WASHINGTON, April 12 (UPI) -- U.S. taxpayers who aren't looking forward to paying their annual federal income taxes this Thursday, keep this in mind: for every Tax Day also comes a Tax Freedom Day, according to an annual study by the Tax Foundation.
"Tax Freedom Day is the day when Americans will finally have earned enough money to pay off their total tax bill for the year. Every dollar that's officially called income by the government is counted, and every payment to the government that is officially considered a tax is counted," the study said.
This year's Tax Freedom Day was Sunday, April 11. Since taxpayers will pay on average 27.8 percent of their income in taxes this year, study authors chose the date that fell 27.8 percent of the way through the year as Tax Freedom Day. On average, taxpayers worked this much of the year to pay their total tax burden -- federal, state, and local -- for 2004, the study said.
For those who loathe paying their taxes, this year's study brings good news -- taxes are the lowest they've been in years.
"Not since 1967 has the nation's total tax burden dropped to this level. This year's Tax Freedom Day comes three days earlier than last year's and an amazing 21 days earlier than in 2000. That last year of the boom and bubble was when the total tax burden reached its peak and Tax Freedom Day was not celebrated until May 2," authors J. Scott Moody, the organization's senior economist, and Scott A. Hodge, the organization's president, said in the study, released Thursday.
While this year's average Tax Freedom Day falls on April 11, the exact date for each taxpayer depends on the state he or she lives in. Residents of different states carry different tax loads because the amounts of state and local tax they pay vary.
People in about one-quarter of all states have to work no later than April 4 to pay their taxes. Those residing in about one-half of all states must work till at least April 5, and as long as April 11. In the remaining one-quarter of states, taxpayers must work till April 12 or longer to pay that year's taxes.
Also, residents in different states have different average federal tax burdens. Federal taxes make up two-thirds of people's tax burden, the study said.
States with the highest federal tax burdens as a percentage of income are Connecticut (21.8 percent), Massachusetts (20.2 percent), New Jersey (19.8 percent), Wyoming (19.7 percent) and New York (19.4 percent).
Conversely, states with the lowest federal tax burdens are Mississippi (15.3 percent), West Virginia (15.4 percent), Louisiana (15.5 percent), Hawaii (15.7 percent) and Idaho (15.8 percent).
Alaskans work the fewest days to fulfill their tax obligations, and Alaska is the only state in the country to celebrate its Tax Freedom Day in March. Connecticut taxpayers on average must work the longest number of days, 118, to pay their taxes, followed by New York and the District of Columbia at 117 days.
On the other side of the coin, Alaska residents will only have to work 85 days to pay off their taxes, followed by Alabama and Tennessee, states where taxpayers must put in 91 days.
The average income per capita in the 25 states with the highest federal tax burdens is $36,775, while the average income of the 25 states with the lowest federal tax burdens is $30,705. The three states with per-capita incomes over $40,000 -- Connecticut, Massachusetts and New Jersey -- are ranked first, second and third in tax rates.
The five states with the highest state and local tax burdens are New York (12.9 percent), Maine (12.3 percent), Ohio (11.3 percent), Hawaii (11.3 percent) and Rhode Island (11.1 percent), whereas the five states with the lowest state and local tax burdens are Alaska (6.3 percent), New Hampshire (7.5 percent), Delaware (8.2 percent), Tennessee (8.5 percent) and Texas (8.7 percent).
The study also looked at whether the recently enacted and proposed tax cuts signal a trend of lower taxes, or merely an economic anomaly.
"Due to an expected economic recovery, between 2004 and 2010, Tax Freedom Day is projected to increase by eleven days and fall on April 22. Thus, even with the current tax cuts in place, tax burdens will still tend to grow higher due to the nature of the graduated rate income tax structure. The expiration of [the Economic Growth and Tax Reform Reconciliation Act in 2010] is expected to push Tax Freedom back an additional seven days to April 29 in 2014," the study indicated.
Organizations in several other countries have launched their own Tax Freedom Day and produce their own reports on taxation. The Tax Foundation currently knows of Tax Freedom Day reports being published in seven countries (Though due to the different ways that countries gather and evaluate public financial data, Tax Freedom Days are not comparable from one country to another, the study said).
For instance, Great Britain's Tax Freedom Day will fall on the 163rd day of 2004, June 11.
Other countries where organizations mark their citizens' Tax Freedom Day include Canada, South Africa, Slovakia, the Czech Republic, Lithuania, and India.
