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by Kyle Pomerleau & Lyman Stone

What is Tax Freedom Day®?Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for year. A vivid, calendar-based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. In 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income. This year, Tax Freedom Day falls on April 21, or 111 days into the year.

Why is Tax Freedom Day later this year? Tax Freedom Day is three days later than last year due mainly to the continuing economic recovery, which will boost federal tax revenue collected through the corporate, payroll, and individual income tax.

When is Tax Freedom Day if you include federal borrowing? Since 2002, federal expenses have exceeded federal revenues, with the budget deficit exceeding $1 trillion annually from 2009 to 2012 and over $800 billion in 2013. In 2014, the deficit will continue to decline to $636 billion. If we include this annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur on May 6, 15 days later. The latest ever deficit-inclusive Tax Freedom Day occurred during World War II on May 21, 1945.

When is my state’s Tax Freedom Day? The total tax burden borne by residents of different states varies considerably due to differing state tax policies and because of the progressivity of the federal tax system. This means a combination of higher-income and higher-tax states celebrate Tax Freedom Day later: Connecticut (May 9), New Jersey (May 9), and New York (May 4). Residents of Louisiana will bear the lowest average tax burden in 2014, with Tax Freedom Day arriving for them on March 30. Also early are Mississippi (April 2) and South Dakota (April 4).

How has Tax Freedom Day changed over time? The latest ever Tax Freedom Day was May 1, 2000, meaning Americans paid 33.0 percent of their total income in taxes. A century earlier, in 1900, Americans paid only 5.9 percent of their income in taxes, meaning Tax Freedom Day came on January 22.

Who calculates Tax Freedom Day? Tax Foundation economists calculate Tax Freedom Day using federal budget projections, data from the U.S. Census and the Bureau of Economic Analysis, and projections of state and local taxes. Tax Freedom Day was created in 1948 by Florida businessman Dallas Hostetler, who deeded the concept to the Tax Foundation when he retired in 1971. Tax Freedom Day by state has been calculated since 1990, when sufficient data became available. Learn more about Tax Freedom Day at www.taxfoundation.org/taxfreedomday

April 21, Three Days Later Than Last Year

State/Local Sales and Excise Taxes 13 Days

State/Local Income Taxes 9 Days

Federal Income Tax33 Days

Social Insurance Taxes 27 Days

Fed. Corporate Income Taxes 8 DaysOther Fed. Taxes 4 Days

Other State/LocalTaxes 3 Days

State/Local Corporate Income Taxes 1 Days

Property Taxes 11 Days

State/Local Social Insurance Taxes 3 hours

Fed. Excise Taxes2 Days

January

February

March

April

Tax Freedom Day April 21

1 2 3 4

8765 9 10 11

15141312 16 17 18

22212019 23 24 25

29282726 30 31 1

1

5432 6 7 8

1211109 13 14 15

19181716 20 21 22

26252423 27 28 1

30 31

1

5432 6 7 8

1211109 13 14 15

19181716 20 21 22

26252423 27 28 29

1 2 3 4 5

9876 10 11 12

16151413 17 18 19

22212120 23 24 25

29282726 30 31 1

Tax Freedom Day 2014

VAApr 24

#11NC

Apr 14 #28SC

Apr 9 #43GA

Apr 12#34

FL Apr 15 #25

ALApr 7#46

MSApr 2#49

TN Apr 5 #47

KYApr 8 #44

OHApr 14

#28IN

Apr 16#24

ILApr 28

#7MO

Apr 11#36

ARApr 12

#34

LA Mar

30 #50

IAApr 13

#32

MNApr 29

#5 WIApr 22

#13 MI Apr 17

#21 PAApr 21

#15

NYMay 4

#3

MEApr 11

#36

TXApr 13

#32

OKApr 11

#36

KSApr 18

#19

NEApr 14

#28

SDApr 4#48

NDApr 25

#9

MTApr 14

#28

WYApr 17

#21

COApr 22

#13

NMApr 8#44

AZApr 11

#46

UTApr 17

#21

NVApr 15

#25

IDApr 11

#36

ORApr 20

#16

WAApr 25

#9

CAApr 30

#4

AKApr 11

#36

HIApr 15

#25

WVApr 10

#42

Apr 29 #5MA

Apr 23 #12RI

May 9 #1CT

May 9 #1NJ

Apr 18 #19DE

Apr 28 #7MD

Apr 18 (#19)DC

Apr 19 #17VT

Apr 19 #17NH

When does Tax Freedom Day arrive in your state?

Earlier Later

Note: Each state’s Tax Freedom Day is the day that residents of that state have worked long enough to pay all tax obligations at the federal, state, and local level.

Source: Tax Foundation calculations

Tax Freedom Day

by State 2014

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

March 1

April 1

May 1

June 1

February 1

For more informat ion, v is i t taxfoundat ion.org/taxfreedomday Tax Freedom Day has not always been this late in the year. World War I tax increases led to a jump in Tax Freedom Day from 1917’s January 24 to 1918’s February 8 to 1921’s February 22. In the 1920s, when Justice Oliver Wendell Holmes described taxes as the price of civilized society, Tax Freedom Day was arriving in February.

The Great Depression and the Hoover/Roosevelt tax increases led to not only a later Tax Freedom Day but also a shift in who was collecting. In 1932, Americans spent 10 days paying federal taxes and 46 days paying state and local taxes. By 1940, Americans worked 33 days to pay each. World War II brought increased federal spending and borrowing, with Tax Freedom Day arriving in April for the first time in 1943.

The federal tax burden never returned to pre-war levels. The 1950s and 1960s also saw a rise in state-local tax burdens and a boost in economic growth following the 1964 Kennedy/Johnson tax cut. Vietnam War-era tax increases and the “stagflation” of the 1970s pushed personal incomes into higher tax brackets, and by 1981, Tax Freedom Day arrived on April 24.

The Reagan tax cut signed into law that year ushered in an economic boom; federal revenues grew but the economy grew even faster. Despite pressure on state and local taxes following taxpayer revolts like Proposition 13 in California, the strong economic growth led

to increased tax collections, and in 1989, Tax Freedom Day arrived on April 22. That year, federal income tax revenues as a share of the economy were higher than they had been in nearly all years prior, and higher than all but one year (1952) of the 1940s, 1950s, and early 1960s, when the top rate exceeded 90 percent.

A string of record-setting federal tax burdens followed, and the latest ever Tax Freedom Day occurred on May 1, 2000. With federal revenue routinely exceeding forecasts, there was strong popular pressure for a major tax cut.

The new president delivered on his tax cut promises, which, combined with a recession in 2001, caused the tax burden to fall considerably. In 2003, Tax Freedom Day arrived on April 14, more than two weeks earlier than it had in 2000.

Beginning in 2007, stimulus tax cuts and a weakening economy pushed Tax Freedom Day earlier still; in 2009, Tax Freedom Day was on April 10, earlier than any year since Lyndon Johnson was in the White House. This course was reversed in 2013 with tax increases at the federal level and a slowly recovering economy, which pushed Tax Freedom Day to April 18. This year, Tax Freedom Day is April 21, three days later than last year due mainly to the continuing economic recovery, which will boost federal tax revenue collected through the corporate, payroll, and individual income tax.

MethodologyWe count in the denominator every dollar that is officially part of national income according to the Department of Commerce’s Bureau of Economic Analysis. We count in the numerator every payment to the government that is officially considered a tax. Taxes at all levels of government are included, whether levied by Uncle Sam or state and local governments. In calculating Tax Freedom Day for each state, we look at taxes borne by residents of that state, whether paid to the federal government, their own state or local government, or governments of other states. Where possible, we allocate tax burdens to the taxpayer’s state of residence. Leap days are excluded to allow comparison across years, and any fraction of a day is rounded up to the next calendar day.

For a more detailed description of Tax Freedom Day’s methodology and some questions relating to the timing of tax burdens and income, please see Tax Freedom Day: How It’s Calculated and Addressing Some Methodological Issues.

Feb. 1

Mar. 1

Apr. 1

May. 1

1930 1940 1950 1960 1970 1980 1990 2000 2010

Tax Freedom Day since 1900

Federal Tax Burden

State-Local Tax Burden

Tax Freedom Day

Deficit-Inclusive Tax Freedom Day

Americans will spend 15 days working to pay sales and excise taxes, 11 days to pay property taxes, and 7 days for other miscellaneous taxes (such as car taxes, severance taxes, and estate taxes).

Individual income taxes represent the largest component of Americans’ tax bills. All but seven states levy a state income tax on top of the federal income tax. Paying these taxes together takes Americans about 42 days of work.

Americans will work 27 days to pay their payroll, or social insurance, taxes—taxes which are collected to fund social insurance programs such as Social Security and Medicare.

Americans will work 9 days to pay their share of corporate income taxes. This figure peaked, along with corporate profits, in 2006 at 14 days and dropped in half by 2009 to 7 days. All taxes on businesses are ultimately passed on to individuals in the form of higher prices, lower wages or employment levels, or lower share value.

$0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

Food

Clothing

Housing State-Local Taxes

Federal Taxes

Federal Tax Burden Nearly Twice State-Local Tax Burden

Americans Will Spend More in Taxes in 2014 Than They Will on Food, Clothing, and

Housing Combined

Trill

ions

of D

olla

rs