Tuesday, April 8, 2014

My Favorite Day of the Year

Every year about this time, the people over at the Tax Foundation publish their numbers calculating “Tax Freedom Day” in America. That’s the day when the nation has made enough money collectively to pay its total tax burden for the year, including not only Federal taxes but state and local taxes as well.  This year it will be three days later than last year, arriving on April 21.

There are a few quibbles I have with the process, for instance, people who live in low tax states like Tennessee and Mississippi reach their Tax Freedom Day a heck of a lot sooner than the good people in New York and California. Not only that, but low income people reach their Tax Freedom Day very early in the year compared with some Wall Street bond trader in New York city. We’re talking the “average American here, and who wants to admit that they’re average?

So, seeing as I am in possession of my 2013 tax return hot off the presses, I did the math myself. I added up all my income, then totaled up all of my tax payments to Uncle Sam, FICA, the State of Virginia, and Henrico County. Then I did the division on my $3.99 calculator. It turns out that my Tax Freedom Day arrived on April 16.

The Tax Foundation folks claim that the average American spends more money paying taxes than they do on food, clothing and shelter…combined. I ran the numbers and found out that they were right on that one too, by a long shot.

Big government types always hate it when Tax Freedom Day is announced, calling it “flawed, and devious anti-government propaganda.” I happen to think it serves as a decent measuring stick as to how we are doing economically as a nation, and on that score, it turns out, not too badly!

For example, in the year 2000, we weren’t free of our tax bills until May 1, and back then our tax burden represented over 33% of our income. Of course back in 1900, we were done forking over money to all branches of government by Jan. 22. In 1940 after the Great Depression and right before World War II, it was still earlier…March 7.

However, if we think we have it bad, we should walk a mile in the European’s shoes. Our buddies in the United Kingdom slave away until May 30 until they get to keep any of their money. For the Germans it’s July 8, for the French it’s July 16, and pity the poor Belgians who pay a whopping 58.5% of their income to the government, which takes them all the way until August 3 to get into the black. Just think about that for a minute. Those countries have that kind of tax rate and they don’t have to worry about fielding a military capable of defending themselves!

Of course all of these statistics are meaningless unless they are attached to what sort of value we are getting for all of this money. If our government provided excellent service, tremendous schools, and efficiency and accountability, a tax rate of 30% would be considered a bargain. Conversely, when we get the DMV, the United States Postal Service, career politicians with lifelong pensions, and a National Security Agency that listens to all of our calls, 30% seems unfair and confiscatory. Eye of the beholder, I suppose.

But, cheer up. At least we don’t live in Afghanistan, where the top tax rate is only 3%, but nobody survives long enough to pay!