Every year, the Tax Foundation calculates “Tax Freedom Day,” the day when the nation as a whole has earned enough money to pay all of the taxes it owes for the year. The Tax Foundation calculates Tax Freedom Day by dividing the nation’s income by the total tax bill, including all federal, state, and local taxes. For 2015, national Tax Freedom Day falls on April 24th, 114 days into the year. This means that if all the money Americans earned since the beginning of the year went immediately to paying off taxes, April 24th is the day Americans can start keeping the money they earn for other uses.
Americans will pay $3.28 trillion in federal taxes and $1.57 trillion in state and local taxes in 2015, for a total tax bill of $4.85 trillion. This is 31% of national income. That means collectively Americans will spend more on taxes than they will on food, clothing and housing combined!
This year’s Tax Freedom Day is one day later than last year. This is mainly because of the country’s economic growth. Higher wages and corporate profits translate into higher tax revenue for the government.
If the federal deficit (which represents future taxes owed) were included in the calculation of Tax Freedom Day, Americans wouldn’t be able to celebrate until May 8th – fourteen days later. In 1900, Americans reached Tax Freedom Day on January 22, only paying 5.9% of their income to taxes.
So which taxes do you have to work the longest to be able to pay off? This year it will take Americans 43 days of work to pay individual income taxes, 26 days to pay payroll taxes, and 15 days to pay sales and excise taxes. Corporate income taxes consume another 12 days, and property taxes take 11 days of work to pay off. Finally, 7 more days are needed to pay estate and inheritance taxes, customs duties and all other taxes.
Utah celebrated Tax Freedom Day on April 20th, four days earlier than the national Tax Freedom Day.
To view the Tax Foundation’s complete Tax Freedom Day report, click here.
