Tax Freedom Day falls on April 24 this year, 114 days into the year. What exactly is this day and what does it mean for taxpayers?
According to the Tax Foundation, Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. It is computed by taking all federal, state, and local taxes and divides them by the nation’s income.
This year, Americans will collectively pay more in taxes than they spend on housing, food and clothing combined.
With regards to Tax Freedom Day, Americans will work the longest to pay federal, state, and local individual income taxes (46 days). Payroll taxes will take 26 days to pay, followed by sales and excise taxes (15 days), corporate income taxes (nine days), and property taxes (11 days). The remaining seven days are spent paying estate and inheritance taxes, customs duties, and other taxes.
Tax Freedom Day is one day earlier this year than last year due to slightly lower projected tax collections as a share of the total U.S. economy. The latest that Tax Freedom Day has ever been was May 1, 2000. Americans paid 33% of their total income in taxes that year. The earliest it has ever been was January 22, 1900. At that time, Americans only paid 5.9% of their total income in taxes.
Tax Freedom Day also varies on a state-by-state basis due to varying state tax policies and the progressively of the federal tax system. The map below from the Tax Foundation shows when Tax Freedom Day occurs in each state. Connecticut has the latest date (May 21) and Mississippi has the earliest (April 5).