by Doug Bandow
May 16, 2007

Americans have finally stopped paying for government. According to the Tax Foundation, "Tax Freedom Day" was April 30 this year. That's when local, state, and federal officials stopped fingering the average American's wallet. 

Unfortunately, Tax Freedom Day has been getting later. The Bush tax cuts dropped the day from May 1 in 2001 to April 21 in 2002 and April 18 in 2003. But it moved back to April 19 the following year and moved a full week into April in 2005, to April 26. It was April 28 in 2006—nearly where it was when President George W. Bush took office.

The increases are striking since there have been no big tax hikes. But, as Curtis S. Dubay and Scott A. Hodge of the Tax Foundation note: "The nation's tax burden tends to rise as income rises because thriving taxpayers are pushed into higher income tax brackets at the federal and state levels. Also, the federal government raises the income cap on Social Security taxes each year, and local governments have been collecting much more inproperty taxes."

Americans not "undertaxed"

The Tax Foundation's numbers refute the liberal mantra that Americans are "undertaxed." This year the average American will spend 79 days working to pay Uncle Sam. That's longer than for any other purpose—housing and household operations only take 62 days. Next runs health care at 52 days.

State and local levies come next, accounting for 41 days. In contrast, food and transportation each only run 30 days. Clothes take just 13 days.

Of course, April 30 is the national average. Best is Oklahoma at April 12, followed by Mississippi and Alaska, both April 13. Worst is Connecticut, which tops off the list at May 20, followed by New York at May 16 and New Jersey at May 10.

State, local levels hit record

Taxpayers usually worry most about their federal taxes, but state and local levies are hitting a record 11 percent of income this year. In another Tax Foundation report, Dubay rates Vermont as imposing the nation's highest tax burden, taking 14.1 percent of its citizens' earnings, with Maine and New York following closely behind at 14.0 and 13.8 percent, respectively. (Connecticut actually collects more in taxes, but its citizens have a higher per capita income.)

Unfortunately, taxpayers have little reason for optimism. Federal outlays, which ultimately drive tax collections, climbed by about 9 percent last year, the largest annual rise since 1990.

"Total federal spending has skyrocketed 45 percent since President George W. Bush took office in 2001," noted economist Daniel Mitchell, now with the Cato Institute, last September. "[S]pending as a percentage of GDP (gross domestic product) has grown more under George W. Bush than it has under any other President since Franklin D. Roosevelt."

The Tax Foundation's Hodge, Andrew Chamberlain, and Gerald Prante estimate that in 2004 government redistributed between $1.03 trillion and $1.53 trillion to people in the three lowest income quintiles. That's as much as 44 percent of total government outlays. Unfortunately, Uncle Sam isn't as good at preserving our lives, wealth, and liberties as it is in robbing Peter to pay Paul—and pay some government employees along the way.

Rich pay most taxes

The rich pay the most in taxes, of course. Those in the top quintile (top 20 percent) account for almost half of all taxes, 48.8 percent. Members of the second quintile pay 22.4 percent of the total. The center bracket covers 14.8 percent. The bottom two pay 9.6 percent and 4.3 percent, respectively.

Those in the bottom quintile receive the most tax dollars in return. They collect an estimated $8.21 in "benefits" for every dollar they pay in taxes. Those in the middle quintile, with incomes between $23,700 and $42,305, get $1.30 back for every dollar paid. The rich receive 41 cents.

Unfortunately, taxpayers are not getting good value for their money. Uncle Sam provides nearly $100 billion in corporate welfare to well-heeled businesses. The biggest social programs, Social Security and Medicare, are racing towards financial catastrophe.

Foreign aid does nothing to promote international development. Public schools spend ever more to impart ever less knowledge. Farm subsidy programs are a global embarrassment. Energy subsidies have enriched big firms without providing new, cost-effective sources of energy. And so it goes.

But don't worry, be happy. At least Americans have finally stopped paying for government this year. Except for those who live in Connecticut. Or one of the other 16 higher-tax jurisdictions.

And just wait until next year.