Thursday marks Tax Freedom Day

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Residents in the Land of Enchantment celebrate earlier than April 9 national average

By Special to the Monitor

WASHINGTON, DC — Tax Freedom Day — the date on which Americans will have worked long enough to have earned enough money to pay this year’s tax obligations at the federal, state and local levels — will fall on Thursday for residents of New Mexico.

That’s 91 days into 2010. The date for all Americans is April 9, the 99th day of the year.

This year’s national Tax Freedom Day is one day later than in 2009, but more than two weeks earlier than in 2007.

The shift toward a lower tax burden since 2007 has been driven by three factors:

• The recession has reduced tax collections even faster than it has reduced income;

• President Obama and the Congress have enacted large but temporary income tax cuts for 2009 and 2010, just as President Bush did in 2008; and

• Two significant taxes were repealed for 2010 as part of previous legislation, the estate tax and the so-called PEP and Pease provisions of the income tax.

Despite all these tax reductions, Americans will pay more taxes in 2010 than they will spend on food, clothing and shelter combined.

In the study, Tax Foundation Special Report No. 177, “America Celebrates Tax Freedom Day,” Tax Foundation staff economist Kail Padgitt traces the course of America’s tax burden since 1900, examines the composition of today’s tax burden by type of tax and calculates a Tax Freedom Day for each state.

Comparison: Tax Freedom

Day by State

Each state has its own Tax Freedom Day. Because of modest incomes and low state and local tax burdens, Alaska and Louisiana celebrate Tax Freedom Day earliest on March 26, the 85th day of the year. Connecticut celebrates last on April 27, the 117th day of the year, because income per capita is higher than in any other state. High-income states pay much more in federal taxes and they often have higher state-local taxes as well.

Joining Connecticut in the latest celebrations are New Jersey (April 25), New York (April 23), Maryland (April 19) and Washington (April 15). Alaska and Louisiana are joined in early celebration by Mississippi (March 28), South Dakota (March 29) and West Virginia (March 30).

Tax Freedom Day answers the basic question, “What price is the nation paying for government?” An official government figure for total tax collections is divided by the nation’s total income. The answer this year is that taxes will amount to 26.89 percent of our income, and the stretch of 99 days from Jan. 1 to April 9 is 26.89 percent of the year. Income and tax data are then parsed out to the states, yielding 50 state-specific Tax Freedom Days.

For more information, visit www.taxfoundation.org/taxfreedomday.