Statistician Garth Zietsman has calculated that average income earners will work one more day in 2015 to pay their taxes before starting to work for themselves. He says, “given the estimated Central Government Revenues for 2015 as a percentage of GDP the General Government Tax Freedom Day for 2015 is estimated to occur on May 20 – one day later than 2014. There has been a trend toward taking more of the GDP in taxes every year. Below is a graph of the linear trend of days to Tax Freedom Day by year from 2002 to 2015. According to the graph, the government seems to be taking more than an extra 1.7 days of national production every year, or almost 1/5th more since 2002.”
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As the graph shows, government is taking a steadily increasing percentage of people’s earnings, which means that we have to work longer every year for the government and have fewer days to work for ourselves. Naturally, the taxes that government takes is spread over the year but it is useful to illustrate just how much it is by calculating what chunk of earnings it represents to see how many days of work in the year it takes to earn the amount of money we need to pay those taxes.
No 2015 estimates are yet available for other countries but when compared with some 2014 Tax Freedom Day figures, Australia was 10 April, US 21 April, UK 28 May, Brazil 31 May and Canada 6 June. A feature that most countries appear to have in common is that Tax Freedom Day is reached later every year rather than earlier than the previous year.
Encroaching on people’s incomes, and inevitably their freedoms, has become a worldwide phenomenon. Another phenomenon to note is the steady change that seems to be developing in the relationship between governments and their citizens. Theoretically democratic governments were conceived of as being appointed to serve their citizens; this has imperceptibly changed to a point where governments act as if the citizens are there to serve them, which is decidedly undemocratic. Does the fault lie with increasingly autocratic government or are citizens not doing enough to protect their freedoms?
To roll back government encroachment on incomes and freedoms, South Africans need to be more pro-active. One step they could take is to stipulate the maximum percentage of GDP that government can take every year. If the figure were to be set at 20 per cent per annum, government would be taking only 73 days of national income every year, which would set Tax Freedom Day back to 15 April, which is five days later than Australia’s. This would put more money in the pockets of the people, make government less intrusive, increase savings and capital formation, which, in turn, would increase economic growth and reduce unemployment.
Author: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.