The Tax Foundation

America Celebrates Tax Freedom Day®

America's Tax Freedom Day® Arrives April 30 in 2007, Two Days Later Than 2006

Tax Freedom Day® will fall on April 30 in 2007, according to the Tax Foundation's annual calculation using the latest government data on income and taxes. (Click here to read the full study).

"Tax freedom will come two days later in 2007 than it did in 2006," said Tax Foundation President Scott A. Hodge, "and fully 12 days later than in 2003, when tax cuts caused Tax Freedom Day to arrive comparatively early, on April 18."

However, 2007's Tax Freedom Day is still slightly arlier than it was in 2000, when the economic boom, the tech bubble and higher tax rates pushed tax burdens to a record high, and Tax Freedom Day was postponed until May 5.

Tax Freedom Day, 1980-2007 (click for larger image)

"The economy has been growing at a good clip since mid-2003," said Hodge, "and those growing incomes are pushing people into higher tax brackets. When that happens, tax collections grow faster than incomes."

The report is Tax Foundation Special Report No. 152, "America Celebrates Tax Freedom Day®," by Hodge and Tax Foundation economist Curtis Dubay. The report traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, calculates a Tax Freedom Day for each state, and compares tax payments to other typical consumer expenditures.

Days Spent Working to Pay Various Taxes, 2007 (click to enlarge)

Taxes and Other Expenses
The report compares the number of days Americans work to pay taxes to the number of days they work to support themselves.

"Americans will work longer to pay for government (120 days) than they will for food, clothing and housing combined (105 days)," said Hodge. "Since 1986 taxes have cost more than these basic necessities. In fact, Americans will work longer to afford federal taxes alone (79 days) than they will to afford housing (62 days)."

In 2007 Americans will work another 41 days to afford their state and local taxes. That makes taxation a bigger financial burden than housing and household operation (62 days), health and medical care (52 days), food (30 days), transportation (30 days), recreation (22 days), or clothing and accessories (13 days).

Days Americans Work to Pay Taxes Compared to Other Expenses, 2007 (click to enlarge)

Tax Freedom Day by State
Six out of the ten states with the heaviest tax burdens and the latest Tax Freedom Days are in the Northeast: Connecticut (May 20), New York (May 16), New Jersey (May 10), Vermont (May 09), Rhode Island (May 09), and Massachusetts (May 06). The other four are Nevada (May 08), California (May 07), Washington (May 06), and Minnesota (May 04).

Many of these states are taxed the heaviest and celebrate Tax Freedom Day later because of the progressive federal income tax. States with large metropolitan areas offer higher-paying jobs, and as a result, many of the citizens earn enough to pay income tax at the highest rates--currently 25%, 28%, 33% and 35%. As a result, they must work longer to pay their disproportionate share of the tax burden.

The ten states with the lightest total tax burdens celebrate Tax Freedom Day the earliest. Oklahoma's April 12 is the earliest of all. The next nine are Alabama (April 12), Mississippi (April 13), Alaska (April 13), Tennessee (April 15), New Mexico (April 15), Louisiana (April 16), South Dakota (April 16), Texas (April 19), and Idaho (April 19).

In most of these states, Tax Freedom Day is early because of a large number of low-income taxpayers who pay most of their federal income taxes at the lower rates, 10% and 15%.

Tax Freedom Day by State, 2007 (click to enlarge)

How Tax Freedom Day is Calculated
Tax Freedom Day answers the basic question, "What price is the nation paying for government?" We divide the most authoritative figure for total tax collections by the most authoritative figure for the nation's income. The answer this year is that taxes will amount to 32.7 percent of our income. We convert that percentage into days worked, and if we started on January 1, it would take until April 30. That's when we could start keeping some of our earnings. Income and tax data are then parsed out to the states, yielding 50 state-specific Tax Freedom Days.

The Department of Commerce's Bureau of Economic Analysis (BEA) is the most authoritative source of income and total tax collection data. For its income measurement, the Tax Freedom Day report uses Net National Product as income, which among BEA's measures of income is most appropriate for comparison to tax collections. Critics of the Tax Freedom Day report claim Net National Product excludes income from capital gains on things such as corporate stocks and home sales. This is false: Net National Product accounts for almost all capital income. (Additional discussion of technical issues can be found in the full Tax Freedom Day report, in the Tax Freedom Day Working Paper (Tax Foundation Working Paper No. 3, coming soon), and at http://www.taxfoundation.org/publications/show/1406.html.)

The Tax Foundation is a nonpartisan, nonprofit tax research organization that has monitored fiscal policy at the federal, state and local levels since 1937.

Table 1: Tax Freedom Day and Tax Burden, Selected Years 1900 - 2007

Year

Tax Freedom Day

Taxes as a Percentage of Income

1900

22-Jan

5.90%

1910

19-Jan

5.02%

1920

13-Feb

11.96%

1930

12-Feb

11.61%

1940

7-Mar

17.98%

1950

01-Apr

24.87%

1960

12-Apr

27.88%

1970

20-Apr

29.90%

1980

22-Apr

30.68%

1990

23-Apr

30.80%

2000

5-May

33.98%

2001

1-May

33.01%

2002

21-Apr

30.27%

2003

18-Apr

29.51%

2004

19-Apr

29.69%

2005

26-Apr

31.53%

2006

28-Apr

32.29%

2007

30-Apr

32.69%

Source: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Tax Foundation.

 

Table 2: Tax Freedom Day by State and Rank, Calendar Year 2007

United States

30-Apr

-

Connecticut

20-May

1

New York

16-May

2

New Jersey

10-May

3

Vermont

9-May

4

Rhode Island

9-May

5

Nevada

8-May

6

California

7-May

7

Washington

6-May

8

Massachusetts

6-May

9

Minnesota

4-May

10

Maine

4-May

11

Florida

2-May

12

Wisconsin

2-May

13

Illinois

2-May

14

Hawaii

1-May

15

Maryland

1-May

16

Virginia

30-Apr

17

Ohio

29-Apr

18

Wyoming

28-Apr

19

Colorado

28-Apr

20

Pennsylvania

27-Apr

21

Michigan

27-Apr

22

Nebraska

26-Apr

23

North Carolina

25-Apr

24

Delaware

24-Apr

25

Arizona

24-Apr

26

Oregon

24-Apr

27

Kansas

24-Apr

28

West Virginia

23-Apr

29

Indiana

23-Apr

30

Georgia

22-Apr

31

Arkansas

22-Apr

32

New Hampshire

22-Apr

33

Utah

22-Apr

34

Iowa

21-Apr

35

Kentucky

21-Apr

36

North Dakota

21-Apr

37

South Carolina

21-Apr

38

Montana

21-Apr

39

Missouri

20-Apr

40

Idaho

19-Apr

41

Texas

19-Apr

42

South Dakota

16-Apr

43

Louisiana

16-Apr

44

New Mexico

15-Apr

45

Tennessee

15-Apr

46

Alaska

13-Apr

47

Mississippi

13-Apr

48

Alabama

12-Apr

49

Oklahoma

12-Apr

50

D.C.

12-May

-

Note: Leap day is omitted.
Source: Tax Foundation calculations based on data from the Department of Commerce, Bureau of Economic Analysis.

Click here to read the full study.

Click here to view every state's Tax Freedom Day and rank from 1970 to 2007.

(For more information, please call (202) 464-6200.)

Attached Files