Today is Tax Freedom Day, the day of the year where Americans have finally earned enough income to pay all their taxes for the year. Calculated by dividing the total national income by federal, state and local taxes, it took from January 1 until today to pay America’s $5.2 trillion total tax bill. Yet thanks in part to the tax reform law, Tax Freedom Day falls four days earlier this year than it did last year.
Tax Freedom Day is a national date, and state-by-state “Tax Freedom Days” can vary. According to the Tax Foundation, individual states’ Tax Freedom Days can fall anywhere from April 4 (Louisiana and Alaska) to May 14 (New York), depending on state tax rates. Yet as a nation, Americans can celebrate today as the day where Uncle Sam’s paycheck skimming ends and their income becomes their own.
Income taxes are far and away the most onerous taxes that Americans have to work to pay off, at 70 days. Sales and excise taxes come next, at 15 days, and property taxes take another 11 days of work to pay. Corporate income taxes make up only 7 days. The National Taxpayers Union Foundation found that tax compliance cost the economy a record amount in tax year 2017: nearly $304 billion.
Luckily, a simpler tax code that results in far fewer Americans having to itemize their deductions will mean a much less painful Tax Day come next April. The Tax Cuts and Jobs Act cut individual income taxes across the board, and in the process enacted significant simplifications by trimming complicated credits and deductions. The Tax Policy Center estimates that 80 percent of Americans will pay less on their taxes next year, while only 5 percent will pay more. (The remainder will pay roughly the same amount.)
While paying taxes is never a pleasant experience, taxpayers have a great deal to be thankful for this Tax Freedom Day. Hopefully Congress will follow up this victory on overly high taxes by getting to work on the spending reforms necessary to clean up the deficit, as well.