Today the Tax Foundation announces its 2015 Tax Freedom Day. The date that Americans will have earned enough to pay their total annual tax burden falls on April 24—114 days into 2015. On average, it takes over 30 percent of the year for Americans to cover their tax obligations.
Of the $4.8 trillion collected in taxes, more than Americans spend of food, clothing, and housing combined, $1.5 trillion goes to state and local governments and $3.3 trillion goes to Washington. While the state and local tax burden still remains around the level it was in the 1930s, the federal tax burden has increased drastically.
Last year the total federal income tax burden took the longest to pay off at 33 days. Federal excise tax obligations only took two days to satisfy. These numbers highlight a monumental departure from the funding of the federal government from the end of the Civil War to the beginning of World War I. During that period, the United States collected 90 percent of its federal tax revenue from excise taxes on liquor, beer, wine, and tobacco.
This changed in February 1913 with the ratification of the 16th Amendment, which authorized the federal income tax. Back then, the top marginal rate of 7 percent applied to individuals and families earning over $500,000 (about $12 million today). This is higher than today’s lowest bracket of 10 percent that applies to annual earnings under $9,225 a year.
Tax Freedom Day did not always fall this late. In 1900, it was on January 22, and up until the 1950s it rarely moved past March.
Tax freedom days differ substantially by state. Connecticut and New Jersey residents are not free to keep their earnings until May 13, whereas Louisiana residents have all of their tax obligations covered on April 2.
Though April 15 is undoubtedly weighing on many Americans’ minds, at least taxpayers can take solace in knowing that in less than a month they will be able to work for themselves—not the government.
Jared Meyer is a fellow at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter @JaredMeyer10.
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