What’s your favorite holiday?
Christmas, Thanksgiving or perhaps Fourth of July? Maybe it’s a Festivus for the rest of us, the fictional holiday proposed in an episode of the TV comedy “Seinfeld.”
How about Tax Freedom Day?
Most business owners and managers as well as individual taxpayers remain all too aware of the filing deadline for tax returns. But far fewer people know about Tax Freedom Day even though the event has been celebrated for decades.
Tax Freedom Day is the day when taxpayers collectively have earned enough money to pay their federal, state and local taxes for the year. For 2016, Tax Freedom Day falls on April 24 in the United States as well as Colorado.
Tax Freedom Day offers a measure of how long taxpayers have to work to earn enough money to pay taxes. For 2016, Americans and Coloradans will have to work 114 days into the year. 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.
By the way, the collective federal, state and local tax bill in the United States total nearly $5 trillion, or 31 percent of income earned in the country. To put that into perspective, 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. It’s kind of a bad news and good news situation: Tax Freedom Day comes the latest in those states with the highest taxes, but also the highest income levels.
For 2016, Tax Freedom Day arrived the earliest at April 5 in Mississippi. Tax Freedom Day won’t be celebrated until May 21 in Connecticut. With a Tax Freedom Day of April 24, Colorado will be the 37th state to reach the milestone.
It’s no Christmas, Thanksgiving or perhaps even Festivus. But Tax Freedom Day still constitutes a holiday worth celebrating as well as a good time for reflection about the effects of taxes on our businesses and lives.