How Long Until Your Tax Freedom Day?

0
19

TaxesEvery year, you have to pay a large portion of your income to taxes. Whether those taxes are property taxes, local taxes, state taxes or federal taxes, a big chunk of your income goes toward paying these bills. The Tax Foundation has a unique way of looking at this burden, using a concept known as Tax Freedom Day.

With this concept, you look at your earnings as if they were all going to paying off your tax bills at the beginning of the year before anything else was purchased. If you use this model, how long would it take you to pay off all of your taxes before you can start spending your money on the things that you need to buy? The day varies all around the country because of different state and local tax rates and because of varying incomes.

The average for the entire country is 107 days. This means that it takes 107 days of working before the average person has paid off all of their taxes for the year. This year, that puts the average tax freedom day on April 17, which is also the day that taxes are due to the IRS.

What it Means

Obviously, no one is devoting 100 percent of their income to taxes for the first few months of the year. However, this concept does help put into perspective exactly how much money we are paying in taxes as a society. A big portion of our income goes to taxes every year. In fact, the amount of money that the average person pays in taxes is higher than what they pay for housing, food and clothing expenses on an annual basis.

Controversy

While the idea of Tax Freedom Day is interesting and makes for some compelling conversation, some argue that it is misleading and is not accurate. The Tax Foundation uses a figure of 29 percent for the average household paying taxes. However, not many people actually pay that much in taxes. While their tax bracket may fall into that range, few people pay that effective tax rate after deductions and credits are applied. In fact, less than 80 percent of families pay this much money in taxes each year.

Regardless of who’s right and who’s wrong, there is definitely no disputing that we pay a lot in taxes. The idea of a Tax Freedom Day applies regardless of when it actually occurs for the average person.