Identification

• Tax Foundation photo
  
  Tax Freedom Day is a copyrighted term that describes an annual calculation of an abstract date that the average taxpayer has completed paying all federal and state taxes. In the U.S., the date is determined by the Tax Foundation, using figures provided by the Bureau of Economic Analysis, or BEA, which is part of the U.S. Department of Commerce. The Tax Foundation also publishes Tax Freedom Day dates for each state.
  
  

Misconceptions

• The actual day that a taxpayer finishes paying her individual tax bill depends on income, tax bracket, capital gains income, how much sales tax is paid on merchandise bought and a number of other variables. The annual date varies according to the state and whether some wages are earned in other states and how accurately nontaxed income like tips is reported. The largest discrepancy in most individual cases comes from capital gains, whose taxes are included in the BEA's reporting but income is not, artificially lowering income and increasing the tax burden for taxpayers listing capital gains. To find your individual Tax Freedom Day, gather up your tax return and use one of the calculators that you can find online.
  
  

History

• Tax Freedom Day was trademarked by Florida businessman Dallas Hostetler in 1948. He calculated the date for the next 23 years before transferring rights to the concept to the Tax Foundation, a private nonprofit organization in Washington, D.C., whose objectives are to study and advocate reform for the U.S. tax system. Although the Tax Foundation has its critics--and Tax Freedom Day its detractors--the foundation has computed the averaged day and published the results since 1971. Tax Freedom Day is a worldwide observance, including calculations by The Fraser Institute in Canada and the Adam Smith Institute in the U.K. Most organizations participating in the observation are conservative economic think tanks.
  
  

Significance

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  The importance of Tax Freedom Day lies not so much in the actual date but in its usefulness in comparing tax burdens between states and national trends. It also provides taxpayers a day to celebrate beginning to work for themselves and their families rather than working to pay for national defense, state roads and all the other things that taxes fund.
  
  

Considerations

• Freedom Day may be a good excuse to toast the day but it doesn't merit a state or federal holiday. Americans can be impressed that their Tax Freedom Day is ahead of many countries, but since formulas vary according to economic systems, even that may be subject to discussion. Americans' date has changed little over the past 50 years, making our tax system pretty stable, one of the goals of the Tax Foundation. America's 2008 Tax Freedom Day, April 30, was ahead of England's (June 2) and Canada's (June 14) but behind Australia's (April 22).