Each April, as millions of Americans are filing their taxes, the Tax Foundation publishes its annual report about Tax Freedom Day. National Tax Freedom Day is calculated by measuring how long an American has to work through the year before they have earned enough money to pay all federal, state and local taxes for that year. In 2012, that day was April 17th. The average American would have needed to work 107 days in that year to earn enough to pay their share of taxes.
The survey also breaks down the tax burden for each of the fifty states. Tennessee ranked 50th (or lowest) in tax burden with the earliest tax freedom day of March 31. Connecticut topped the list with a date of May 5, a full 35 days past the Volunteer State. Our Southeastern neighbors (Georgia: April 10, North Carolina: April 11, and Florida: April 12) all fall behind as well. Even though it took Tennesseans 89 days to earn enough to pay taxes, they fared much better than others across the country.
Because Tennessee doesn’t have a state income tax, the majority of that tax burden falls on what we owe at the Federal level. The Tax Foundation doesn’t publish their annual results for 2013 until April (Tennessee was the only state to meet the date in March last year), but the date for us will be pushed back by at least a few days in 2013 because of new tax increases. Payroll taxes increased by 2 percent in 2013 as Congress and the President let that temporary tax cut expire. Marginal tax rates, as well as capital gains and dividend taxes, along with an Obamacare tax on investment income, went into effect for higher earners. As the budget battle continues in D.C., and the discussion of entitlement reform of Medicare and Social Security come to the forefront, taxes have the potential to go even higher.
So, it’s great to be a Tennessee Vol and have the lowest tax burden in the S.E.C. and the nation. But given our increasing national debt, trillion-dollar budget deficits, and stagnant economy, each of us may have to work beyond April 15 to pay for the tax check we’ll have to write next year.