BERLIN- Many local residents, like their brethren all over
the country, got their state and federal tax returns filed by last week’s
deadline, but most still have some earning to do to meet their tax burden for
2007.
Tax Freedom Day, the point in the year when typical
Americans stop working for Uncle Sam and start working for themselves, arrives
next week, April 30, which is four days later than last year but still much
earlier than in years gone by. Calculated annually by the non-profit Tax
Foundation, Tax Freedom Day is the point on the calendar when the typical U.S.
worker has earned enough to meet his or her federal, state and local tax burden
for the year and starts devoting wages to other life essentials such as food,
shelter, clothing and recreation.
Tax Freedom Day in the U.S. arrives on April 30 and will
arrive in Maryland one day later on May 1, which puts the state somewhere among
the last states in the U.S. to reach the milestone.
Tax Freedom Day will arrive in Connecticut on May 20,
making that state the last in the Union to reach the finish line. Workers in
Alabama and Oklahoma were the first to reach Tax Freedom Day, meeting their tax
burden on April 12.
The Tax Foundation formula divides the per capita tax
burden – the combination of federal, state and local taxes – by the per capita
income to arrive at the date workers across the country have earned enough to
meet their tax burden and begin to earn money for themselves. For example,
Americans in general will work 121 days to meet their tax burden in 2007, while
Marylanders will work 122 days.
In Maryland, the per capita income projected for 2007
comes in around $49,324 with residents paying about $16,000 in federal and
state income tax, meaning the typical worker in the state spends about 33
percent of what he or she makes paying taxes. Consequently, Marylanders make
more than the national per capita income, but also pay considerably more in
taxes. Maryland is ranked 13th in the country in terms of the
typical tax burden.
Tax Freedom Day arrives four days later this year than
last year and 11 days later than it did as recently as 2004, which seems to
reflect a growing tax burden for workers in the U.S. including Maryland.
Tax Foundation President Scott Hodge, who prepares the
annual report, said the later date is the reflection of a robust economy and
not necessarily an indication of how things are going for American taxpayers.
“Tax Freedom Day comes four days later in 2007 than it did
in 2006,” he said. “The economy has been growing at a pretty good rate since
mid-2003 and those growing incomes are pushing people into higher tax brackets.
When that happens, tax collections grow faster than incomes.”
The downside to the growing economy argument is that
Americans, including Marylanders, are still spending for more in combined tax
burdens than on any other life essentials by far.
“Americans will work longer to pay for government than
they will for food, clothing and housing combined,” said Hodge. “Since 1986,
taxes have cost more than these basic necessities. In fact, Americans will work
longer to afford federal taxes alone than they will to afford housing.”
For example, Americans will work 121 days this year to pay
for government, but just 105 days to pay for food, clothing and shelter
combined. In addition, most Americans will work 79 days just to meet their
federal tax burden, while they will work just 62 days to pay for their housing,
whether it is a mortgage or rent.
According to the Tax Foundation report for 2007, Americans
will work 79 days to earn enough to pay federal taxes and another 32 days to
pay state and local taxes. It will take the typical American worker another 62
days to earn enough to pay for housing, 52 days for medical care, 30 days for
food, and 30 days for transportation. Unfortunately for most wage earners, only
20 days of the year are spent working for recreation and only two days work is
devoted to savings.
When Tax Freedom Day was first calculated at the turn of
the 20th century, the typical American worker met his or her tax
burden for the entire year in the first month of the year. The earliest Tax
Freedom Day was recorded in 1912 when American workers reached the break-even
point on Jan. 22. The latest came in 2000 when Tax Freedom Day arrived on May
12 across the country.
Wage-earners concerned too much of their hard earned money
is devoted to meeting their federal, state and local tax burden should think
twice about moving to another country.
In
Canada, for example, Tax Freedom Day in 2007 will arrive on June 29, or the 180th
day of the year. In Great Britain, Tax Freedom Day this year will arrive on
June 1, or the 160th day of the year.