Work Becomes Even More Taxing, Survey on Tax Burden Finds
If you think your tax burden is becoming increasingly weighty, you’re probably right.
Thanks in part to an improving economy and higher tax rates, the average American now works 128 days--until May 7--to pay federal, state and local taxes. That’s according to the Tax Foundation, a Washington-based nonprofit research organization, which released its annual study on the eve of the nation’s tax filing deadline.
That’s the latest “tax freedom day” in history--a full day later than it was last year, and a full week later than it was in 1992.
“The tax burden now, measured by tax freedom day, is the highest it’s ever been,” says J.D. Foster, executive director and chief economist at the Tax Foundation. “It’s terrible to think about the amount of tax we have to pay now.”
To put it another way, the typical worker spends two hours and 47 minutes of an eight-hour day just earning the money necessary to pay taxes. That means a worker arriving at 9 a.m. would have earned enough to pay federal taxes by 10:50 a.m. and enough to pay state and local taxes by 11:47 a.m.
This year, Connecticut residents have to work the longest to pay taxes, three hours and 19 minutes, while Alabamians have the shortest, two hours and 29 minutes. California, which has the 19th-greatest per capita tax burden, weighs in just a few minutes shy of the national average.
The wages earned during the rest of the day are spent on food, clothing and shelter. The average person spends 15 minutes less each day earning enough to pay for those necessities.
The main reasons for the rising tax burden are twofold: an improving economy that’s pushing increasing numbers of people into higher tax brackets, and the 1993 tax bill, which boosted top tax rates.
Although average wage increases have been modest--ranging from 3% to 5% for most workers--inflation has been even lower, experts note. Tax rates are loosely adjusted for inflation, but those adjustments averaged between 2% and 3% for the 1995 tax year and are likely to be under 3% again in 1996.
Consequently, anyone whose income climbed faster than that will find themselves paying comparatively more tax.
In addition, the 1993 tax bill pushed many middle-income senior citizens into higher tax brackets by making a greater portion of their Social Security benefits taxable. It also limited deductions and raised rates for higher-income filers.
Many state governments have also boosted sales and income taxes in the past few years, Foster said.
To make matters worse, today’s income tax system has become so complex that compliance costs have also soared. Americans will spend about $235 billion--roughly $900 for every man, woman and child in the nation--to comply with federal, state and local tax laws.
Compliance costs are estimated based on the amount of time the government figures it takes to fill out the forms, multiplied by average hourly wages, Foster said.
Perhaps not surprisingly, Americans appear to be fed up.
When asked what word or phrase best describes the federal income tax system, 70% of the 1,000 individuals surveyed offered negative responses that ranged from “complex” and “confusing” to “screwed up,” “corrupt,” “crazy,” “nuts” and “bloodsucking,” according to a telephone survey conducted at the end of March by MBIA Insurance Corp., an Armonk, N.Y., bond insurance company.
A whopping 85% of those surveyed want meaningful tax reform in the next three years, with 27% of respondents supporting a flat tax, according to the survey.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
The State of Taxes
The tax burden doesn’t fall equally on all Americans. Residents of Connecticut, New York and New Jersey get hit far harder than residents of most other states, with California ranking 19th. Tax burdens by state, ranked by combined federal and state tax as a percentage of income:
*--*
Per capita Per capita Tax as State Income tax % of income 1. Connecticut $32,773 $13,580 41.5% 2. New York 29,139 11,699 40.2 3. New Jersey 31.818 12,033 37.8 4. Minnesota 26,191 9,667 36.9 5. Wisconsin 24,326 8,969 36.9 19. California 25,521 8,759 34.3 46. Delaware 27,109 8,572 31.6 47. Louisiana 20,963 6,602 31.3 48. Missouri 24,090 7,533 31.3 49. Mississippi 18,690 5,845 31.3 50. Alabama 20,821 6,457 31.0
*--*
* The District of Columbia, which is not a state, would have ranked third on this list, with per capita income of $34,723 and per capita taxes amounting to $13,510, or 38.9% of income.
Source: Tax Foundation, Washington
