By Mike Whittlesey
If you’re reading this in the Print Edition of The Progress Review and have not yet filed your federal tax return, you may have a problem. The month of April is a significant one when it comes to taxes. In addition to the April 15 federal filing deadline, the state of Iowa will be looking for state returns to be completed by April 30.
According to the folks at the Tax Foundation, there is another reason why the month of April is significant from a tax perspective. Tax Freedom Day officially arrives on April 21, 2014. This is the day when the nation, as a whole, has earned enough to pay its total tax bill for the year. It’s important to note that Tax Freedom Day, the federal event, arrives three days later than last year. Experts attribute this to continuing economic recovery, which will boost the federal tax revenue collected through the corporate, payroll and individual income tax. Tax Freedom Day is calculated by economists using federal budget projections, data from the U.S. Census and the Bureau of Economic Analysis.
For residents of the state of Iowa, the tax burden is slightly more favorable. April 13th was Tax Freedom Day for state residents, with Iowa the 18th of 50 states to reach the milestone. Comparing taxes among the states can be challenging due to the wide discrepancy in tax policies that exist from state to state. Generally speaking, though, the states where residents have higher income but also pay higher taxes typically celebrate Tax Freedom Day later in the year. For example, Connecticut and New Jersey (May 9th) and New York (May 4th) are the states that attain tax freedom the latest. Louisiana (March 30), Mississippi (April 2) and South Dakota (April 4), on the other hand, arrive there the soonest.
Lest we get bogged down in the details of the numbers and how they are calculated, the computation of Tax Freedom Day has value when we take a “big picture” view of the trends over time. As recently as the year 2000, Americans paid 33 percent of their total income to taxes. That compares to just 5.9 percent in 1900, the year when tax freedom arrived on January 22nd.
“Arguments can be made for why the collective tax bill is too high or too low, but in order to have an honest discussion, it’s important to understand where we stand,” said Tax Foundation Economist Kyle Pomerleau.
“Tax Freedom Day gives us a vivid representation of how much we pay for the goods and services provided by governments at all levels.”
As part of that conversation, consider the following: Americans will spend more on taxes in 2014 than they will on food, clothing, and housing combined.