'Tax Freedom Day' comes three days later this year

Americans on average will have to work 102 days, three days longer this year than in 2010, to pay their total tax bill - federal, state and local - for the year.

Tax Freedom Day will be April 12, according to the Washington, D.C.-based Tax Foundation, compared with April 9 in 2010. Iowans will be able to celebrate Tax Freedom Day on April 6, two days later last year.

Each state has its own Tax Freedom Day because resi­dents of different states pay different amounts of state and local taxes and their federal tax payments can vary dramatically.

Because of modest incomes and low state and local tax burdens, Mississippi celebrates its Tax Freedom Day first in the nation on March 26, after only 85 days. Connecticut is the last in the nation to observe Tax Freedom Day, on May 2, with 122 days required for that state's taxpayers to earn enough money to pay the year's tax total.

Tax Freedom Day does not include payment for the federal deficit. To do that, the average American would have to work an additional 41 days or until May 23 to pay their tax and deficit obligation.

“Tax Freedom Day 2011 is later than last year largely because of income changes rather than statutory tax law changes,” said Kail Padgitt, Tax Foundation staff economist. “As the economic recovery continues, individuals' rising income pushes them into higher tax brackets. Also, corporate tax revenue has also seen a resurgence.”

Although income increases are the main reason for the later Tax Freedom Day, several tax law changes are also partly to blame. The federal estate tax has returned after a one-year repeal, this time at a rate of 35 percent and with an exemption of $5 million.

In addition, taxes associated with the Patient Protection and the Affordable Care Act con­tinue to be phased in. Only taxes that will actually be collected dur­ing 2011 count in the Tax Foundation tally.

Historically, the date for Tax Freedom Day has fluctuated significantly. In 2000, Tax Freedom Day was May 1, the latest date ever. A string of tax cuts between 2001 and 2003 pushed Tax Freedom Day up by two weeks, so that it fell on April 16 in 2003.

The tax burden is primarily made up of five major categories of taxes.

Individual income taxes – including federal, state and local – require 36 days of work. Payroll taxes take another 22 days of work.

Sales and excise taxes, mostly state and local, take 15 days to pay off. Corporate income taxes take 12 days, and property taxes take another 12.

Americans will work four more days to pay other miscellaneous taxes, most notably including motor vehicle license taxes and severance taxes, and about 18 hours for estate and gift taxes.