Happy Partial-Revelation-of-What-Government-Costs Day

It’s Tax Day, that annual date when your share of the cost of government is partially revealed.

I say “partially” for a few reasons. First, taxes only cover part of the cost of government in an era of perpetual deficits. The Tax Foundation calculates a “Tax Freedom Day” each year to illustrate how much of the year the average American works simply to pay his or her federal, state and local tax bill: This year’s national-average date is April 24. (In Georgia, ours is today, which is earlier than those of 33 states.) But the foundation adds a second calculation that shows when that day occurs once the cost of federal borrowing is included:

Historic Tax Freedom Day Dates

That puts us at May 8, two weeks later. That’s a little more than one-third of the year. Do you feel like one-third of what you have in your life comes from the government?

The second reason I say “partially” is because I suspect most Americans, when completing their tax filings, focus on the bottom line: What they owe the government or the government owes them. But that obscures what their actual income-tax bill is, because they’ve also been making withholding payments from each paycheck throughout the year. For anyone who doesn’t pay attention to either those withholding payments or their actual total income tax, just the check they’ll write or receive upon filing, that obscures how much government costs them.

Third, income taxes are only part of our total tax bills. With a Tax Freedom Day of April 24, the average American works 114 days to pay for government. But only 43 days — a little over one-third of the total — are required to pay federal, state and any local income taxes. The next-biggest chunk of days is for payroll taxes: 26 days, or almost a full month. Sales and excise taxes consume another 15 days; corporate income taxes (which we all pay in the form of lower wages, higher prices or lower returns on our investments) take up 12 days; property taxes, 11 days; and all other taxes, seven days. So even if you do pay attention to your total income taxes paid — at all levels of government — you’re seeing less than 40 percent of what you actually send to public coffers.

The fourth reason gets back to withholding taxes. Although we tend to celebrate tax-refund checks, they actually represent money we’ve loaned to the government on an interest-free basis. The data crunchers at FiveThirtyEight.com have built a calculator to show you just how much money you had to forgo in either interest you weren’t paid on a savings account, interest you had to pay on credit-card debt, or returns you didn’t get on an investment you didn’t make — all because the government was holding money to which it wasn’t actually entitled.

From FiveThirtyEight.com

From FiveThirtyEight.com

The image above is a screen capture that doesn’t work, but if you click this link you can enter your own information and see what you didn’t realize you didn’t get.

Given all that, it’s no wonder Tax Day falls seven months before Election Day rather than, say, a week before it.

Of course, you could consider sending a letter to the IRS and your lawmakers along the lines of this annual missive from a former Cabinet member:

Rumsfeld IRS letter

Reader Comments 0

36 comments
DawgDadII
DawgDadII

Another significant factor: In 2014 the out-of-pocket cost of purchasing medical insurance through my employer plan, with no non-mandated plan changes except rising deductibles, rose 33%. I consider that a tax, as it is now a government mandate. And, I do not appreciate being lied to outright by the Administration and the media proclaiming the costs of health care are going down. BULL. Evidence is there in black and white on my YTD pay stub.

RafeHollister
RafeHollister

Well, I'm just overjoyed that all those illegal immigrants can now get their backlogged "Earned" Income Tax Credits in one lump sum after living here all those years.  Break into a country, ignore our laws, send your children to our schools, get government benefits and medical care, and several years down the road get a check for your EITC credits.  What a country, huh?


Proggies keep downplaying the debt as no big deal, but once interest rates return to near normal, something like 6% or so, Tax Freedom day will move back to about Jul 31, due to the massive interest we will be paying on this debt.

RichardKPE
RichardKPE

"The fourth reason gets back to withholding taxes. Although we tend to celebrate tax-refund checks, they actually represent money we’ve loaned to the government on an interest-free basis."


Actually, Kyle, that's not necessarily true.  Turbo Tax offers to give you your refund in the form of an Amazon gift card with a 5% bonus on it.  So you could conceivably earn 5% on your money.


Oh, and another thing: if you gave the government (or anyone else) an interest free loan, that's your own fault.

Kyle_Wingfield
Kyle_Wingfield moderator

@RichardKPE "Turbo Tax offers to give you your refund in the form of an Amazon gift card with a 5% bonus on it."

Yes, if you're willing to spend your refund with one of their partner merchants, you can get something of a bonus.

"Oh, and another thing: if you gave the government (or anyone else) an interest free loan, that's your own fault."

I'm not an accountant, but isn't there a limit to how many allowances you can claim?

RichardKPE
RichardKPE

@Kyle_Wingfield @RichardKPE Technically, you could declare yourself exempt then have your employer withhold an additional amount per paycheck (I do this).  As long as you do the math in advance, you can get the total bill exact (one of my co-workers got it within $7) or  owe the government at the end.  You shouldn't mind owing the government since that money could have been earning an average of 9.5% in an S&P index fund.

PinkoNeoConLibertarian
PinkoNeoConLibertarian

@RichardKPE @Kyle_Wingfield That's too easy. I make a game of it every year by juggling the allowances to see just how close I can get without going over. Last year was a tough one to estimate with all the stock options and getting married. :)

RichardKPE
RichardKPE

@PinkoNeoConLibertarian @RichardKPE @Kyle_Wingfield A friend of mine does it that way.  He does exempt for the first few months to get more cash in his pocket up front then increases the withholding over the course of the year.  Technically, that's the optimal method, but it's too much work for me.


Oh and you should check to see if a divorce would save you money.  My wife and I are watching this because we want to then get remarried in one of the 11 second courthouse weddings.

MarkVV
MarkVV

The tax day is here, and with it the usual annual gnashing of teeth by the conservatives. Complemented by such illuminating evidence of the government excessive appetite for money as a graph of the changes in the “freedom day” over time. Very persuasive, especially a comparison of today’s data with those from early 1900s. How did they ever do it, paying for space exploration, expensive health research, air traffic safety, nuclear arsenal, and all those other things we now want the government to take care of. Of course, they did not have to bother with such unnecessary things like administrating Social Security, Medicare and Medicaid.

And then we are to answer such inane questions as “do you feel like one-third of what you have in your life comes from the government?” As if a “feeling” was a rational way to consider a subject like that.

JFMcNamara
JFMcNamara

Do you feel like one-third of what you have in your life comes from the government?

Yes, a lot does as stated in previous comments.

lvg
lvg

How many trillions owed to Chinese for Reagan buildup of the military (most of which later scrapped ) and the Iraq escapade as well as 400% increase in military budget since the Saudis attacked us on 9-11( for overtsaying our welcome in the holy kingdom)?What is the interest being paid on all that? How much deficit has been created by the Bush tax cuts?


Hilarious that of all people you should be using Rumsfeld as a source. Man who was Reagan's emissary to Sadaam providing wmd and unlimited US arms and engineer of the Iraq war.Maybe he can get Mitt and Anne to do his returns . They had no problem finding all the loopholes.


IReportYouWhine#1
IReportYouWhine#1

I'll bet clinton sets to work lessening our burden on her very first day in office, not.


Scott Walker will.

IReportYouWhine#1
IReportYouWhine#1

These are just direct costs. None of this covers the cost of compliance with regulations nor the hidden taxes that you pay that are passed along to you in the cost of any product or service. By the time you add it all up, it's way over 50%, I'd say even 75%.


Do you feel like one-third of what you have in your life comes from the government?


Absolutely correct. For what? A government that just keeps piling it on, year after year after year? A government that approves and disapproves of your private conduct and thoughts?


It's gotta end. Soon.

Hedley_Lammar
Hedley_Lammar

@IReportYouWhine#1 A government that approves and disapproves of your private conduct and thoughts?



Got that tin foil hat on a bit tight this afternoon I think

EdUktr
EdUktr

More shocking is the fact that roughly 45% of earners pay no income tax. Many instead receive money redistributed from the incomes of working neighbors. 

Hedley_Lammar
Hedley_Lammar

@EdUktr More shocking is the fact that roughly 45% of earners pay no income tax.


1. Not accurate

2. Doesn't tell the whole story at all


While relatively few low-income people pay federal income tax, a large and growing share owe Social Security and Medicare payroll taxes, according to new estimates by the Tax Policy Center. As a result, while about 43 percent of all households will pay no federal income tax this year, only 14 percent will pay neither income nor payroll tax.


http://www.forbes.com/sites/beltway/2013/09/12/most-americans-do-indeed-pay-federal-taxes-including-the-poor/

LogicalDude
LogicalDude

@EdUktr Did you like Bush's tax cuts or did you not like Bush's tax cuts? 

straker
straker

Kyle, do all these stats also apply to Big Business?

LogicalDude
LogicalDude

Huh. Using Donald Rumsfeld as an example? 


Not sure that's the most logical person to us as an example for the rest of us. 


What did he do while in office to help the IRS simplify matters for everyone?  repeal any loopholes? Make all income the same so a single rate can apply to the sum of income from labor, interest, or capital gains? 


I do like the exercise of "tax freedom day" as that gives a good physical feel to equating labor income to taxes.  Now, not sure how that can equate to interest income or capital gains income (make it zero!!!! some Republicans exclaim.) 


MANGLER
MANGLER

Do 1/3 of the things in my life come from the government? 

Hmm.

Roads, bridges, civil defense, armed services, fire rescue and ambulatory services, (some) hospitals, most schools and colleges, potable water, electricity, patent protections, stable currency ....

You're right.  Not much at all.

Claver
Claver

@MANGLER "All right ... all right ... but apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order ... what HAVE the Romans ever done for Us?"

Hedley_Lammar
Hedley_Lammar

@Claver @MANGLER Everyone enjoys the stable society our Government provides.


Some just don't want to have to pay for it is what it boils down to. 

Kyle_Wingfield
Kyle_Wingfield moderator

@MANGLER "ambulatory services" -- Most if not all of these are private.

"(some) hospitals" -- Please point out the nearest state-owned hospital.

"electricity" -- You don't get an electric bill?

"stable currency" -- Taxes don't pay for the Fed.



Hedley_Lammar
Hedley_Lammar

The Tax Foundation's annual study that calculate Tax Freedom Days in the United States has been criticized by other think tanks, such as the Center on Budget and Policy Priorities (CBPP)[42] and Citizens for Tax Justice(CTJ),[43] citing repeated "methodological errors" and "reliance on early projections without hard data." CBPP has also criticized other reports by the Tax Foundation,[44][45][46] and in turn the Tax Foundation has responded or criticized CBPP reports.[47][48][49][50][51] The two groups have some areas of agreement, such as opposition to most tax expenditures[52] and sales tax holidays.[53][54]


http://en.wikipedia.org/wiki/Tax_Foundation

Kyle_Wingfield
Kyle_Wingfield moderator

@HeadleyLamar And every year, you cite (now) 16-year-old complaints about them as gospel. And every year you pay little attention to the fact most of the criticism is how the Tax Foundation assigns corporate taxes and taxes paid in other states to individual taxpayers -- decisions that don't in any way affect the total amount of taxes paid.

Given that in 2012 (last year for which data are available*), state and local tax revenues totaled $3 trillion, or about 18.7% of GDP, and federal revenues that year** totaled $2.45 trillion, or about 15.3% of GDP -- for a total of 34% of GDP -- it should be beyond dispute that it takes about a third of the year for the average American to cover his/her tax bill.

Not, of course, that you'll be dissuaded from disputing that fact.


*Source: http://www2.census.gov/govs/local/summary_report.pdf


** Source: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200


Hedley_Lammar
Hedley_Lammar

Not that shocking that Donald Rumsfeld cant fill out a tax return


This is the same guy who thought a small force would win easily in Iraq