Tax Freedom Day
Tax Freedom Day is a concept developed and trademarked by American businessman Dallas Hostetler, which aims to calculate the first day of the year on which a nation as a whole has theoretically earned enough income to pay its taxes. Every dollar that is officially considered income by the government is counted, and every payment to the government that is officially considered a tax is counted. Taxes at all levels of government – local, state and federal – are included.
History and methodology
The concept of Tax Freedom Day was developed in 1948 by Florida businessman Dallas Hostetler, who trademarked the phrase "Tax Freedom Day" and calculated it each year for the next two decades. In 1971, Hostetler retired and transferred the trademark to the Tax Foundation.[better source needed]
In the United States, the "Tax Freedom Day" is annually calculated by the Tax Foundation, a Washington, D.C.-based think tank. Their results are as follows:
|Year||Tax Freedom Day||Tax Burden|
Around the world
Many other companies and organizations in countries throughout the world now produce their own "Tax Freedom Day" analysis. According to the Tax Foundation, Tax Freedom Day reports are currently being published in eight countries. Due to the different ways that nations collect and categorize public finance data, however, Tax Freedom Days are not necessarily directly comparable from one country to another.
|Country||Day of year||% burden||Date of year||Updated||Source||Reference|
|India||74||20%||March 14||2000||Centre for Civil Society|||
|Australia||107||29%||April 17||2019||Centre for Independent Studies|||
|United States||114||31%||April 24||2015||Tax Foundation|||
|Estonia||114||31%||April 24||2007||Eesti Maksumaksjate Liit (Estonian Taxpayers Association)|||
|Lithuania||128||35%||May 15||2015||Lithuanian Free Market Institute|||
|Spain||181||50%||June 30||2016||Foundation for the Advancement of Liberty and Spanish Taxpayers' Union|||
|Uruguay||133||39%||May 13||2010||CPA Ferrere|||
|Hungary||140||38%*||May 20||2008||Hungarian Central Statistic Institute|||
|New Zealand||127||35%*||May 7||2018||Staples Rodway|||
|South Africa||141||39%||May 22||2014||Free Market Foundation|||
|Bulgaria||124||36%||May 4||2018||Radio Bulgaria|||
|United Kingdom||151||41%||May 31||2021||Adam Smith Institute|||
|Brazil||153||41%||May 31||2014||Instituto Brasileiro de Planejamento Tributario|||
|Slovakia||155||42%||June 5||2017||Nadácia F.A.Hayeka|||
|Canada||164||45%||June 14||2019||Fraser Institute|||
|Belarus||135||37%||May 15||2016||The Public Association «Discussion and Analytical Society Liberal Club»||[permanent dead link]|
|Croatia||161||44%||June 10||2010||Adriatic Institute for Public Policy|||
|Czech Republic||149||41%||May 29||2017||Liberální institut|||
|Belgium||218||54%||August 6||2018||Institut économique Molinari (IEM)|| Archived December 20, 2018, at the Wayback Machine|
|Greece||169||46%||June 19||2012||Φορολογικό Παρατηρητήριο, Κέντρο Φιλελεύθερων Μελετών – Μάρκος Δραγούμης|||
|Poland||156||43%||June 6||2018||Centrum im. Adama Smitha|||
|Germany||192||52%||July 11||2015||Bund der Steuerzahler|||
|Israel||197||54%||July 14||2013||Jerusalem Institute for Market Studies|||
|Turkey||194||53%||July 14||2012||Liberal Democratic Party|| Archived October 20, 2013, at the Wayback Machine|
|France||208||57%||July 27||2018||Institut économique Molinari (IEM)|| Archived December 20, 2018, at the Wayback Machine|
|Bosnia and Herzegovina||161||44%||June 10||2017||Centre for Policy and Governance «Centar za politike i upravljanje»|||
|Austria||216||59%||August 5||2019||Austrian Economics Center|||
A 2010 study published in L'Anglophone, a Brussels newspaper, compared the tax burdens of "Average Joes" in each of the 27 EU member states and projected the Tax Freedom Day for workers earning a typical wage. Income taxes, social security contributions (by the employee and the employer) and projected VAT contributions were included in the calculations.
Regarding the discrepancy between their calculation of August 3 as the typical Belgian worker's Tax Freedom Day and that of PriceWaterhouseCoopers (PWC), L'Anglophone's authors wrote:
[PWC's] figures count revenue from all taxes (including those on corporate profits, petrol, cigarettes, &c.) and thus present a more complete picture of the country’s total tax burden," adding that it is "an average applied to all Belgians – not all Belgian workers; in 2008, less than half of Belgium’s population (4.99 million working out of 10.67 million citizens) was legally working. Consequently, a huge share of Belgium’s tax burden is borne by the working population.
|Country||Day of year||% burden||Date of year|
|Czech Rep.||165||45%||June 14|
|United Kingdom||134||36%||May 13|
In the book Filthy Lucre: Economics for People Who Hate Capitalism, philosopher Joseph Heath criticizes the idea that tax-paying is inherently different from consumption:
It would make just as much sense to declare an annual "mortgage freedom day", in order to let mortgage owners know what day they "stop working for the bank and start working for themselves". ...But who cares? Homeowners are not really "working for the bank"; they're merely financing their own consumption. After all, they're the ones living in the house, not the bank manager.
For Canada, the Fraser Institute also includes a "Personal Tax Freedom Day Calculator" that estimates a customized Tax Freedom Day based on additional variables such as age of household head, sex of household head, marital status and number of children. However, the Fraser Institute's figures have been disputed. For example, a 2005 study by Osgoode Hall Law Professor Neil Brooks argued that the Fraser Institute's Tax Freedom Day analysis includes flawed accounting, including the exclusion of several important forms of income and overstating tax figures, moving the date nearly two months later.
In America, while Tax Freedom Day presents an "average American" tax burden, it is not a tax burden typical for an American. That is, the tax burdens of most Americans are substantially overstated by Tax Freedom Day. The larger tax bills associated with higher incomes increases the average tax burden above that of most Americans.
The Tax Foundation defends its methodology by pointing out that Tax Freedom Day is the U.S. economy's overall average tax burden—not the tax burden of the "average" American, which is how it is often misinterpreted by members of the media. Tax Foundation materials do not use the phrase "tax burden of the average American", although members of the media often make this mistake.
Another criticism is that the calculation includes capital gains taxes but not capital gains income, thus overstating the tax burden. For example, in the late 1990s the US Tax Freedom Day moved later, reaching its latest date ever in 2000, but this was largely due to capital gains taxes on the bull market of that era rather than an increase in tax rates. In other words, variations in capital gains income and their associated taxes cause changes in the amount of taxes, but not in the income used in the calculation of Tax Freedom Day.
The Tax Foundation argues that the Tax Freedom Day calculation does not include capital gains as income because it uses income and tax data directly from the Bureau of Economic Analysis (BEA). BEA has never counted capital gains as income since they don't represent current production available to pay taxes, and so the Tax Foundation excludes them as well. Additionally, the Tax Foundation argues that the exclusion of capital gains income is irrelevant in most years since including capital gains would only shift Tax Freedom Day by 1 percent in either direction in most years. A 1 percent change would represent 3.65 days. From 1968 to 2009 the date has never left the 21-day range of April 13 to May 3.
- List of countries by tax rates
- List of countries by tax revenue as percentage of GDP
- Rahn curve
- Government spending
- Laffer curve
- Madsen Pirie, Think Tank: A Story of the Adam Smith Institute, Biteback Publishing, 2012, p. 168
- U.S. Patent and Trademark Office, "Tax Freedom Day"[permanent dead link]
- "The Tax Foundation – Tax Freedom Day and Tax Burden, 1900–2010". Archived from the original on May 15, 2006. Retrieved April 27, 2006.
- "Tax Freedom Day 2019 is April 16th". April 10, 2019.
- Berechet, Cristina (May 24, 2016). "Tax Freedom Day 2016" (PDF). Foundation for the Advancement of Liberty. Foundation for the Advancement of Liberty & Spanish Taxpayer's Union.[permanent dead link]
- "Tax Freedom Day". Adam Smith Institute. Retrieved March 24, 2022.
- "Wages and Taxes for the Average Joe in the EU 27" (PDF). Archived from the original (PDF) on October 16, 2011. Retrieved June 8, 2010.
- "Belgian Workers' Wages are Highest-Taxed in Western Europe". Archived from the original on June 14, 2010. Retrieved June 8, 2010.
- Heath, Joseph. Filthy Lucre. p. 90.
- Professor Neil Brooks, Osgoode Hall, 2005, archived from the original on December 16, 2005, retrieved December 11, 2005
- Tax Freedom Day – A Flawed, Incoherent, and Pernicious Concept (PDF), June 5, 2005, retrieved August 16, 2016
- "Tax Foundation".
- "The Tax Foundation – America Celebrates Tax Freedom Day". Archived from the original on April 23, 2006. Retrieved April 27, 2006.
- "Tax Foundation".
- Tax Foundation's Tax Freedom Day (US only)
- Tax Freedom Day Clock A live clock that counts the days till/since Tax Freedom Day for USA only.
- Tax Freedom Day Clock (UK) A live clock that counts the days till/since UK Tax Freedom Day
- Criticism: Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens