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Yesterday was Tax Freedom Day

According to the Tax Foundation, Tax Freedom Day® is defined as:

". . . the day when the nation as a whole has earned enough money to pay its total tax bill for the year. A vivid, calendar based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. 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."

This year, the Tax Foundation points out that Tax Freedom Day will occur five days later this year. Their reasoning:

"Tax Freedom Day is five days later than last year, due mainly to the fiscal cliff deal that raised federal taxes on individual income and payroll. Additionally, the Affordable Care Act’s investment tax and excise tax went into effect. Finally, despite these tax increases, the economy is expected to continue its slow recovery, boosting profits, incomes, and tax revenues."

In Virginia, Tax Freedom Day arrives on Saturday, April 20. According to  the Tax Foundation, it's two days later than in the nation as a whole because:

" . . . In 2013, Virginia taxpayers worked until April 20th (10th latest nationally) to pay their total tax bill. The Tax Freedom Days of neighboring states are: Maryland, April 21st (ranked 8th latest nationally); West Virginia, April 19th (ranked 13th latest nationally); Kentucky, April 6th (ranked 10th earliest nationally); Tennessee, April 2nd (ranked 3rd earliest nationally); and North Carolina, April 10th (ranked 21st earliest nationally).

If you are wondering, Tax Freedom Day is calculated by "Tax Foundation economists (who) calculate Tax Freedom Day using federal budget projections, data from the U.S. Census and the Bureau of Economic Analysis, and projections of state and local taxes. Tax Freedom Day was conceived in 1948 by Florida businessman Dallas Hostetler, who deeded the concept to the Tax Foundation when he retired in 1971. Tax Freedom Day by state has been calculated since 1990, when sufficient data became available."

Kudos to the Tax Foundation. Use the link above to access and read the entire paper.

Additional Resources: CPA Practice Advisor; Heritage Foundation's Foundry blog; John Luciew at Patriot-News; Yahoo News; and the Idaho Reporter.


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