Tuesday, April 14, 2009

Yesterday was Tax Freedom Day- sort of

What is Tax Freedom Day?

Below is the brief explanation from the Tax Foundation, the organization which calculates it. (A more detailed explanation can be found here.)

How Tax Freedom Day Is Calculated

Tax Freedom Day answers the basic question, "What price is the nation paying for government?" An official government figure for total tax collections is divided by the nation's total income. The answer this year is that taxes will amount to 28.2 percent of our income, and the stretch of 103 days from January 1 to April 13 is 28.2 percent of the year. Income and tax data are then parsed out to the states, yielding 50 state-specific Tax Freedom Days.


This year's Tax Freedom Day comes a little earlier than last few years, but only because of the downturn in the economy. Not all states are equal however. I happen to live in the state with the 4th highest tax rate, so my Tax Freedom Day doesn't come until April 20th.

A more complete view of the tax burden government places on us is the Tax Freedom Day which includes the budget deficit----which is in fact simply a deferred tax burden and should be figured in. With the new deficit projections, we won't stop working for government and start working for ourselves until May 29. This is the latest date for "tax freedom" since similar levels were achieved at the height of WWII. The graph below only goes back to 1967, but the current trend is still impressive.



I found it interesting to note that the above dates are set by counting 103 days from January 1st, including weekends and holidays. If you just count Monday through Friday, the days you actually spend working, we don't starting working for ourselves until May 28th-- or if you include the deficit, not until July 28th!

Another very important aspect of these calculations is that these figures reflect the average tax burden. Since 40% of Americans don't pay income taxes, your individual tax freedom day will come much later. As Ari Fletcher points out, "A very small number of taxpayers -- the 10% of the country that makes more than $92,400 a year -- pay 72.4% of the nation's income taxes." As we approach the day when over 50% of the population do not pay income taxes, we come ever closer to the majority of voters receiving benefits from the government for which they do not pay. Talk about moral hazards!

"A government which robs Peter to pay Paul can always depend on the support of Paul."
-- George Bernard Shaw

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4 comments:

Doug Reich said...

I would propose that if you don't pay taxes you should not be able to vote. It is the converse of the argument against taxation without representation. Why should you have representation if you do not pay taxes?

Beth said...

Doug--
Do you really mean that?
Many of the ways that government could (and does) effect us do not directly occur through our wallets. Freedom of speech, religion, right to assembly etc.

Better yet I think is the simple assertion of equality of law--the outlawing of all special interest legislation thus decreasing the sphere of influence open to our elected representatives. Of course, a government which limited itself to the protection of individual rights would accomplish the same thing.

Doug Reich said...

Well, I kind of meant it...

Here is what I'm saying:

In a laissez faire system, where you have voluntary taxation, I think that it would be reasonable to argue that if one does not contribute financially to the maintenance of the state that they have no say in terms of voting rights - of course, the issue would be so marginal since the state would have such a limited function

Today, I think it is more egregious in that voters have the ability to expropriate the incomes of others. Certainly, no one has the right to do this under any circumstances but it seems even more egregious for those who pay nothing in taxes to have a "vote" in taking other people's money.

Keep in mind, originally, at the time of the founding, many states had property restrictions on voting meaning you had to at least own land to have a vote. The idea was that in a republic, only those who really had a stake in the society should be allowed to vote. Obviously, this went away over time. The situation now is so convoluted it is hard to make this argument. It's easier in the context of a very limited government, i.e., under laissez faire.

interested in your thoughts

I was making this point in a flippant way.

Beth said...

Doug,
Thanks for the clarification.

The most interesting comment I ever read on property requirements and voting rights goes something like this: if you had properly constituted limits on what was open for vote, having the franchise wouldn't that much. If other people can't deprive you of your freedom or property via votes or laws, voting would primarily (and simply) be about who does the day to day chores of running government. It's because we don't have true equality before the law that special interests are able to co-opt the coercive power of governemnt and use it against us--even against our "inalienable rights" like freedom of commerce and property rights.

That said--I certainly agree no one should be able to vote away another person property. By definition, the wealthiest individuals will always be a minority and thus vulnerable to the majority. The Founders did their best to construct a Constitution that would protect the minority from the majority--but it looks like its still up to us to defend it.

Another idea--how about we all get to vote and we all don't pay taxes?