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I started talking about this over on Facebook, but found I ran out of space. :) So, here's an LJ-cut:
I don't know exactly how the people who circulate the whole booga-booga-Tax-Freedom-Day-you-work-solely-for-the-gummmit thing calculate it, but I suspect it goes something like this:
Start with the total income tax collected in a year, about a trillion dollars (okay, that's kinda booga-booga scary in itself, but really just a matter of scale...we're a big country). Then divide by the number of taxpayers. Now divide that by the median individual income (I looked that one up, $25,000 or so for all adults or $32,000 for adults over 25, but it's safe to assume they're using the lower number for more scary-factor). Take this fraction and convert into days. I suspect it gets converted into business days, to inflate the results by another 40%. Now present to the public in an attempt to scare them into voting for tax-cutting candidates. Lately the "tax freedom day" is somewhere in early to mid April.
I once did a careful analysis of my own data, but even looking at it not carefully, the bogosity quotient is high. My own income is above median, and I'm in the 28% tax bracket, so you can expect I pay a bigger bite than the median (also, I don't itemize and have no major deductions, so I probably get a smaller refund than others of equal income). My take-home pay is about 3/4 of my gross pay, which means that by the beginning of April I've covered everything that gets withheld from my paycheck.
Everything.
Not just income tax. That includes social security, medical/dental/optical insurance, retirement contributions, parking fees and United Way (although those last two aren't nearly as big as the rest). The beginning of April isn't tax freedom for me, that happened somewhere in February. The only conceivable way to stretch my tax freedom day even into mid-March is to assume I'm only paying taxes on weekdays, and but then I have tax freedom weekends every week. Sure, a lot of people are only paid on weekdays, but the whole "divide total tax burden by total taxpayers" thing includes a LOT of people who are paid 7 days a week one way or another, so it's disingenuous to only count weekdays when calculating tax freedom day.
Of course, if you want to count all taxes, I do spend a bigger chunk of my year paying those. But it's a lot harder to figure that one out, since so many of those taxes are either hidden (like the property tax I indirectly pay as part of my rent, or any other tax passed on to the consumer by a business) or spread out over lots of little bites (sales tax, gas tax, taxes on my cellphone, tax in my electricity bill, etc). But tax freedom day stuff is about protesting income tax, not all the rest.
By the way, one of the reasons for the high bogosity of tax freedom day calculations is that the very rich pay a big chunk of income tax. A figure that's easily found is that the top 1% of earners paid 40% of all income tax collected by the Federal government¹...and while there's a lot of room to argue about that figure, it's indisputable that the uneven distribution of income badly skews any analysis of simple means (even medians can get spotty in data skewed this much). If you remove the top 5% (who pay most of the income tax) and the bottom 5% (who, after things like EIC or simple lack of income, pay virtually no income tax), you'd find that the date of tax freedom day would move back into February.
¹ BTW, don't think I feel bad for that top 1%, even if the figure is accurate. Remember, the very rich make most of their money via sources that don't count under personal income tax. Capital gains tax is a separate stream with its own rates and a lot of ways to lower the effective tax bite even without abusing the system.
I'm leaving this unlocked for now, but I've set comments from non-friends to screen, just in case there's random tax crusaders trolling LJ today.
I don't know exactly how the people who circulate the whole booga-booga-Tax-Freedom-Day-you-work-solely-for-the-gummmit thing calculate it, but I suspect it goes something like this:
Start with the total income tax collected in a year, about a trillion dollars (okay, that's kinda booga-booga scary in itself, but really just a matter of scale...we're a big country). Then divide by the number of taxpayers. Now divide that by the median individual income (I looked that one up, $25,000 or so for all adults or $32,000 for adults over 25, but it's safe to assume they're using the lower number for more scary-factor). Take this fraction and convert into days. I suspect it gets converted into business days, to inflate the results by another 40%. Now present to the public in an attempt to scare them into voting for tax-cutting candidates. Lately the "tax freedom day" is somewhere in early to mid April.
I once did a careful analysis of my own data, but even looking at it not carefully, the bogosity quotient is high. My own income is above median, and I'm in the 28% tax bracket, so you can expect I pay a bigger bite than the median (also, I don't itemize and have no major deductions, so I probably get a smaller refund than others of equal income). My take-home pay is about 3/4 of my gross pay, which means that by the beginning of April I've covered everything that gets withheld from my paycheck.
Everything.
Not just income tax. That includes social security, medical/dental/optical insurance, retirement contributions, parking fees and United Way (although those last two aren't nearly as big as the rest). The beginning of April isn't tax freedom for me, that happened somewhere in February. The only conceivable way to stretch my tax freedom day even into mid-March is to assume I'm only paying taxes on weekdays, and but then I have tax freedom weekends every week. Sure, a lot of people are only paid on weekdays, but the whole "divide total tax burden by total taxpayers" thing includes a LOT of people who are paid 7 days a week one way or another, so it's disingenuous to only count weekdays when calculating tax freedom day.
Of course, if you want to count all taxes, I do spend a bigger chunk of my year paying those. But it's a lot harder to figure that one out, since so many of those taxes are either hidden (like the property tax I indirectly pay as part of my rent, or any other tax passed on to the consumer by a business) or spread out over lots of little bites (sales tax, gas tax, taxes on my cellphone, tax in my electricity bill, etc). But tax freedom day stuff is about protesting income tax, not all the rest.
By the way, one of the reasons for the high bogosity of tax freedom day calculations is that the very rich pay a big chunk of income tax. A figure that's easily found is that the top 1% of earners paid 40% of all income tax collected by the Federal government¹...and while there's a lot of room to argue about that figure, it's indisputable that the uneven distribution of income badly skews any analysis of simple means (even medians can get spotty in data skewed this much). If you remove the top 5% (who pay most of the income tax) and the bottom 5% (who, after things like EIC or simple lack of income, pay virtually no income tax), you'd find that the date of tax freedom day would move back into February.
¹ BTW, don't think I feel bad for that top 1%, even if the figure is accurate. Remember, the very rich make most of their money via sources that don't count under personal income tax. Capital gains tax is a separate stream with its own rates and a lot of ways to lower the effective tax bite even without abusing the system.
I'm leaving this unlocked for now, but I've set comments from non-friends to screen, just in case there's random tax crusaders trolling LJ today.
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From:
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Now, taking into account that my income is very, very small (being self-employed with all sorts of business deductions does that), and I live in a state without a state income tax.
My net income for 2008 (filed yesterday) was about $6,800.
My income and self-employment taxes due, after earned income credit, was $330.
My state property tax in 2008 was about $130 (on business inventory).
Texas sales tax runs between 6.25% and 8.25% depending on jurisdiction, leaning heavily towards the upper end. At 8%, and exempting grocery and medicine purchases- say, cut my net income in half- that's $272.
So, on just personal taxes, I paid $732 out of $6800 net income- or about 10.8%. That puts my tax freedom day at about February 9th.
And I'm certain I make a LOT less than you do, net. Factor in your state sales and income taxes, and your property taxes, and see where that takes you...
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My current "take home" is 62% of my gross (so 38% in taxes/social security/insurance etc); my income goes up a little when I max-out social security contributions.
35% of 365 days is 127.75 days, call it 128. So May 8th?
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I smell the sinister hand of the dread Libertarian in this matter.
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