Isn't this great? We get to celebrate Tax Freedom Day on April 9th this year. Tax Freedom Day is the day you stop working for the government and start working for yourself.
The Tax Foundation prepares this calculation. This means we had to work 99 days in 2010 just to pay our taxes. What's the good news? Tax Freedom Day is two weeks earlier than in 2007. What's the less than good news? According to the Tax Foundation…"Americans will pay more taxes in 2010 than they will spend on food, clothing, and shelter combined." Think about that for a moment.
Tax Freedom Day does not include the current year deficit. If this was factored in, about another $1.3 Trillion would need to be collected. According to the Foundation, this would push Tax Freedom Day to May 17th.
Unfortunately, in Connecticut we don't get to celebrate Tax Freedom Day until April 27th. Oh, and Connecticut is the last state to celebrate this day because it has the highest combined taxes! We barely beat out New Jersey, which came in at number two and celebrate their day on April 25th. Alaska residents were first to celebrate their Tax Freedom Day on March 26th.
Income taxes are the largest tax we pay. It will take a person 32 days just to pay this obligation. Coming in second are payroll taxes, which include social security and Medicare taxes. This will take another 25 days, followed by sales and excise tax at 15 days each and property taxes at 12 days.
ACTION ITEM: Pay attention to your taxes! Not just when you file your tax return or pay your property taxes. Affluent people know the damage taxes can inflict on their net-worth. Take a page out of their playbook and work at managing your tax liability.
Thomas F. Scanlon, CPA, CFP®