MacIver News Service | April 21, 2012
Today is Tax Freedom Day in Wisconsin.
According to the Tax Foundation, today is the day the average Wisconsinite has earned enough to pay for all their local, state and federal tax obligations. Before today, the money they made went to the government, after today they are earning money for themselves.
Congratulations?
The Tax Foundation notes Aa the economic recovery continues, the growth in individual incomes and corporate profits will increase tax revenues and push Tax Freedom Day ever later in the year. The latest ever Tax Freedom Day was May 1, 2000–meaning Americans paid 33.0% of their total income in taxes. A century earlier, in 1900, Americans paid only 5.9% of their income in taxes, meaning Tax Freedom Day came on January 22.
The national Tax Freedom Day was April 17th this year. And the Foundation warns things could get much, much worse.
Next year’s Tax Freedom Day could be eleven days later if Congress fails to act.
According to the foundation:
The biggest effect is on the federal individual income tax, the burden of which would increase more than 5 days unless these tax increases are halted. This is mainly the result of expiration of the Bush tax cuts and the AMT patch, which would each add more than 2 days to the burden.
Another partial day would be added by the expiration of various “tax-extenders,” most of which affect businesses, and are included here to the extent that they are used by pass-through businesses, such as S-corporations, partnerships, and sole proprietorships, that file under the individual code.
The largest tax extender by far is bonus depreciation, which this year allows companies to write off 50 percent of the cost of investment.
The corporate income tax burden would increase more than 3 days, partly as a result of these expiring tax-extenders. Besides bonus depreciation, some of the other large tax-extenders that primarily affect C-corporations include the R&D tax credit, Subpart F for active financing income, and the alcohol fuel tax credit. Additionally, corporate profits are projected to continue their recent accent as the economy recovers, adding to the tax burden.
More than 2 days would be added by expiration of the payroll tax holiday. Finally, expiration of the Bush tax cuts would increase the estate tax burden considerably, but because the estate tax is such a small part of the total burden, it would add only a partial day.
The Tax Foundation is a nonpartisan tax research group based in Washington, D.C. Their Tax Freedom Day is a calendar-based measure of the cost of government and is the most recognized date on the calendar regarding taxes other than the traditional April 15th filing deadline. This year’s deadline has been extended to, ironically, the National Tax Freedom Day of April 17.
Tax Freedom Day is calculated by dividing the official government tally of all taxes collected in each year by the official government tally of all income earned in each year. Governments–federal, state and local–took 30.4% of income in 1980; 30.4% in 1990; 33.6% in 2000; and so on. This percentage is what is properly called the “nation’s total tax burden.” The Tax Foundation then uses the historical trend and the most recent economic data to make a projection of what the tax burden will be in the current year. For more on the methodology click here. For additional information from the Tax Foundation, click here.