April 17, 2006
"Tax Freedom Day" will fall on April 26 this year, according to the Tax Foundation's annual calculation using the latest government data on income and taxes.
The calculation compares the number of days Americans work to pay taxes to the number of days they work to support themselves.
"Tax freedom will come three days later in 2006 than it did in 2005," said Tax Foundation President Scott Hodge, "and fully 10 days later than it did in 2003 and 2004 when a combination of slow income growth and tax cuts caused Tax Freedom Day to arrive comparatively early, on April 16."
However, 2006's Tax Freedom Day is still considerably earlier than it was in 2000, when the economic boom, the tech bubble and higher tax rates pushed tax burdens to a record high, and Tax Freedom Day was postponed until May 3.
"The economy has been growing at a good clip since mid-2003," said Hodge, "and those growing incomes are pushing people into higher tax brackets. When that happens, tax collections grow faster than incomes."
"Despite all the tax cuts that the federal government has passed recently, Americans will still spend more on taxes than they spend on food, clothing and housing combined," said Hodge.
In 2006, Americans will work 77 days to afford their federal taxes and 39 more days to afford state and local taxes. That makes taxation a bigger financial burden than housing and household operation (62 days), health and medical care (52 days), food (30 days), transportation (30 days), recreation (22 days), or clothing and accessories (14 days).
Tax Freedom Day by State
Six out of the ten states with the heaviest tax burdens and the latest Tax Freedom Days are in the northeast: Connecticut (May 12), New York (May 9), New Jersey (May 6), Massachusetts (May 2), Maine (May 1) and Rhode Island (May 1). The other four are Washington (May 4), Minnesota (May 3), California (April 30) and Illinois (April 30).
The ten states with the lightest total tax burdens celebrate Tax Freedom Day the earliest. Alabama's April 11 is the earliest of all. The next nine are Alaska (April 12), Mississippi (April 13), Oklahoma (April 14), Tennessee (April 14), New Mexico (April 15), South Dakota (April 16), Montana (April 16), Idaho (April 16) and West Virginia (April 17).
Tax Freedom Day is early in most of these states because the average income is lower. They pay most of their federal income taxes at the lower rates, 10 percent and 15 percent. Alaska stands out as an exception: income and federal tax payments are above average there, but state-local taxes are extraordinarily low.
How Tax Freedom Day is Calculated
Tax Freedom Day answers the basic question, "What price is the nation paying for government?" The most authoritative figure for total tax collections is divided by the most authoritative figure for the nation's income.
The answer this year is that taxes will amount to 31.6 percent of our income, and it takes from January 1 to April 26 to earn that much.
