Tax Freedom Day

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Tax Freedom Day is the first day of the year in which a nation as a whole has theoretically earned enough income to fund its annual tax burden. It is annually calculated in the United States by the Tax Foundation—a Washington, D.C.-based tax research organization. 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.

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[1]. The Tax Foundation has calculated Tax Freedom Day for the United States ever since, using it as a tool for illustrating the proportion of national income diverted to fund the annual cost of government programs. In 1990, the Tax Foundation began calculating the specific Tax Freedom Day for each individual state.

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United States

In the United States, Tax Freedom Day for 2010 is April 9, for a total average effective tax rate of 26.9 percent of the nation's income. The latest that Tax Freedom Day has occurred was May 1 in 2000. In 1900, Tax Freedom Day arrived January 22, for an effective average total tax rate of 5.9 percent of the nation's income. According to the Tax Foundation, the most important factor driving changes in Tax Freedom Day from year to year is growth in incomes, as the progressive structure of the U.S. federal tax system causes taxes as a percentage of income to rise along with inflation.

Tax Freedom Day varies among the 50 U.S. states, as incomes and state & local taxes differ from state to state. In 2010, Alaska had the lowest total tax burden, earning enough to pay all their tax obligations by March 26. Connecticut had the heaviest tax burden—Tax Freedom Day there arrived April 27. New Jersey had the second heaviest tax burden, having to work until April 25 to pay their total taxes.

According to the Tax Foundation, the following is a list of Tax Freedom Days in the U.S. since 1900:[2]

Tax Freedom Day around the world

Many other 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 comparable from one country to another.

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