The American Spectator

Special Report

Free at Last

By Doug Bandow on 4.30.07 @ 12:08AM

Americans stop paying for government today. According to the Tax Foundation, "Tax Freedom Day" is April 30. That's when local, state, and federal officials stop fingering the average American's wallet.

Unfortunately, Tax Freedom Day has been getting later. The Bush tax cuts dropped TFD from May 1 in 2001 to April 21 in 2002 and April 18 in 2003. But TFD rose to April 19 the following year, and jumped ahead a full week in 2005. It was April 28 in 2006. Now it is almost back to where it started when President George W. Bush took office.

The increases are striking since there have been no big tax hikes, despite the fondest desire of many Democratic politicians. But, explain Curtis S. Dubay and Scott A. Hodge of the Tax Foundation:

The steadily later arrival of Tax Freedom Day these last four years is not surprising. No major tax cuts have been enacted at the federal level since 2003, and the economy has been growing rapidly. The nation's tax burden tends to rise as income rises because thriving taxpayers are pushed into higher income tax brackets at the federal and state levels. Also, the federal government raises the income cap on Social Security taxes each year, and local governments have been collecting much more in property taxes.

The Tax Foundation's numbers disprove the usual liberal mantra that Americans are "undertaxed." TFD did not hit February until 1918, after America's entry into World War I. The date only hit March first in 1933 and then 1937 for good in the midst of the Great Depression. TFD advanced to April in 1943, during World War II. If fell back before heading back into April in 1950 with the Cold War and very hot Korean conflict.

It took almost another half century before TFD broke the May barrier, in 1998. Although we then fell back to April, past history suggests that next year could find the TFD pushing back into May, and for good.

This year the average American will spend 79 days working to pay Uncle Sam. That's longer than for any other purpose -- housing and household operations only take 62 days. Next runs health care at 52 days.

State and local levies come next, accounting for 41 days. In contrast, food and transportation each only run 30 days. Recreation hits 22 days, while clothes take just 13 days.

At the federal level the various payroll levies are almost as burdensome as the income tax, running 29 and 33 days, respectively. (Many low-income Americans no longer pay any income taxes; most wage earners making less than $100,000 pay more in payroll taxes.) At the state level, sales and property taxes (13 and 12 days) outrange income taxes (10 days). The federal corporate income tax makes Americans work another 12 days; estate, gift, and other levies fall far behind.

Of course, April 30 is just the national average. State TFDs range over nearly 40 days. Best is Oklahoma at April 12, followed by Mississippi and Alaska, both April 13. Worst is Connecticut, which tops off the list at May 20, followed by New York at May 16 and New Jersey at May 10.

Although taxpayers usually worry most about their federal taxes, state and local levies are hitting a record 11 percent of income this year. In another Tax Foundation report, economist Curtis S. Dubay reveals that highest state burden is imposed by Vermont, which takes 14.1 percent of its citizens' earnings. Maine and New York are right behind at 14.0 and 13.8 percent, respectively.

Connecticut collects $6,756, the most in state and local taxes (which explains why it has the nation's highest TFD), but its citizens have the highest per capita income, $55,536, so the burden is "only" 12.2 percent, or eighth in the nation. (Non- state Washington, D.C. actually comes in a bit higher on both counts.)

UNFORTUNATELY, TAXPAYERS HAVE LITTLE REASON for optimism about the future. Federal outlays, which ultimately drive tax collections, climbed about 9 percent last year, the largest annual rise since 1990. Reported Dan Mitchell, then of the Heritage Foundation, last September:

This is not just a one-year phenomenon. Total federal spending has skyrocketed 45 percent since President George W. Bush took office in 2001. Adjusted for inflation, spending has jumped by 27 percent in just five years--more than twice as much as real spending grew during the eight years of the Clinton Administration. Measured on an annual basis, inflation-adjusted spending during the Bush years has increased more than three tines as fast as it did during the Clinton years. Indeed, spending as a percentage of GDP has grown more under George W. Bush than it has under any other President since Franklin D. Roosevelt.

The rise in outlays has been spurred in part by the increase in programs. Chris Edwards of the Cato Institute points out that there are now 1696 federal subsidy programs. That's a 44 percent jump since 1990. The number has risen by 271, or one-fifth, since President Bush was elected.

The federal government, in particular, is a huge wealth redistribution machine. Andrew Chamberlain, Gerald Prante, and Scott A. Hodge of the Tax Foundation figure that in 2004 government redistributed between $1.03 trillion and $1.53 trillion to people in the three lowest income quintiles. That's as much as 44 percent of total government outlays. Unfortunately, what Uncle Sam is best at is not preserving our lives, wealth, and liberties, but in robbing Peter to pay Paul, plus a few government employees along the way.

The rich pay the most in taxes, of course. Those in the top quintile account for almost half of all taxes, 48.8 percent. Members of the second quintile pay 22.4 percent of the total. The center bracket covers 14.8 percent. The bottom two pay 9.6 percent and 4.3 percent, respectively.

Federal taxes are a bit more progressive, hitting the wealthiest taxpayers the most. The ratio of taxes paid by top to bottom quintiles is over 20 to one. For state taxes the disparity is "just" 5.5 to one. Top earners pay more of every levy other than tobacco taxes.

There has been little change in the distribution of the tax burden over time. The wealthy (constituting the top quintile) paid a little bit more, 50.6 percent, in 2000 compared to 48.8 percent in 2004. They paid a little less, 46.4 percent, in 1991. Despite a roller coaster of tax hikes and cuts under Presidents Bill Clinton and George W. Bush, respectively, the share paid by top earners has remained relatively consistent.

Letter to the Editor

topics:
Taxes, Transportation, Health Care, Bill Clinton, Business, Social Security, Medicaid, Energy, Alaska, Medicare