April 18 is tax day but that’s just the day taxes for the prior year come due. The tax man really sticks around until April 24.
That’s the day that Americans have earned enough money to pay for their federal, state, and local taxes according to The Tax Foundation (yes, that’s a thing).
Tax Freedom Day comes earlier for Americans in states like New Mexico and Idaho that have lower taxes, and as late as May 21st for Americans in high tax states like New York and Connecticut.
When do you start earning money for yourself? Click here to find out.
All together Americans will pay $4.99 trillion in federal, state, and local taxes for 2016. That’s almost a third of the nation’s total income and more than we spend on housing, food, and clothing. And isn’t just the money; our overly complicated tax codes consumes time. Americans spent 8.9 billion hours preparing their taxes last year. How much time will we lose this year?
The most pernicious but perhaps least noticed cost of our tax code is the loss of freedom. How so? The cumbersome tax code incentivizes and discourages behavior. While Americans attempt to gain as many deductions and credits as they can, satisfied they’ve won a bit back, politicians have achieved a level of behavior modification they could never have achieved through more direct means.
No one can doubt that owning a home, having kids, saving for college, taking college courses, giving to charity, buying an electric car, or paying medical bills are good endeavors but should they be rewarded by the government as tax privileged activities? Is renting an apartment, not having kids, saving for a vacation, buying a bicycle, or paying back a non-medical debt inherently less valid as decisions? Why should government encourage or discourage any positive choice a person can make with his or her own money?
Clicking on deductions and credits on tax software feels like earning Supermarket or Farmville points. Maybe there is a reason for that. The satisfaction masks what should be offensive to Americans, namely that politicians have determined what you should do based on what they value. Even though Tax Freedom Day comes April 24, in a larger sense there is no day that tax policy does not impact how Americans earn and spend their money.
Congress and the President have an opportunity to reform the tax code this year so that it is simpler and fairer to all Americans. With a simpler tax code Americans would spend less time and energy filling out forms. More importantly, a simpler tax code would reduce the opportunity for politicians to engage in behavior modification. Tax revenue is important to sustain the legitimate functions of government such as roads, police, parks, defense, and diplomacy. These taxes, however, can be raised without sacrificing Americans’ freedom to make choices in their lives.
What are your thoughts?
Do higher taxes create a better society through more government programs, or does more freedom help us pursue the American Dream and make an impact in our communities? Let us know on Facebook!
(Oh, and don’t forget to file your taxes.)