Tax Freedom Day
Monday was “Tax Freedom Day,” the mythical date when Americans had finished paying off their obligation to government and begin “working for themselves.” I saw a few stories about it but ignored it because it’s “news” only in the sense as the annual stories about how the day after Thanksgiving is the biggest shopping day of the year (it isn’t) and how retail business establishments finally reach a profitability halfway through Christmas season (which is nonsensical), and other perennials.
Julian Sanchez, whose disdain for taxes is unquestioned, says it’s all bunk.
TF [The Tax Foundation] will accurately talk about the time “the economy as a whole” takes to pay its taxes. But these accounts almost universally use language like “the average taxpayer” or “the average wage earner.” These are totally different. Any claim that TFD somehow measures this latter figure is just unambiguously false. TF’s own claim is just barely honest in a highly pedantic sense thanks to their judicious placement of quotation marks: They’ve measured the “average” American tax burden but damn if that isn’t worded as to almost invite the misreading that they’re measuring the “average American’s” tax burden. They’re not, despite widespread press coverage giving that impression, which TF seems to feel no need to correct.
The word “average” is generally taken to be “arithmetic mean” rather than “median.” Averages can be skewed by extreme outliers but that doesn’t make them non-averages, just poor measures of central tendency.
Further, Tax Freedom Day does not represent, as Julian implies with an ancedotal illustration involving 100 taxpayers, the date when federal income taxes have been paid. Rather, it seeks to answer the question, “What price is the nation paying for government?” State and local taxes, which include sales taxes, tend to be “regressive,” constituting a greater burden for those lower on the economic ladder than they do for the well-off as a percentage of income. Ditto, Social Security and Medicare.
Julian asks, “If you just want to look at the total magnitude of America’s tax burden, why is a date any more illuminating than just giving a percentage of GDP?” For the same reason that anecdotes are more powerful than the recitation of dry statistics. Or that video is more jarring than text. It helps illustrate a point in a way that captures the imagination.
Curtis S. Dubay and Scott A. Hodge, in their Executive Summary of this year’s report, observe that, “Americans will work longer to pay for government (120 days) than they will for food, clothing and housing combined (105 days). Since 1986 taxes have cost more than these basic necessities. In fact, Americans will work longer to afford federal taxes alone (79 days) than they will to afford housing (62 days).”
TF provides this handy-dandy pie chart to illustrate the “Days Americans Work to Pay Taxes Compared to Other Expenses:”
Sure, some people pay much less in taxes and are “free” much sooner; others pay much more and “work for Uncle Sam” much further into the year. But, as a marketing device, Tax Freedom Day strikes me as perfectly valid.
Now, presumably, pro-tax people could come up with some interesting heuristic to illustrate the benefits people receive from government and help make the case that we should be spending more for government services than we do for food, clothing, or shelter. Interestingly, they haven’t.