April 15 is just around the corner and some of us procrastinators are still struggling with our 1040's attempting to complete the onerous forms before the deadline - which was extended to April 18 this year. Will we owe? Will we get a refund? How much of the tax we owe can we trace back to the fun we had playing the slots and table games at our favorite casino? I hope you all won big in 2016, and that you can trace much of your tax tribulations to lucky spins on your favorite games.
There's another special day in April connected to taxes: April 24, 114 days into the year excluding Leap Day - Tax Freedom Day. No, that's not the day we celebrate because because we're through paying taxes for the year. It's the day we celebrate because we will have earned enough to pay our tax liability for 2016. Tax Freedom Day is determined by taking all taxes we pay - federal, state, local, payroll, excise - and dividing them by the nation's income. This year Americans will pay $3.34 trillion in federal tax (up from $3.28 last year). they will pay $1.64 trillion in state and local taxes (up from $1.57 trillion in 2015.) The total income tax bill this year is $4.99 trillion (up from $4.85 trillion) or 31% of national income.
This year Americans will work longer than ever to pay all the income taxes collected - 46 days. Payroll taxes will take 26 days to pay. Sales and excise taxes - 15 days. Corporate income taxes - 9 days. Property taxes - 11 days. The remaining 7 days are spent paying estate and inheritance taxes, customs duties, and other taxes. The Tax Foundation says Americans will spend ore on taxes in 2016 than it will on food, clothing, and housing combined.
What if we include federal borrowing in these calculations? In 2016 the deficit is expected to grow significantly, from $592 billion to $698 billion. If we include these future taxes owed, Tax Freedom Day would occur on May 10, 16 days later.
Your State's Tax Freedom Day will fall somewhere between April 5 and May 21. You can find the date and ranking for your state in the Tax Foundation chart below.
The total tax burden by states varies considerable due to differing state tax policies and the progressivity of the federal tax system. Higher income, higher tax states celebrate Tax Freedom Day later. Mississippi has the lowest average tax burden with Tax Freedom Day arriving on April 5. Also early are Tennessee (April 6) and Louisiana (April 7). Connecticut celebrates later (May 21), New Jersey (May 12) and New York (May 11). California where I live is 45th on the list with an April 30 Tax Freedom Day. Indiana where I used to live is 24th with an April 18th date. It costs to live in the Golden State -- but it's worth it.
If you get a sense of deja vu and feel you've read this before, it's because I got lazy and updated last year's blog entry with the new numbers for this year. My thanks to Scott Greenberg of the Tax Foundation for the figures.
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