Tax Freedom Day

From Example Problems
Jump to navigation Jump to search

Tax Freedom Day is the first day of the year in which a nation as a whole has earned enough money to pay for its annual tax burden. The concept was introduced by the Tax Foundation—a Washington D.C.-based tax research group—as a tool for illustrating the proportion of national income that is paxed as taxes.


In 2003 Tax Freedom Day in Canada was reported as June 28 by the pro-market think tank the Frasier Institute. Tax Freedom Day in Canada reached its latest date in 2000 when it fell on July 2 after a rapid plunge to June 25 in 2001 it has steadily increased since then. The changes in the date of Tax Freedom Day generally have little to do with government policy and instead are a reflection of the state of the economy. When the nation is prosperous more Canadians are paying taxes and paying them at a higher rate, pushing Tax Freedom Day forward.


In Denmark, Tax Freedom Day for 2001 was August 14.

United Kingdom

In the United Kingdom, Tax Freedom Day for 2005 fell on May 31, according to think tank the Adam Smith Institute. The institute calculate Tax Freedom Day as having fallen on the following dates historically:

1963  24-Apr    1984  11-Jun
1964  23-Apr    1985  11-Jun
1965  27-Apr    1986  07-Jun
1966  02-May    1987  04-Jun
1967  11-May    1988  04-Jun
1968  17-May    1989  02-Jun
1969  22-May    1990  01-Jun
1970  26-May    1991  02-Jun
1971  20-May    1992  28-May
1972  13-May    1993  21-May
1973  12-May    1994  22-May
1974  28-May    1995  26-May
1975  02-Jun    1996  24-May
1976  30-May    1997  25-May
1977  28-May    1998  28-May
1978  23-May    1999  03-Jun
1979  25-May    2000  03-Jun
1980  05-Jun    2001  04-Jun
1981  14-Jun    2002  26-May
1982  15-Jun    2003  25-May
1983  12-Jun    2004  27-May
                2005  31-May

United States

In the United States, Tax Freedom Day for 2003 was April 19, the earliest since 1992. The latest that Tax Freedom Day has occurred is April 30 in 2000. In the 20th century, Tax Freedom Day came as early as January 18 (in 1912). It has steadily moved later into the year, which means that the average net tax burden has increased.

Tax Freedom Day differs from state to state, as American states charge a variety of state taxes and charges. In 2001, Alaskans had the slightest tax burden, earning enough to pay all their tax obligations by April 16. Connecticut had by far the heaviest tax burden—Tax Freedom Day there came on May 25. New Yorkers had the second heaviest tax burden, having to work until May 14 to pay their taxes.

According to the Tax Foundation, here is the list of Tax Freedom Days in the U.S. since 1990:



Critics of the concept argue that the methodology used exaggerates the amount of tax paid by middle-income taxpayers, as it is calculated, essentially, by dividing total tax collections by net national product, which is skewed upward by the inclusion of very wealthy taxpayers. Another criticism is that the calculation includes capital gains taxes but not capital gains income, thus overstating the tax burden. However, the Tax Foundation defends its methodology by pointing out that (1) Tax Freedom Day is the nation's average tax burden, and if high-income taxpayers were excluded it would no longer be the mathematical average burden, and (2) the Tax Freedom Day calculation employs income and tax data directly from the Bureau of Economic Analysis (BEA) and the National Income and Product Accounts (NIPA) which have never counted capital gains as income since they don't represent current production that's available to pay taxes, but instead represent the re-valuing and shifting-around of existing assets. Additionally, the latter criticism is irrelevant in most years since including capital gains taxes typically shifts Tax Freedom Day by roughly 1 percent.

See also: income tax

External links

pl:Dzień Wolności Podatkowej