Tax (Disappearing) Freedom Day
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.
The foundation notes that "if the federal government raised taxes enough to close the budget deficit -- an additional $1.014 trillion -- Tax Freedom Day would come on May 14 instead of April 17." This year's deficit really appears more likely to come in at about $1.2 trillion -- if we're lucky. The reported deficits in February and March were both higher than the year-ago figures for the same months. In March, the federal government set an all-time single-month spending record; the $369 billion spent was over $30 billion higher than any other previous month. Recent employment-related news, with only 120,000 seasonally adjusted jobs added in March, and initial unemployment claims "unexpectedly" shooting back up again in recent weeks, may foreshadow yet another mediocre summer for the economy, and therefore for government tax collections. A $1.2 trillion deficit would move what could be called "Government Spending Freedom Day" to about May 19.
Not to criticize the foundation, which surely wanted to avoid working up a treatise on supply-side economics, but if the federal government ever tried to raise its collections through tax increases by the roughly 50% necessary to theoretically balance the budget without cutting spending, economic growth would disappear and more than likely go negative faster than you can say "class warfare." The predicted increases in receipts would fall far short of expectations, and might not materialize at all.
It would also not be out of line to add the costs of government regulation to the TFD calendar, simply because you're not working for yourself when you're engaging in state-required busywork, paperwork, and other forms of compliance. The Competitive Enterprise Institute cited a paper in its 2011 "Ten Thousand Commandments" publication claiming that "an evaluation of the U.S. federal regulatory enterprise ... (found that) annual regulatory compliance costs hit $1.752 trillion in 2008." No one can possibly believe that these costs have gone down in the past three years. Add in the cost of state and local regs, and the current figure for the annual cost of all forms of regulatory compliance and subservience is surely at least $2 trillion. That tacks on another 53 days, taking us well past the half-year mark to about July 11, which perhaps should be tagged as "We Finally Have Our Lives Back" Day.
The proposition that we live in a genuinely free country becomes more questionable with each passing year.
(Thumbnail on PJM homepage assembled from multiple Shutterstock.com images.)