Discussion Tax Freedom Day Use your favorite search engine to research Tax Freed
ID: 2426967 • Letter: D
Question
Discussion Tax Freedom Day
Use your favorite search engine to research Tax Freedom Day. Then (a) explain the term Tax Freedom Day, (b) determine when Tax Freedom Day occurred in 2013, (c) predict the 2016 Tax Freedom Day and elaborate on why you chose that day, and (d) identify your home state’s Tax freedom Day for the most recent year. Why do you think your home state’s Tax Freedom Day varies from your neighboring states’ Tax Freedom Day? Provide specific details to support your opinions in your response.
Explanation / Answer
A)Tax Freedom Day is the day when the nation as a whole has earned enough money to pay off its total tax bill for the year. Tax Freedom Day provides Americans with an easy way to gauge the overall tax take-a task that can otherwise be daunting due to the multiplicity of taxes at various levels of government and "hidden" taxes and fees that are often buried in the cost of living. Tax Freedom Day computed by dividing total tax collections by the nation's income, as reported by the Bureau of Economic Analysis. Every dollar that is officially called income by the government is counted, and every payment that is officially considered a tax is counted. The resulting percentage is then converted into days of a 365-day calendar year..
B) In 2013, Americans will pay $2.76 trillion in federal taxes and $1.45 trillion in state taxes, for a total tax bill of $4.22 trillion, or 29.4 percent of income. April 18 is 29.4 percent, or 108 days, into the year.
C) In 2016 the Tax Freedom Day would be April 15 (Friday).
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 1917s January 24 to 1918s February 8 to 1921s 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 not only to a later Tax Freedom Day but 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. Federal tax increases and the economic recovery will push Tax Freedom Day this year to April 18, five days later than last year.