Tomorrow is Tax Freedom Day, marking the date that the U.S. as a whole will earn enough money to pay off its tax bill for the year.
The Washington-based Tax Foundation has released a report calculating Tax Freedom Day for every year since 1971, and 2015’s continues to highlight the disturbing growth of government.
First and foremost, Tax Freedom Day falls on April 24 this year—three days later than last year’s date of April 21. In fact, Americans now pay more in taxes than they do in clothing, food, and housing combined.
As if that wasn’t disturbing enough, Tax Freedom Day does not account for all state spending, since governments have the tendency to rack up billions of dollars in debt and unfunded liabilities. Altogether, Tax Freedom Day would fall on May 8 if you account for federal borrowing.
It seems pretty obvious that four months of wages is an unhealthy amount for the government to demand, but some disagree. Last week, I refuted some of the most popular tax myths perpetuated by prominent progressive thought leaders like former secretary of labor Robert Reich.
Another popular myth often circulated during tax season is that high taxes have little effect on reducing economic growth. After all, the top marginal income tax rate in the U.S. was 94 percent throughout the 1950s, one of the most prosperous decades in American history.
Of course, the tax code of the 1950s was littered with so many loopholes as to bring the effective top rate down much lower. But beyond anecdotal evidence, hardline data from America’s own “laboratories of democracy”—the states—prove that lower taxes create more economic growth.
Read the rest at Rare…
Though April 15 has passed, Americans are still a week away from the finish line when it comes to paying their taxes. This year, it will take the average American until April 24 to work enough to pay off their share of federal, state, and local taxes. We spend 30 percent of the year working to pay the government before we can start to keep the money that we earn.
April 24 is the average Tax Freedom Day, as calculated by the nonpartisan Tax Foundation. But the date when Americans are free to start working for themselves varies across states and income levels.
In total, Americans will pay about $4.8 trillion in taxes this year, which is more than they’ll spend on food, clothing and housing combined. Of this total, $3.3 trillion goes to the federal government and $1.5 trillion is paid to state and local governments.
Connecticut and New Jersey share the infamous honor of having the latest Tax Freedom Day. Average residents of these states are not free to keep the money that they earn for about another month, until May 13. On the other end of the spectrum, Louisiana residents had their average total tax bill paid off two weeks ago, on April 2.
This spread between high- and low-tax states would be even wider if not for the federal deduction of state and local taxes, which totaled $56 billion last year. Currently, these taxes can be subtracted from total federal taxable income, which creates a large subsidy for high-tax jurisdictions.
Taxpayers in low-tax states are forced to pay higher federal taxes to cover the reduced burden on those in high-tax states. State and local governments are rewarded for poor fiscal management since they can export part of their costs to residents of other states.
Read the rest at U.S. News…
April 15 marked Tax Day in the United States and sparked an expected national conversation about the role of government.
One would think the day millions of Americans scramble to send off their returns to the IRS wouldn’t be the most ideal to advocate raising taxes, but many prominent liberal pundits nevertheless called for squeezing “the rich.”
One such voice is Robert Reich, former secretary of labor under the Clinton administration and social media superstar. Reich reposted one of his popular videos on Facebook yesterday listing “three reasons why taxes have to be raised on the richest Americans.”
Reich’s reasons are actually common myths among the left that deserve some serious scrutiny from a free-market perspective.
We have a large budget deficit and need more tax revenue.
With a federal deficit of $468 billion in 2015 and a national debt of $18 trillion, there’s no doubt that the U.S. is in big fiscal trouble. However, this is ultimately a problem of spending, not revenue. That is, the government is in debt because it’s spending beyond its means, not because it’s failing to raise enough money.
In fact, federal revenues have only increased after adjusting for inflation since the end of the Great Recession in 2009. Mandatory spending on entitlement programs like Medicare, Medicaid, and Social Security is out of control, and discretionary spending on bloated bureaucracies like the Department of Defense isn’t much better. The key to fixing America’s deficits is budget reform, not tax hikes.
Read the rest at Rare…