Happy Tax Freedom Day!

April 13, 2009 (PLANSPONSOR.com) - While most of us are all too aware of the significance of April 15, today is also a very significant tax day.

Today is Tax Freedom Day – the point in the year at which individuals have paid off their federal, state, and local tax obligations – falls a full two weeks earlier this year than it did in 2007. In fact, according to the Tax Foundation, not since 1967 has Tax Freedom Day come earlier than this year’s April 13 date.

Unfortunately, that “betterment” is being driven by two factors: the recession has reduced tax collections even faster than it has reduced income; and the stimulus package, a.k.a. HR 1, the American Recovery and Reinvestment Act of 2009, includes temporary tax cuts for 2009 and 2010.  

Nevertheless, in 2009, Americans will pay more in taxes than they will spend on food, clothing and housing combined, according to the report.

Where Withal

Of course, where you live – and how much income you have – can affect the timing.   Residents of Alaska, due to their relatively modest incomes and “extremely low” state-and-local tax burden, could have celebrated on March 23.   Residents of Louisiana, Mississippi, South Dakota and West Virginia round out the five states projected to reach Tax Freedom Day earliest.

On the other hand, the residents of Connecticut “will celebrate last, as usual, working until the 120th day of the year, from January 1 to April 30, before earning enough to pay all their taxes,” according to the report.   New Jersey (April 29) and New York (April 25) are second and third, respectively, while California (April 20) and Maryland (April 19) round out the top five.

The latest-ever Tax Freedom Day was May 3, 2000.   On the other hand, in 1900, Americans paid only 5.9% of their income in taxes – and Tax Freedom Day arrived on January 22, according to the report.

You can read the report (and see how your state stands) at http://www.taxfoundation.org/files/sr165.pdf