Tax Freedom Day

As we enter a new year, I’d like to talk about taxes. And the fact that you’re working for free right now. Tax Freedom Day is the day that the average American has earned enough money to pay in full his or her total yearly tax bill. It’s essentially the day where the money you earn going forward actually becomes your money. This handy image from the Tax Foundation best illustrates what I’m talking about:


In the year 1900, tax freedom day was celebrated on January 22nd. As taxes have increased over the years, the date has been pushed back. In 2014, the day was April 21st. But keep in mind what’s known as Tax Freedom Day is an average among all states. You may be able to pop the champagne much earlier – or later than many other people. Connecticut and New Jersey residents in 2014 didn’t get to celebrate until May 9th.

The idea of Tax Freedom Day shouldn’t come as a shock to anyone. It makes sense… most freelancers for instance budget 30% each year for taxes. We have 365 days/year… 30% of that makes 122 days. 122 days into 2014 was May 2nd. Pretty darn close to what you would expect. Note: Self-employed workers pay higher taxes than those who are employed in many cases.

It’s shocking to see that Americans work for over 100 days each year without ever seeing a dime of our effort. Or do we? Keep in mind we do get roads, bridges, schools, social security (questionable if you’ll receive this if you’re under the age of 55) etc. from what we pay in taxes. So there are usually 2 kinds of people when it comes to tax freedom day: those who gripe about taxes being too high and those who believe are fine paying them.


Day Freedom Day Abroad

As most readers are from America, these are all US numbers. But how does tax freedom day look for the rest of the world? Pretty much as you would expect. Poorer countries and countries with lower tax rates celebrate tax freedom day early. Countries that favor taxes, celebrate much later. India has a tax ‘burden’ of only 20% – they celebrate about 74 days into the year. France, however, waits until the year is over half gone – about the end of July. The French pay over 50% in taxes.


Does anyone really celebrate tax freedom day?

No. Probably because celebrations are supposed to be fun. But when the topic of taxes comes up during a party – it’s pretty much a mood killer. Pretty quickly people realize if you’re a democrat or republican – then fights may ensue. Or maybe it’s not celebrated because we are too tired from working to pay taxes. According to this source, as a whole last year, we Americans paid about $3 trillion in federal taxes and $1.5 trillion in state taxes. We’re probably just too tired to party.


Tax Freedom Day Moving Forward

According to this Forbes article, half of us will be freelancers by 2020. What will this mean for taxes? If Americans work from their laptops, why should we have to pay taxes? If America blows up, most of us will still have clients. Plus, if you work from your laptop, why not just move abroad? As mentioned, in India, we could celebrate TFD 40 days earlier! And I’m not even assuming it’ll just be the selfish people who want to move abroad so they can keep more money… If most people work freelance, they won’t be using the roadways as much. They obviously will be comfortable doing things online so the physical infrastructure of America will not be quite as important to update. Or, maybe because most people will be freelancers moving away, America will need to increase taxes in order to keep things looking nice with fewer citizens.


Final Thoughts

Who knows what the future holds for tax freedom day. But as they say… taxes, in some amount, are as unavoidable as death. We know taxes exist, it’s just sometimes shocking to think about how much time it takes for each of us to actually pay our fair share.