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Tax Freedom Day

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Not to be confused with Tax Day.

Tax Freedom Day is a concept developed and trademarked by American businessman Dallas Hostetler, which aims to calculate the first day of the year on which a nation as a whole has theoretically earned enough income to pay its taxes. Every dollar that is officially considered 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 – local, state and federal – are included.

History and methodology

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The concept of Tax Freedom Day was developed in 1948 by Florida businessman Dallas Hostetler, who trademarked the phrase "Tax Freedom Day" and calculated it each year for the next two decades.[1] In 1971, Hostetler retired and transferred the trademark to the Tax Foundation.[2][better source needed]

United States

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See also: Taxation in the United States

In the United States, the "Tax Freedom Day" is annually calculated by the Tax Foundation, a Washington, D.C.-based think tank. Their results are as follows:

Tax Freedom Days in the U.S. since 1900:[3][4]
Year Tax Freedom Day Tax Burden
1900 January 22 5.9%
1910 January 19 5.0%
1920 February 13 12.0%
1930 February 12 11.7%
1940 March 7 17.9%
1950 March 31 24.6%
1960 April 11 27.7%
1970 April 19 29.6%
1980 April 21 30.4%
1990 April 21 30.4%
2000 May 1 33.0%
2010 April 9 26.9%
2011 April 12 27.7%
2012 April 13 29.2%
2013 April 18 29.4%
2014 April 21 30.2%
2015 April 24 31.2%
2016 April 22 30.9%
2017 April 23 30.9%
2018 April 19 29.7%
2019 April 16 29.0%

Around the world

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Many other companies and organizations in countries throughout the world now produce their own "Tax Freedom Day" analysis. According to the Tax Foundation, Tax Freedom Day reports are currently being published in eight countries. Due to the different ways that nations collect and categorize public finance data, however, Tax Freedom Days are not necessarily directly comparable from one country to another.

Tax Freedom Days for countries by date
Country Day of year % burden Date of year Updated Source Ref
Switzerland 121 33% May 1 2015 Deloitte [5]
India 74 20% March 14 2000 Centre for Civil Society [6]
Australia 110 29% April 20 2024 Centre for Independent Studies [7][8]
United States 114 31% April 24 2015 Tax Foundation [9]
Estonia 114 31% April 24 2007 Eesti Maksumaksjate Liit (Estonian Taxpayers Association) [10]
Lithuania 128 35% May 15 2015 Lithuanian Free Market Institute [11]
Spain 181 50% June 30 2016 Foundation for the Advancement of Liberty and Spanish Taxpayers' Union [12]
Uruguay 133 39% May 13 2010 CPA Ferrere [13]
Hungary 140 38%* May 20 2008 Hungarian Central Statistic Institute [14]
New Zealand 127 35%* May 7 2018 Staples Rodway [15][16]
South Africa 141 39% May 22 2014 Free Market Foundation [17]
Bulgaria 124 36% May 4 2018 Radio Bulgaria [18]
United Kingdom 161 41% June 10 2024 Adam Smith Institute [19][20]
Brazil 153 41% May 31 2014 Instituto Brasileiro de Planejamento Tributario [21]
Slovakia 155 42% June 5 2017 Nadácia F.A.Hayeka [22]
Canada 164 45% June 14 2019 Fraser Institute [23]
Belarus 135 37% May 15 2016 The Public Association «Discussion and Analytical Society Liberal Club» [24]
Croatia 161 44% June 10 2010 Adriatic Institute for Public Policy [25]
Czech Republic 149 41% May 29 2017 Liberální institut [26]
Slovenia 164 37% June 13 2015 Svetilnik [27]
Belgium 218 54% August 6 2018 Institut économique Molinari (IEM) [28]
Greece 169 46% June 19 2012 Φορολογικό Παρατηρητήριο, Κέντρο Φιλελεύθερων Μελετών – Μάρκος Δραγούμης [29]
Poland 156 43% June 6 2018 Centrum im. Adama Smitha [30]
Germany 192 52% July 11 2015 Bund der Steuerzahler [31]
Israel 197 54% July 14 2013 Jerusalem Institute for Market Studies [32]
Turkey 194 53% July 14 2012 Liberal Democratic Party [33]
Norway 210 57% July 29 2007 Skattebetalerforeningen [34]
France 208 57% July 27 2018 Institut économique Molinari (IEM) [35]
Bosnia and Herzegovina 161 44% June 10 2017 Centre for Policy and Governance «Centar za politike i upravljanje» [36]
Austria 216 59% August 5 2019 Austrian Economics Center [37]
Italy 153 42% June 2 2018 CGIA [38]
Mexico 177 48.6% June 25 2024 Caminos de la Libertad [39]

European Union

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A 2010 study published in L'Anglophone,[40] a Brussels newspaper, compared the tax burdens of "Average Joes" in each of the 27 EU member states and projected the Tax Freedom Day for workers earning a typical wage. Income taxes, social security contributions (by the employee and the employer) and projected VAT contributions were included in the calculations.

Regarding the discrepancy between their calculation of August 3 as the typical Belgian worker's Tax Freedom Day and that of PriceWaterhouseCoopers (PWC), L'Anglophone's authors wrote:[41]

[PWC's] figures count revenue from all taxes (including those on corporate profits, petrol, cigarettes, &c.) and thus present a more complete picture of the country’s total tax burden," adding that it is "an average applied to all Belgians – not all Belgian workers; in 2008, less than half of Belgium’s population (4.99 million working out of 10.67 million citizens) was legally working. Consequently, a huge share of Belgium’s tax burden is borne by the working population.

2010 Tax Freedom Days for the "Average Joe" in the European Union, as published in L'Anglophone
Country Day of year % burden Date of year
Austria 191 52% July 10
Belgium 215 59% August 3
Bulgaria 145 40% May 25
Cyprus 72 19% March 13
Czech Rep. 165 45% June 14
Denmark 168 46% June 17
Estonia 150 41% May 30
Finland 166 45% June 15
France 207 56% July 26
Germany 200 55% July 19
Greece 164 45% June 13
Hungary 218 59% August 6
Ireland 117 32% April 27
Italy 169 46% June 18
Latvia 161 44% June 10
Lithuania 167 45% May 20
Luxembourg 135 37% May 15
Malta 99 27% April 9
Netherlands 184 50% July 3
Poland 160 44% June 9
Portugal 150 41% May 30
Romania 178 49% June 27
Slovakia 167 46% June 16
Slovenia 164 45% June 13
Spain 136 37% May 16
Sweden 181 49% June 30
United Kingdom 134 36% May 13

Criticism

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In the book Filthy Lucre: Economics for People Who Hate Capitalism, philosopher Joseph Heath criticizes the idea that tax-paying is inherently different from consumption:

It would make just as much sense to declare an annual "mortgage freedom day", in order to let mortgage owners know what day they "stop working for the bank and start working for themselves". ...But who cares? Homeowners are not really "working for the bank"; they're merely financing their own consumption. After all, they're the ones living in the house, not the bank manager.[42]

Mathematical

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For Canada, the Fraser Institute also includes a "Personal Tax Freedom Day Calculator" that estimates a customized Tax Freedom Day based on additional variables such as age of household head, sex of household head, marital status and number of children. However, the Fraser Institute's figures have been disputed. For example, a 2005 study by Osgoode Hall Law Professor Neil Brooks[43] argued that the Fraser Institute's Tax Freedom Day analysis includes flawed accounting, including the exclusion of several important forms of income and overstating tax figures, moving the date nearly two months later.[44]

In America, while Tax Freedom Day presents an "average American" tax burden, it is not a tax burden typical for an American. That is, the tax burdens of most Americans are substantially overstated by Tax Freedom Day. The larger tax bills associated with higher incomes increases the average tax burden above that of most Americans.

The Tax Foundation defends its methodology by pointing out that Tax Freedom Day is the U.S. economy's overall average tax burden—not the tax burden of the "average" American, which is how it is often misinterpreted by members of the media.[45] Tax Foundation materials do not use the phrase "tax burden of the average American", although members of the media often make this mistake.[46]

Another criticism is that the calculation includes capital gains taxes but not capital gains income, thus overstating the tax burden. For example, in the late 1990s the US Tax Freedom Day moved later, reaching its latest date ever in 2000, but this was largely due to capital gains taxes on the bull market of that era rather than an increase in tax rates. In other words, variations in capital gains income and their associated taxes cause changes in the amount of taxes, but not in the income used in the calculation of Tax Freedom Day.

The Tax Foundation argues that the Tax Freedom Day calculation does not include capital gains as income because it uses income and tax data directly from the Bureau of Economic Analysis (BEA). BEA has never counted capital gains as income since they don't represent current production available to pay taxes, and so the Tax Foundation excludes them as well. Additionally, the Tax Foundation argues that the exclusion of capital gains income is irrelevant in most years since including capital gains would only shift Tax Freedom Day by 1 percent in either direction in most years.[47] A 1 percent change would represent 3.65 days. From 1968 to 2019 the date has never left the 21-day range of April 13 to May 3.

See also

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Notes

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  1. ^ Madsen Pirie, Think Tank: A Story of the Adam Smith Institute, Biteback Publishing, 2012, p. 168
  2. ^ U.S. Patent and Trademark Office, "Tax Freedom Day"[permanent dead link‍]
  3. ^ "The Tax Foundation – Tax Freedom Day and Tax Burden, 1900–2010". Archived from the original on May 15, 2006. Retrieved April 27, 2006.
  4. ^ "Tax Freedom Day 2019 is April 16th". April 10, 2019.
  5. ^ [1] Archived June 25, 2016, at the Wayback Machine
  6. ^ [2]
  7. ^ "The Truth About the Tax Burden". April 3, 2024.
  8. ^ [3]
  9. ^ [4]
  10. ^ [5]
  11. ^ [6]
  12. ^ Berechet, Cristina (May 24, 2016). "Tax Freedom Day 2016" (PDF). Foundation for the Advancement of Liberty. Foundation for the Advancement of Liberty & Spanish Taxpayer's Union.[permanent dead link‍]
  13. ^ [7]
  14. ^ [8]
  15. ^ [9]
  16. ^ [10]
  17. ^ [11]
  18. ^ [12]
  19. ^ "Tax Freedom Day". Adam Smith Institute. Retrieved June 10, 2024.
  20. ^ "Tax Freedom Day: Tax Burden is the Highest Since Current Records Began".
  21. ^ "Archived copy". Archived from the original on May 31, 2014. Retrieved May 26, 2014.{{cite web}}: CS1 maint: archived copy as title (link)
  22. ^ [13]
  23. ^ [14]
  24. ^ [15][permanent dead link‍]
  25. ^ [16]
  26. ^ [17] Archived June 9, 2017, at the Wayback Machine
  27. ^ [18] Archived June 23, 2015, at the Wayback Machine
  28. ^ [19] Archived December 20, 2018, at the Wayback Machine
  29. ^ [20]
  30. ^ [21]
  31. ^ [22]
  32. ^ [23]
  33. ^ [24] Archived October 20, 2013, at the Wayback Machine
  34. ^ [25]
  35. ^ [26] Archived December 20, 2018, at the Wayback Machine
  36. ^ [27] Archived May 17, 2018, at the Wayback Machine
  37. ^ [28]
  38. ^ [29]
  39. ^ https://www.centroricardobsalinaspliego.org/cdl-actualidad/dia-de-la-libertad-fiscal-2024/]
  40. ^ "Wages and Taxes for the Average Joe in the EU 27" (PDF). Archived from the original (PDF) on October 16, 2011. Retrieved June 8, 2010.
  41. ^ "Belgian Workers' Wages are Highest-Taxed in Western Europe". Archived from the original on June 14, 2010. Retrieved June 8, 2010.
  42. ^ Heath, Joseph. Filthy Lucre. p. 90.
  43. ^ Professor Neil Brooks, Osgoode Hall, 2005, archived from the original on December 16, 2005, retrieved December 11, 2005
  44. ^ Tax Freedom Day – A Flawed, Incoherent, and Pernicious Concept (PDF), June 5, 2005, retrieved August 16, 2016
  45. ^ "Tax Foundation".
  46. ^ "The Tax Foundation – America Celebrates Tax Freedom Day". Archived from the original on April 23, 2006. Retrieved April 27, 2006.
  47. ^ "Tax Foundation".
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