Tax Freedom Day®: Holiday for dummies
Listen to this articleIt’s that time of year again: when a tiny cell of activists encamped in a nondescript DC office building start sending out press releases for their annual publicity stunt.
Tax Freedom Day® isn’t just a registered trademark! It’s also – according to a couple dozen guys who call themselves the Tax Foundation – “the day when the nation as a whole has earned enough money to pay off its total tax bill for the year.” And this time around, the Tax Foundation guys announced yesterday, it supposedly arrives on April 24.
This may seem like an interesting bit of trivia if you don’t think about it too hard – which of course is precisely the outcome the Tax Foundation is going for. But let’s unpack the figures a bit:
- No, you are almost certainly not spending 114 days of every year paying off your taxes. That’s the implication of TFD® — and it’s one that’s only possible by pretending that everyone pays off their taxes at the same rate. In fact, someone making the median income of roughly $52k, for example, will pay their taxes off in about 71 days.
- And of course, the rich will pay their taxes off much more quickly than you do, because they pay extremely low rates in proportion to their actual income. Warren Buffet, for instance, paid nearly $7 million in taxes in 2010 – but he earned about $10 billion that year, according to Forbes. That means he paid all of his taxes off for the year in about six hours.
- Even as a comparison of taxes paid to incomes nationwide, the TFD®’s figures are riddled with methodological errors. For example, it counts the taxes Americans (mostly the rich) pay on capital gains — but then pretend that capital gains don’t count as a form of income. As the Center for Budget and Policy Priorities noted nearly six years ago, “The methodological errors that the Tax Foundation commits all distort its figures in the same direction — they all make taxes look higher than they actually are.”
So in general, TFD® is misleading in both letter and implication. It not only conveys an inaccurate impression of what you pay, but conveys an inaccurate convention of what everyone pays. But the basic conceptual problems TFD® suffers from are even worse:
- Tax totals are a ridiculous measure of the financial burdens facing Americans absent any consideration of their benefits. A drop in taxes that pay for housing subsidies, for instance, can mean a jump in rent costs. It’s a complicated story and obviously the left and right are going to disagree about how things work out on balance, but the craziest thing you can do is simply ignore benefits altogether.
- It’s also problematic to characterize taxes as an obligation one is “freed” from in a country where we levy our own taxes through democratic elections. The story is, again, more complicated – it’s not as if taxes are a direct function of individual preference, either – but here, TFD® continues to ignore an inconvenient complication for the sake of deliberately simplistic sloganeering.
The most severe problem, of course, is that TFD® is an utterly trivial milestone compared to America’s most important holiday: Capitalism Freedom Day. That, of course, is the day when we are finally free from all exploitive labor – when we’re no longer subject to a system that relentlessly funnels all of our wealth to the 1%.
Sadly, Capitalism Freedom Day has been cancelled again this year. So for now, let’s all be grateful for taxes: unlike capitalism, they give us something and they don’t take everything.
Carl Beijer is a Marxist working in Washington, DC to slowly but surely inaugurate the dictatorship of the proletariat.