by Howard Stephenson
Tax Freedom Day is the day when Americans will finally have earned enough money to pay off their total tax bill for the year. Every dollar that’s officially called income by the government is counted, and every payment to the government that is officially considered a tax is counted. Taxes at all levels of government are included, whether levied by Uncle Sam or state and local governments.
Tax Freedom Day gives Americans an easy way to gauge the overall tax take, a task that can be quite daunting due to the multiplicity of taxes at each level of government, especially the “hidden” taxes and fees that are often buried in the cost of living. In effect, Tax Freedom Day provides taxpayers with a tax barometer that measures the total tax burden over time and by state. The complete Tax Freedom day analysis can be found at www.taxfoundation.org.
Tax Freedom Day by State
Tax burdens vary considerably from state to state, not only because of different state and local taxes, but because of divergent federal tax payments. Therefore, the report includes a separate calculation of Tax Freedom Day for each state.
The five states with the heaviest tax burdens and who therefore wait the longest for Tax Freedom Day are all in the northeast: Connecticut (April 28), New York (April 27), New Jersey (April 19), Massachusetts (April 18) and Rhode Island (April 16). Because the cost of living and salaries are higher in these states, taxpayers must work longer to pay their disproportionate share of progressive federal income taxes. The next five most-taxed states in 2004 are Maine (April 15), Washington (April 15), Wyoming (April 14), Nevada (April 13) and California (April 13).
The five states with the lightest total tax burdens celebrate Tax Freedom Day the earliest. March 26 is the earliest of all. That’s when Alaskans will celebrate. Alabama, Tennessee and South Carolina have the second, third and fourth lightest total tax burdens, and they were all done working for government on April 1. Oklahoma, Mississippi, Louisiana, and South Dakota all celebrated Tax Freedom day on April 2 while North Dakota and Iowa celebrated April 3.
Utah’s Tax Freedom Day
Utah’s tax freedom day this year is April 8, three days earlier than the nation’s tax freedom day. But Utah’s slightly better tax ranking is not due to favorable state and local taxes (the Tax Foundation ranks Utah state and local taxes 7th highest in the nation for 2004). Instead, Utahns pay proportionately lower federal income taxes than most of their counterparts in the rest of the nation, yielding an overall ranking of 24th highest in combined federal, state and local taxes. Utah federal taxes are relatively low because of larger families, lower average wages, and higher mortgage and charitable deductions.