Everyone hates paying taxes, and the end of tax season is a cause for celebration for most Americans. Yet even after you file your returns, the average American is still working for the IRS and their state and local governments even longer. In fact, only yesterday, April 23, did Americans reach Tax Freedom Day -- the day on which they have worked long enough in order to pay their share of the country's tax burden. What that means is that for most people, nearly four months of the work they do each year go solely to cover all of the taxes they have to pay.
What Tax Freedom Day means
Every year, the nonprofit Tax Foundation publishes its latest statistics on Tax Freedom Day, with the goal of making more real to taxpayers how much of your time goes toward paying taxes. The Tax Foundation takes the total amount of taxes Americans have to pay and divides that number by their total income. It then takes the result and multiplies it by 365 to come up with the number of days of work Americans have to put in before they actually get to keep what they earn.
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Over time, Tax Freedom Day has trended later. In 2010, the day happened on April 9, two weeks earlier than 2017's number. Still, the date this year is an improvement from 2015 and 2016, when Tax Freedom Day was April 24.
How do all of the taxes Americans pay factor into Tax Freedom Day?
The Tax Foundation shows a breakdown of how each type of tax affects its calculation. All told, Americans will pay an estimated $3.5 trillion in federal tax and another $1.6 trillion in state and local taxes. The resulting total of $5.1 billion is about 31% of the nation's total income. That total is greater than what Americans spend on food, clothing, and shelter -- combined.
Income taxes make up the biggest portion of tax liability for Americans, and they'll have to work 46 days in order to cover their income taxes at the federal, state, and local levels. Payroll taxes add 26 days to the equation, and the sales and excise taxes Americans pay represent 15 days' worth of work. Corporate income taxes make up 10 days, and property taxes take away another 10 days of job time. The remaining six days get split up between estate and inheritance taxes, customs duties, and other levies.
In some states, you're not yet free from taxes
When you look at Tax Freedom Day at the state level, you'll find even sadder news: many people are still days or even weeks away from taking care of their tax liability for the year. Tax Freedom Day comes on April 24 or later for 14 states and the District of Columbia, and in five states -- California, Massachusetts, New York, New Jersey, and Connecticut -- taxpayers will have to wait until May to be free of the tax man. Connecticut has the latest date, May 21, while Mississippi was the first to declare tax freedom, on April 5.
Indeed, comparing where Tax Freedom Day is the latest with the political map has attracted attention from tax reform efforts in Washington. One proposal would attack the federal deduction for state and local taxes, which are highest in states that have the latest Tax Freedom Days. Proponents argue that their intent is to end what amounts to a federal subsidy for extensive state and local government operations, but many have noticed that those states have tended to be Democratic strongholds in national elections recently.
Don't wait for your Tax Freedom Day
If you don't want all of your work going toward paying taxes, there are some things you can do. Use tax credits, deductions, and other breaks to maximum advantage in order to reduce your tax burden. Be smart about things that can trigger tax, such as selling off stocks with large gains in a taxable account. Plan your taxes throughout the year to avoid last-minute slip-ups that can cost you more in tax.
There's no way to avoid paying tax entirely. But being aware of how long you have to work to pay your taxes should be incentive enough to work toward cutting your tax bill as much as you can.
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