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Tax Tip of the Week | No. 351 | Tax Freedom Day Set For April 24 This Year April 20, 2016

Posted by bradstreetblogger in : General, Tax Tip, Taxes, Uncategorized , trackback

Tax Tip of the Week | April 20, 2016 | No. 351 | Tax Freedom Day Set For April 24 This Year

Tax Freedom Day, the day when the nation as a whole has earned enough to pay the federal, state, and local tax bill for year, will arrive 114 days into the year on April 24, according to an annual report from the Tax Foundation.

Collectively, Americans will spend more on taxes in 2016 than they will on food, clothing, and housing combined, according to the report. Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of almost $5.0 trillion, or 31 percent of the nation’s income.

Tax Freedom Day is one day earlier than last year, due mainly to the Protecting America from Tax Hikes Act of 2015, which made several business and individual tax cuts permanent. If annual federal borrowing is included in the calculation, which represents future taxes owed, Tax Freedom Day would occur 16 days later on May 10.

Historically, the date for Tax Freedom Day has fluctuated significantly. The latest-ever Tax Freedom Day was May 1, 2000, meaning that Americans paid 33 percent of their collective incomes toward taxes. A century earlier, in 1900, only 5.9 percent of national income was required to pay the tax bill, and Tax Freedom Day fell January 22.

While the national date arrives nine days after the tax filing deadline, each state’s total federal, state and local tax burden varies greatly, according to the Washington, D.C.-based nonpartisan think tank. Tax Freedom Day arrives earliest in Mississippi (April 5), Tennessee (April 6), and Louisiana (April 7). On May 21, Connecticut will be the last state to reach Tax Freedom Day this year, while New Jersey (May 12) and New York (May 11) trail closely behind.

“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 Tax Foundation analyst Scott Greenberg in a statement. “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.”

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