This year marks the 100th anniversary of the Internal Revenue Service.
Yesterday was the day that the United States, as a country, had earned enough income to pay our total annual tax bill for 2013, deemed Tax Freedom Day®, as calculated by the Tax Foundation, a non-profit research group located in Washington, D.C. The Tax Foundation is dedicated to educate taxpayers about sound tax policy and the size of tax burdens borne by Americans at all levels of government. This date serves as a great measuring gauge as to the true incidence of taxation on Americans. It is calculated by dividing total taxes collected (and in many circumstances the individual is not aware of taxes being collected since they are not specifically detailed in the transaction) by total national income as reported by the Bureau of Economic Analysis.
In 2013, the Tax Foundation estimates that if all income from the country was collected, by the 108th day of 2013 that income would be enough to pay the total annual tax bill for the nation for the year. This implies that the average total tax rate for the typical taxpayer is 29.4 percent. The Tax Foundation estimates that 2013 total taxes – federal, state and local – will sum to $4.22 trillion. And just how much is $4.22 trillion (since I really have not adapted to that many decimal points)? According to the Tax Foundation, we will spend more in taxes in 2013 in the U.S. than total spending on food, clothing and housing, combined.
So where are all of these taxes and what do they cover? The table below shows the total percentage of various types of taxes for 2013.
Where you reside impacts your respective state’s Tax Freedom Day®, given the variability of taxes from state-to-state as well as income levels (where a progressive tax charges a greater rate the more an individual earns). The Tax Foundation’s 2013 estimates for each state are in the following table.
Each year the Tax Freedom Day® can vary, given the changing tax rates, taxes (think of the new 3.8 percent ObamaCare Tax, for example) and levels of government spending. This year for the country as a whole, the Tax Freedom Day® was five days further into the year than in 2012. In 1917, that date was January 24th. In 1981, prior to the tax cuts of President Reagan’s administration, Tax Freedom Day® was April 24th.
What is not included in the Tax Freedom Day® calculation is the government spending in excess of tax revenues—the deficit. Since 2002, the U.S. has run a deficit each and every year. In 2013, assuming that the $833 billion dollar deficit is included in tax collections, Tax Freedom Day® will arrive May 9th. To put this in perspective, the latest date ever, including deficit spending, was registered on May 21, 1945—during World War II.
To read the entire Tax Foundation’s Tax Freedom Day® report, historical information and other related facts click here.
Just out of curiosity, have any of you reading this had or have planned a 100th Anniversary Celebration of the IRS? And if yes, what would your invitation look like? And party favors? Food and drinks?