Tax Freedom Day

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Tax Freedom Day

WHAT IS Tax Freedom Day

Tax Freedom Day is the day when the typical American earns enough money to pay off his or her entire tax obligations for the year. The computation used to arrive at this date implies that everyone in the country begins working eight hours a day on January 1 and that every dollar generated is not wasted.

BREAKING DOWN Tax Freedom Day

The Tax Foundation determines Tax Freedom Day. Tax Freedom Day commemorates the amount of hours Americans must work in order to pay the nation’s taxes. Tax Freedom Day came on April 19, 2019, 105 days into the year and five days sooner than in 2017. Tax Freedom Day is calculated by summing all federal, state, and municipal taxes and then dividing them by the nation’s revenue.

Americans paid a total of $5.3 trillion in taxes in 2019, including $3.4 trillion in federal taxes and $1.9 trillion in state and local taxes. Though Tax Freedom Day happened sooner in 2019 than it did in 2017, if the Tax Foundation had factored in yearly government borrowing, Tax Freedom Day would have occurred on May 8, 22 days later than it did in 2018.

What Tax Freedom Day Means to You

Because the computation covers all taxes incurred, including income tax, federal tax, state tax, Medicare, and excise taxes, Tax Freedom Day is a good indication for measuring the burden of taxes each year. Because Tax Freedom Day is based on the national average, it may not always fully reflect the tax loads imposed by citizens of various states. For example, if you live in New York, your Tax Freedom Day is May 3, however if you live in Louisiana or Alaska, your Tax Freedom Day is considerably sooner. New Jersey and Connecticut, like New York, have later Tax Freedom dates. Tennessee, Oklahoma, and Alabama have even earlier deadlines.

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Who decides what day is Tax Freedom Day?

Tax Freedom Day is calculated by the Tax Foundation, an independent tax policy foundation. The charity, which was founded in 1937, supports research and analysis to improve tax policy at the state, municipal, and federal levels. The Tax Foundation also publishes indexes and statistics, such as the State Business Tax Climate Index, Taxes and Growth Models, and Options for Reforming America’s Tax Code. The Tax Foundation also has relationships with powerful persons who work closely with governors, major legislators, and presidential candidates.

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