Tax Freedom Day

by Ryan Guina

Nationwide, the average American works until April 30th to pay this year’s tax obligations according the the Tax Foundation’s annual estimate. This does vary because each state sets its own state income, sales, and property taxes. Here is the state by state breakdown.

This estimate even makes the assumption the worker was working 7 days a week! That means the average worker works one third of the year before seeing any real income for personal use. Of course taxes aren’t really assessed this way, they are assessed as you receive income. But, it is a sobering thought that you must work 4 months to pay taxes before you get to work for yourself. When you add debt to the equation, some people will work all year and not actually see any income for themselves.

There are two very interesting parts of the article that include a breakdown of the national average for number of days it takes to pay the taxes, and the breakdown for how many hours of an 8 hour work day it takes to pay other expenses.

Breaking that 120 days down, the Tax Foundation estimates it will take:

  • 43 days of work to pay off federal, state and local income taxes
  • 30 days to pay off payroll taxes (for Social Security and Medicare)
  • 16 days to pay off sales and excise taxes
  • 14 days to pay off corporate income taxes (This assumes that a tax on a business is passed on to its customers, employees and shareholders in terms of higher prices, lower paychecks and less shareholder value.)
  • 12 days to pay off property taxes
  • 4 days to pay off other taxes (e.g., customs duties)
  • 1 day to pay off estate and gift taxes

The Tax Foundation also compares the time Americans work to pay taxes with the time we work to pay for life’s other expenses.

Based on an 8-hour workday, the research group estimates that Americans as a whole work:

  • 1 hour 43 minutes to pay all federal taxes (income, sales, etc.)
  • 1 hour 22 minutes to pay for housing and household operations
  • 1 hour 8 minutes to pay for health and medical care
  • 52 minutes to pay all state and local taxes (income, sales, etc.)
  • 51 minutes to pay “other” taxes
  • 40 minutes to pay for food
  • 39 minutes to pay for transportation
  • 28 minutes to pay for recreation
  • 17 minutes to pay for clothing

What you will notice in the above breakdown is that there is no accounting for debt (or savings). The nation as a whole actually has a negative savings rate… It looks like there is mandatory overtime in the forecast!

Published or updated March 9, 2011.
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