by Sarah Curry
Director of Fiscal Policy Studies
This week brought every American’s favorite day, April 15th. Hopefully you filed and paid your taxes by the Wednesday deadline, but do you know exactly how long it took you to pay those taxes? If we add up every tax you have to pay — federal, state, property, etc. — how long would you have to work to pay them? What is the cost of government in terms of a calendar? The day when you have earned enough money to pay your total tax bill for the year has been dubbed Tax Freedom Day.
According to the Tax Foundation, North Carolina taxpayers will experience their Tax Freedom Day on April 16th, two days later than last year. Here are our neighboring states’ Tax Freedom Days:
The total tax burden imposed on residents of different states varies considerably. The federal tax system is progressive, meaning the more you earn, the more you pay. States also each have their own tax policies, which tax people at different rates and on different sources of income. These two factors are the main reasons why the Tax Freedom Day varies from state to state. Higher-tax states celebrate Tax Freedom Day later. In 2015, Connecticut and New Jersey have the latest dates of May 13th followed by New York on May 8th. The lowest average tax burden states celebrate their Tax Freedom days the earliest. Louisiana is first with a date of April 2nd followed by Mississippi on April 4th and South Dakota on April 8th.
Looking at the United States as a whole, the national Tax Freedom Day is April 24th, or 114 days into the year. This is one day later than last year according to the Tax Foundation, which publishes this data on an annual basis. The later date is mainly due to the continuing economic recovery, which will boost federal tax revenue collected through the corporate, payroll, and individual income tax. In a strange quirk, North Carolina’s Tax Freedom Day is also later this year, in large part, because we have enjoyed a stronger economic recovery than the nation as a whole. That means more tax money heading from here to the federal government.
According to the Tax Foundation’s research:
In 2015, Americans will pay $3.28 trillion in federal taxes and $1.57 trillion in state and local taxes, for a total tax bill of $4.85 trillion, or 31 percent of national income. The latest ever Tax Freedom Day was May 1, 2000, meaning Americans paid 33 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.
Since 2002, federal expenses have surpassed federal revenues, with the budget deficit exceeding $1 trillion annually from 2009 to 2012 and over $800 billion in 2013. In 2015, the deficit will continue to decline to $580 billion. If we include this annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur on May 8, 14 days later. The latest ever deficit-inclusive Tax Freedom Day occurred during World War II on May 25, 1945.
If you want to read more about Tax Freedom Day in America for 2015, click here for the Tax Foundation’s full report.
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