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Government continues to dominate the American taxpayer’s budget.
Americans will spend more on taxes in 2008 than they will spend on food, clothing and housing combined.
In 2008, we’ll work 74 days to afford our federal taxes and 39 more days to pay state and local taxes.
Meanwhile, buying food requires 35 days of work, clothing 13 days and housing 60 days. Other major categories are health and medical care at 50 days, transportation at 29 days and recreation at 21 days.
The Tax Foundation’s annual calculation of Tax Freedom Day from the latest government data on income and taxes has the country celebrating three days earlier this year than in 2007.
The stimulus rebates that Congress passed recently will make a dent in the tax burden, but on the downside, the economic slide we’re experiencing also slows tax collections and moves Tax Freedom Day up a bit.
In South Dakota, residents will be ringing in Tax Freedom Day nine days earlier than most of the nation.
While the nation will have to file its taxes first by April 15 and then wait another eight days for Tax Freedom Day on April 23, South Dakotans can celebrate April 12.
Tax freedom has been a see-saw affair in recent years. In 2000, Tax Freedom Day was celebrated May 3, the latest date ever. Then a string of tax cuts between 2001 and 2003 pushed Tax Freedom Day up by more than two weeks, so that it fell on April 16 in 2003 and April 17 in 2004.
For the next three years, incomes and tax collections soared, pushing Tax Freedom Day back to April 26 in 2007.
Now, the stimulus rebates and a projected slowing of income growth have made Tax Freedom Day come three days earlier, on April 23.
Five major categories of taxes dominate the tax burden:
• Individual income taxes, both federal and state, require 42 days of work.
• Payroll taxes take 28 days of work.
• Sales and excise taxes, mostly state and local, take 16 days to pay off.
• Corporate income taxes take 13 days.
• Property taxes take 12.
South Dakota’s state and local taxes are significantly lower than in most states, and this is the main reason tax freedom comes nine days early. Per capita income is slightly lower than the national average, which means the federal 1040 doesn’t bite quite as hard on South Dakotans’ income.
Three states will have to wait until May to celebrate their state-specific Tax Freedom Days: Connecticut, New Jersey and New York. Although they have high state and local taxes, too, the main culprit is the progressive federal income tax.
States with large metropolitan areas offer higher-paying jobs, and as a result, many of the citizens earn enough to pay income tax at the highest rates. If those rates rise, as they are scheduled to do in 2011, these states will bear the brunt.
Tax Freedom Day answers the basic question, “What price is the nation paying for government?”
Prante is a senior economist at the Tax Foundation, a nonpartisan, nonprofit organization that monitors fiscal policy
State rankings
State Tax Freedom Day Rank
Iowa, April 16, No. 34
Minnesota, April 27, No. 8
Montana, April 8, No. 48
Nebraska, April 19, No. 25
North Dakota, April 12, No. 39
South Dakota, April 12, No. 41
Wyoming, April 20, No. 21
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