Break even date would be May 23, if taxes matched spending

NEW ORLEANS, La. – The Tax Foundation states that the 2011 Tax Freedom Day will fall on April 12. That means Americans work from January 1 to April 12 before they have generated enough money to pay this year’s tax burden at the federal, state, and local levels, paying on average 28 percent of their income.

However, if the federal government were planning to collect enough taxes during 2011 to finance all of its spending, it would have to collect $1.48 trillion more in tax revenue. That would extend Tax Freedom day to May 23, the latest deficit-inclusive Tax Freedom Day since World War II.

Other spending not included in the Tax Foundation’s report are state and federal unfunded liabilities, which include off-the-books expenses such as government employee pensions. The Tax Foundation ignores unfunded pension liabilities because of the difficulty in allocating funds year-to-year, and the inability to assume which taxes would be used to cover which deficits.

Louisiana’s Tax Freedom Day fell on March 30, 2011, the fourth earliest of any state, even though a 2010 Tax Foundation report ranked Louisiana as the 15th highest business tax burden in the country.

Tax Foundation economist Kail Padgitt states that Louisiana appears lower on the Tax Freedom Day study because of its ability to export taxation through severance packages.

“Louisiana is taxing its citizens a lot, but it is exporting some of that tax burden [through severance payments]. This shows that taxes are being collected in an inefficient manner.”

This year, Tax Freedom Day arrives three days later than in 2010, but two weeks earlier than in 2007.

According to the Tax Foundation, the shift towards a lower tax burden since 2007 has been driven by the Great Recession lowering tax collections faster than it has reduced income. Other policy changes to contribute include the extension of Bush-era tax cuts and the replacement of the Making Work Pay tax credit with a 2 percent reduction in the payroll tax.

Mr. Padgitt claims that recent increases in the tax burden, since 2010, were due to the reinstatement of the federal estate tax, new taxes packaged with health care reform, and rising incomes that pushed individuals into higher marginal tax brackets.

The Tax Foundation, a nonpartisan, nonprofit organization that advocates for lower taxes, calculates Tax Freedom Day based on income, Social Security, sales, property, and other taxes. They base their reports on total tax collections, not what individuals taxpayers pay, so it reflects a total tax burden rather than an individual tax burden. The calculation assumes that the nation starts working on January 1, earning the same amount each day and spending nothing.

Individual income taxes make up 35 percent of the total tax burden, while social insurance taxes, which include Social Security and Medicare payments, make up 21 percent. Sales and excise taxes make up 14 percent.

Robert Ross is a researcher and social media strategist with the Pelican Institute for Public Policy. He can be contacted at, and you can follow him on twitter.