While most people have either filed their income tax returns for 2015 or soon will, they’ll have to work a bit longer to earn enough money to pay their taxes for 2016.
The day when taxpayers collectively have earned enough money to pay their federal, state and local taxes for the year won’t occur until April 24, according to the latest analysis by the Tax Foundation. So-called Tax Freedom Day falls on the same day in Colorado this year.
“Tax Freedom Day gives us a vivid representation of how much federal, state, and local tax revenue is collected each year to pay for government goods and services,” said Scott Greenberg, an analyst with the Tax Foundation, a nonpartisan, nonprofit group based in Washington, D.C., that monitors government fiscal policy.
“Arguments can be made that the tax bill is too high or too low. But in order to have an honest discussion, it’s important for taxpayers to understand the cost of government. Tax Freedom Day helps people relate to that cost,” Greenberg said.
For 2016, Americans — as well as Coloradans — will have to work 114 days into the year to earn enough money to pay taxes. That’s one day less than last year as a result of federal legislation enacted in 2015 making several business and individual tax cuts permanent.
The latest national Tax Freedom Day occurred on May 1 in 2000. Exactly a century earlier, Tax Freedom Day fell on Jan. 22. If federal borrowing and future taxes owed were considered in the analysis for 2016, Tax Freedom Day wouldn’t come until May 10.
The latest total breaks down to 43 days of work to pay federal, state and local taxes; 26 days to pay payroll taxes; 12 days to pay corporate income taxes; 11 days to pay property taxes; and seven days to pay various other taxes. The collective federal, state and local tax bill in the United States comes to nearly $5 trillion, or 31 percent of income earned in the country. Americans pay more in taxes than they do for clothing, food and housing combined.
Tax Freedom Day varies by state because of different tax policies as well as a progressive federal tax system that imposes higher taxes on higher incomes. Tax Freedom Day comes the latest in those states with the highest taxation and levels.
For 2016, Tax Freedom Day arrived the earliest at April 5 in Mississippi, April 6 in Tennessee and April 7 in Louisiana. Tax Freedom Day won’t come until May 11 in New York, May 12 in New Jersey and May 21 in Connecticut.
With a Tax Freedom Day of April 24, Colorado will be the 37th state to reach the milestone.