calendar.

Perhaps the best object lesson in fiscal folly can be found in President Obama’s home state of Illinois. Its TFD went from April 15 in 2011 to April 23 this year. Early last year, Governor Pat Quinn and his Democrat-dominated legislature pushed through massive tax hikes while doing little to rein in spending. The state has added 32,000 seasonally adjusted jobs in the past twelve reported months, just about the worst performance as a percentage of the workforce in the nation. Even worse, the state’s money woes are more serious than ever. Meanwhile, Midwestern neighbors Wisconsin, Ohio, and Michigan — “newly red” states where Republican governors Scott Walker, John Kasich, and Rick Snyder succeeded spendthrift Democrats in 2011 — all managed to balance their state budgets last year without tax increases.

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