August 20th, 2010

Today You’re Finally Working for Yourself (Not the Taxman)

According to, this year the average American toiled from January 1 through August 19, 2010 just to pay the total burden of government taxes, fees, surcharges, and mandatory withholding. In other words, August 19th was the day on which the average American had earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government at the federal, state, and local levels. So enjoy today, August 20th. You finally get to spend the money you earned!

Cost of GovernmentThe latest report by the Center for Fiscal Accountability reveals that “Working people must toil 231 days out of the year just to meet all costs imposed by government — 8 days later than last year and a full 32 days longer than 2008.” Think about that — this year you worked a full month longer for the government than you did two years ago. It sort of like being in a leaky lifeboat and you have to keep bailing faster and faster just to stay afloat. According to the Report, the cost of government now consumes an astonishing 63.41% of national income!

We do question some of the assumptions used for this calculation — after all most wage-earners do keep more than half their income, even after taxes. Nonetheless, there is no question that government spending, at all levels, is rising, and significant new taxes are in the works. To learn more about the tax burden on the average American, you can download the 2010 Cost of Government Day Report. Even if some of the numbers in the report over-state the immediate problem, it is undeniable that government spending is increasing at an alarming rate.

In the interest of balanced reporting, we note that another watchdog organization, the Tax Foundation, has calculated that “Tax Freedom Day” occurred on April 9th, 2010, one day later than in 2009. This would be the day when Americans have collectively earned enough money to pay this year’s tax obligations at the federal, state and local levels. Why the big difference in the Tax Freedom dates (April vs. August)? Well the Tax Foundation looks at actual tax revenues collected, while the Center for Fiscal Accountability calculates tax burden based on total government spending and obligations. Since the federal government (and many states) are engaged in massive deficit spending, the spending-based tax burden is actually much larger than current tax collections.

The Tax Foundation explains: “Tax Freedom Day does not count the [federal] deficit even though deficits must eventually be financed. Since 1948, when Tax Freedom Day was first calculated, the difference between what governments are spending and what they’re collecting has never been as great as during 2009 and 2010. If Americans were required to pay for all government spending this year, including the $1.3 trillion federal budget deficit, they would be working until May 17 before they had earned enough to pay their taxes — an additional 38 days of work.” If you add in debt service, local taxes, and other factors you can push the Tax Freedom date out even further — this explains, in part, how the Center for Fiscal Responsibility came up with August 19th.

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