Relieved to have filed your income tax forms for another year — or at least filed for the extension that provides a reprieve?
That’s a rhetorical question, of course. Who isn’t relieved to complete the onerous task of figuring how much is owed Uncle Sam and his ilk in Denver — or worse still, sending off the checks?
But here’s another question: Are you relieved to have finally earned enough money to pay your federal, state and local taxes?
Tax Freedom Day, the day when taxpayers collectively have earned enough money to pay their taxes for the year, fell on April 16 in the United States and April 14 here in Colorado.
The Tax Foundation — a nonpartisan, nonprofit group based in Washington, D.C., that monitors government fiscal policy — calculates Tax Freedom Day each year to offer a measure of how long taxpayers work in a given year to earn enough money to pay their taxes. The clock starts ticking on Jan. 1 and doesn’t stop for weekends or holidays.
For 2019, Americans worked a total of 105 days to pay taxes — 42 days just for federal, state and local individual income taxes. Payroll taxes took 26 days to pay, followed by sales and excise taxes at 15 days, property taxes at 11 days and corporate income taxes at five days. The remaining six days were spent paying estate and inheritance taxes, customs duties and other taxes.
For those keeping score, the collective federal, state and local tax bill in the United States totals more than $5.2 trillion. That’s 29 percent of all income earned in the country. Americans spend more in taxes than they do for clothing, food and housing combined.
By way of comparison, Tax Freedom Day fell on Jan. 22 in 1900, a year in which Americans paid only 5.9 percent of their income in taxes. Tax Freedom Day fell on May 1, the latest date ever, in 2000 as Americans paid 33 percent of their income in taxes.
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 a kind of 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 2019, Colorado was the 26th the 50 states to reach the milestone.
Tax Freedom Day arrived the earliest at March 25 in Alaska, followed by March 30 in Oklahoma, April 4 in Louisiana and April 5 in Texas. Tax Freedom Day won’t come until April 25 in Connecticut and Rhode Island, April 30 in New Jersey and May 3 in New York and Washington, D.C.
So is Tax Freedom Day something to celebrate or bemoan?
For those who see the glass as half full, celebrate the fact you’re done working for Uncle Sam for another year and can start earning some money for yourself. For those who view the glass as half empty and taxes too high, you’ve earned the right to go ahead and complain.
One way or another, Tax Freedom Day affords a good time to reflect on the effects of taxes on our businesses and lives.