Congratulations! As of April 24, everyone in the U.S. will have worked enough to pay their taxes for 2016. For the first 115 days of 2016, all our work has been to pay federal, state, and local taxes.
Americans will collectively pay more for taxes this year than for food, clothing, and housing combined, according to the Tax Foundation, an independent tax policy research organization that has been doing tax research and analysis since 1937. We will pay $3.3 trillion in federal taxes, and $1.6 trillion in state and local taxes, for a total tax burden of $4.99 trillion. That’s 31 percent of national income.
Tax Freedom Day is one day earlier this year than in 2015, due to slightly lower federal tax collections as a share of the U.S. economy. While federal individual income tax revenues are expected to rise as a share of the economy, federal corporate, payroll, and excise tax revenues are projected to fall.
We work the most days to pay federal, state, and local individual income taxes — 46 days. Payroll taxes take another 26 days, sales/excise taxes 15 days, corporate income taxes 9 days, and property taxes 11 days. The remaining 7 days are spent to pay estate and inheritance taxes, customs duties, and other taxes.
Since 2002, federal expenditures have exceeded federal revenues. From 2009 to 2012, the budget deficit exceeded $1 trillion annually.
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Mississippi, the state with the lowest tax burden, was the first to achieve Tax Freedom Day, on April 1; Tennessee was No. 2, April 6; Louisiana was No. 3, April 7; Missouri and Arkansas were No. 12, April 12 and April 13, respectively. Connecticut residents will work the longest to pay taxes, until May 21; followed by New Jersey, May 12; New York, May 11; and Massachusetts, May 5.
The latest-ever national Tax Freedom Day was May 1, 2000, and Americans paid 33 percent of their total income in taxes. A century earlier, in 1900, Tax Freedom Day was Jan. 22 and our citizens paid only 5.9 percent of their income in taxes.
And if you’re worried about the IRS calling you up for an audit of your tax returns, only about 1 in 120 households filing a return. If you’re in the $10 million and up income bracket, you have a 35 percent chance of being audited — but then, with that kind of money, you can pay as many accountants and tax lawyers as are necessary to explain things to the feds. Or conversely, if you report no adjusted gross income, or claim an Earned Income Tax Credit, you’re slightly more likely to be subject to an IRS audit because of higher rates of fraud or incorrect calculations.