Tax Freedom Day will fall on April 24 this year, meaning that Americans must work 114 days into the year before being able to afford their total tax bill, according to a report from the Tax Foundation.
The Tax Foundation defines Tax Freedom Day as the day when the nation has earned enough money to pay its total tax bill for the year and calculates it by taking all federal, state, and local taxes and dividing this by the nation’s income.
This year, Americans will pay nearly $5 trillion in taxes, which includes $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes. This amounts to almost a third of national income.
"This year, Americans will work the longest to pay federal, state, and local individual income taxes (46 days)," states the report. "Payroll taxes will take 26 days to pay, followed by sales and excise taxes (15 days), corporate income taxes (nine days), and property taxes (11 days). The remaining seven days are spent paying estate and inheritance taxes, customs duties, and other taxes."
Tax Freedom Day is one day earlier than last year because projected federal tax collections are lower than they were in 2015. However, if you included federal borrowing, which represents future taxes owed, Tax Freedom Day would fall on May 10.
The report also finds that Americans will spend more on taxes than they will on food, clothing and housing combined.
The Tax Foundation calculates Tax Freedom Day for the nation as well as each of the states. Tax Freedom Day arrives earliest in Mississippi on April 5 followed by Tennessee on April 6 and Louisiana on April 7. Connecticut will be the state with the latest Tax Freedom Day of May 21, followed by New Jersey on May 12 and New York on May 11.
"Tax Freedom Day gives us a vivid representation of how much federal, state, and local tax revenue is collected each year to pay for government goods and services," said Tax Foundation analyst Scott Greenberg. "Arguments can be made that the tax bill is too high or too low, but in order to have an honest discussion, it’s important for taxpayers to understand the cost of government. Tax Freedom Day helps people relate to that cost."