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Reviewing the budget for North Carolina and hearing all the discussion out of Washington about taxes leads one to wonder — How long does it take to pay all those taxes?  That is exactly what Tax Freedom Day tells us; it is the date on which Americans will have earned enough money to pay this year’s tax obligations at the federal, state, and local levels.  Actually, the Tax Foundation has calculated multiple Tax Freedom Days, one for each state and one for the country as a whole.

North Carolina’s Tax Freedom Day arrives on April 10th this year ranking it 21st earliest in the nation.  Neighboring states are ranked:

    • Tennessee, April 2nd (3rd earliest)
    • South Carolina, April 3rd (4th earliest)
    • Georgia, April 9th (18th earliest)
    • Virginia, April 20th, (10th latest)

    Unsurprisingly, at the national level, Tax Freedom Day arrives five days later (April 18th) this year than it did in 2012.   You guessed it!  More taxes are the reason for the extension of the date.  Specifically, the fiscal cliff deal increased federal tax rates on individual income and payroll in addition to the Affordable Care Act’s investment and excise tax taking effect this year. 

    The figure used to calculate the April 18th date considers how long it will take the nation to pay its total tax bill for the year, excluding any federal borrowing figures.  In 2013, the deficit will be slightly below $833 billion, a figure that has been growing since 2002, when federal expenditures were consistently above federal revenues.  If a calculation for Tax Freedom Day were to include annual federal borrowing, the new date would be May 9th or 21 days later.  Historically, the latest Tax Freedom Day was during World War II when it occurred on May 21, 1945.

    Unfortunately, it is unlikely our Tax Freedom Day will be on an earlier date in coming years unless some major spending or tax reform is instituted in Washington.  Luckily, the North Carolina legislature has discussed tax reform and will hopefully drop North Carolina taxpayers’ burden in the upcoming years.  Tax reform should put the state in a more competitive position with regard to taxes, which is necessary when comparing with neighboring states South Carolina and Tennessee who are only behind Mississippi and Louisiana for the earliest Tax Freedom Days in the country.

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