Tax Freedom Day comes earlier in Colorado

Coloradans will work two days fewer this year than last to earn enough money to pay their taxes, according to the latest results of an annual analysis of income and tax statistics.

Taxpayers nationwide won’t be quite as fortunate and will have to work three more days in 2011 than they did in 2010.

Tax Freedom Day arrives April 8 in Colorado and April 12 nationwide. That’s the day the average taxpayer has earned sufficient income to pay local, state and national taxes for this year.

Tax cuts and credits have lowered the overall tax burden over the past four years. Still, Americans will pay more in taxes in 2011 than they’ll spend on groceries, clothing and shelter combined.

The Tax Foundation — a nonprofit group in Washington, D.C., that monitors government fiscal policy — calculates Tax Freedom Day by diving federal, state and local tax collections by income. That ratio then is multiplied by 365 days to determine the number of days required to earn enough money to pay taxes. The calculation assumes taxpayers work every day, including weekends, and spend nothing.

For 2011, Coloradans will work 98 days. That ranks 24th among the states in terms of the most days spent working to pay taxes.

Mississippi celebrated the earliest Tax Freedom Day on March 26, while Connecticut won’t observe Tax Freedom Day until May 2.

Over the past 30 years, Colorado has dropped 18 places in a separate ranking of the state and local tax burden calculated by the Tax Foundation. While Colorado levies every major form of taxes, its tax rates are among the lowest in the country. Moreover, constitutional limits on government spending and taxes have kept that tax burden low.

Colorado ranks 15th in the State Business Tax Climate Index for 2011, a Tax Foundation measure of how taxes affect businesses.

Falling on April 12, National Tax Freedom Day arrives three days later in 2011 than 2010, but nearly two weeks earlier than 2007.

Even as the recession has reduced tax collections faster than incomes, Bush-era tax cuts were extended for two years and the Making Work Pay tax credit was replaced with a 2 percent reduction in payroll tax. At the same time, though, the federal estate tax has returned at a rate of 35 percent after a $5 million exemption. Taxes associated with health care reform legislation continue to be phased in.

Tax Freedom Day falls later in 2011 than 2010 mostly because incomes have increased as the economy has recovered.

Tax Freedom Day doesn’t take into account budget deficits.

If the federal government were planning to collect enough in taxes in 2011 to cover all spending, Tax Freedom Day would fall on May 23.

 

 

The Business Times has served as the definitive source for Grand Junction business news since 1994. The journal offers news, views and advice you can use twice each month in print with daily updates online at www.TheBusinessTimes.com
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Posted by on Apr 3 2011. Filed under Business News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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