Americans celebrated tax freedom day on April 17

Tax Freedom Day fell on April 17 in 2005, according to the Tax Foundation’s annual calculation using the latest government data on income and taxes. In 2005, Americans have worked 70 days to pay their federal taxes and 37 more days to pay state and local taxes.

According to researchers:

Four out of the five states with the heaviest tax burdens and the latest Tax Freedom Days are in the northeast: Connecticut (May 3), New York (April 29), New Jersey (April 25), Massachusetts (April 24) and Wyoming (April 24).

In general, where the cost of living is high and salaries are commensurately higher, taxpayers are hard hit by the federal income tax’s progressive structure.

As a result, they must work longer to pay their disproportionate share of the tax burden, and they wait longer to celebrate Tax Freedom Day.

The five states with the lightest total tax burdens celebrate Tax Freedom Day the earliest:

Alaska’s April 2 is the earliest of all, followed by Alabama (April 4) and Tennessee (April 6).

South Dakota and Mississippi round out the five most lightly taxed states, celebrating on April 7.

The course of future Tax Freedom Days depends greatly on tax questions under debate right now. Will Social Security reform result in higher taxes, or will contributions to restricted private accounts no longer count as “taxes”? Will the commission advising the President on fundamental tax reform lead to a dramatic re-writing of the tax code? Will recent tax cuts expire in 2008 and 2010 as they are set to under current law? Assuming the status quo prevails, Tax Foundation economists predict that the tax burden will grow, and Tax Freedom Day will fall later in April.

Source: America Celebrates Tax Freedom Day: In 2005, Americans Will Work from January 1 to April 17 Before Earning Enough To Pay Taxes; Economic Growth Pushes Federal Collections Up, Special Report No. 134, April 2005, Tax Foundation.

For text: http://www.taxfoundation.org/taxfreedomday.html

For more on Income Taxes: http://www.ncpa.org/iss/tax/

FMF Policy Bulletin/ 26 April 2005