Monday, April 21, was 2014 Tax Freedom Day®, according to the Tax Foundation. The Tax Foundation is not exactly known for unbiased research, and its promotion of Tax Freedom Day® is no exception.
The Foundation claims that Tax Freedom Day® is “a vivid, calendar-based illustration of the cost of government.†In other words, instead of saying that its analysts expect total taxes in the United States (including social insurance) to reach 30.2% of net national income (NNI) in 2014, they say that Tax Freedom Day® arrives three days later than last year. Precise, huh?
Of course, the word “freedom†tips us off to the fact that the Tax Foundation is actually trying to create an emotional response. Something along the lines of, “Oh boy, after today I’m working for myself rather than the greedy government!†The implication further is that the later Tax Freedom Day® occurs, the worse it is for the country. The thing is, neither of these insinuations is true.
As the Center on Budget and Policy Priorities points out every year, that emotional response, frequently picked up directly by the media, is not true for the vast majority of Americans. As CBPP’s Figure 1 below shows, for the federal portion of taxes, more than 80% of Americans are paying less than the 20.1% federal component of Tax Freedom Day® would suggest. (In addition, the burden of some taxes does not fall on individuals at all.) The Tax Foundation responds that it’s not trying to mislead anyone, it’s just comparing “total U.S. tax collections with totalU.S. income.†Of course, if that were all it was really trying to do, it could just say that projected tax collections equal x% of NNI. But no, it trumpets Tax Freedom Day®.
Moreover, a relatively late Tax Freedom Day® is usually a sign that incomes are increasing, so taxes are, too. As the Foundation Tax Foundation,
