Joe Steel
Class Warrior
As it does every year, the Center on Budget and Policy Priorities has debunked the Tax Foundation's "Tax Freedom Day."
Tax Freedom Day is a myth. Don't believe it.
Tax Freedom Day is a myth. Don't believe it.
Each year, the Tax Foundation releases a report projecting Tax Freedom Day, which it describes as the day when Americans will have earned enough money to pay this years tax obligations at the federal, state, and local levels.[1]
The Tax Foundations Tax Freedom Day report is plagued by two major problems. First, its estimates of state and local tax burdens suffer from a number of serious methodological flaws (see the box on page 4). Second, over the years, many journalists and policymakers have misinterpreted the Tax Foundations report as reflecting the tax burdens faced by typical middle-income workers.
In fact, the Tax Foundations calculation of the average tax burden merely measures tax revenues as a share of the economy; it is similar to estimates of total revenues as a share of Gross Domestic Product (GDP). In a progressive tax system like that of the United States, only upper-income households pay tax at rates equal to or exceeding the overall level of revenues as a share of the economy. Authoritative figures from the non-partisan Congressional Budget Office show that middle- and even upper-middle-income Americans pay a considerably smaller share of their income in taxes than the Tax Foundation report implies. The CBO data suggest that 80 percent of U.S. households pay federal tax at a lower rate than the Tax Foundations estimated average federal tax burden.
The Tax Foundation itself acknowledges this issue in a methodology paper accompanying its report, pointing out that its estimates reflect the average tax burden for the economy as a whole, rather than for specific subgroups of taxpayers.[2] Journalists and others who report on Tax Freedom Day as if it represented the day until which the typical or average American must work to pay his or her taxes are misinterpreting these figures and inadvertently fostering misimpressions about the level of taxes most Americans pay.
Tax Foundation Figures Do Not Represent Typical Households Tax Burdens