www.jsonline.com | Return to regular view

Original Story URL: http://www.jsonline.com/story/index.aspx?id=415936

State waits longer for Tax Freedom Day

By ANDREW CHAMBERLAIN

Posted: April 14, 2006

With many tax forms mailed and even some refund checks on the way, the tension in America's neck is finally beginning to unwind.

But tax time isn't over yet. Americans will finish slaving over IRS forms on Monday, but they'll keep working for Uncle Sam for another full week - until April 26, the 116th day of the year.

That's when this year's Tax Freedom Day will arrive. That's the day each year when Americans have finally worked enough to pay their annual tax bill and start working to pay their own bills. It includes everything officially considered income and taxes, at all levels of government.

Of course, Tax Freedom Day is just a national average. Some states bear a much heavier tax load than others.

This year, Wisconsin taxpayers will work until April 28 -two full days longer than the rest of the nation - to work off the 12th highest total tax burden in the nation.

That shouldn't come as a surprise to Badger State taxpayers. Wisconsin's state and local tax burden alone - ignoring federal taxes - has ranked among the 10 highest since the days when Warren P. Knowles occupied the governor's mansion.

Today, Wisconsin's state and local taxes consume about 12% of income. That ranks the state 7th-highest nationally, well above supposedly high-tax states like California, New Jersey and Connecticut. That totals up to about $4,290 per person for state and local government, on top of the federal tax bill.

All things considered, it's hard to say whether taxes are too high or too low at any point in time. But one thing's for sure - it hasn't always been this way.

For most of America's history, we've been a low-tax haven. From the nation's founding through the early part of last century, government spending at all levels rarely exceeded 10% of the nation's income, and even then only during wartime.

In 1904, Supreme Court Justice Oliver Wendell Holmes made his famous observation that "taxes are what we pay for civilized society."

Easy for him to say. At that time, the average American tax burden was around 6% of income, and Tax Freedom Day arrived in late January.

Today, it hovers around 32%. And that doesn't include the high and very real costs of tax compliance.

These "paperwork burdens" add another $265 billion - or 22 cents for every federal tax dollar - to the nation's total tax bill.

Of course, taxes ultimately pay for government services. And many of these are essential to keeping society running smoothly - police, roads, courts. Everyone pitches in for them.

But where is the limit? In addition to these basic services, everyone has a list of publicly funded projects he or she thinks necessary. At what point are we no longer getting a good deal for tax dollars?

One way to answer that is to compare taxes with our other expenses.

This year, we'll work 116 days to pay taxes. In contrast, we'll work just 106 days on average for food, clothing and housing, combined.

That wasn't always the case. Only in the last decade have taxes exceeded spending on those basic necessities.

Today we work 52 days for our own health and medical care, but twice as many for the health of local, state and federal governments.

But there's another way to judge tax fairness. In March, we commissioned a national survey that asked over 2,000 adults, "How would you rate the value you personally get from the taxes you pay to the federal government?"

The response wasn't surprising. Sixty-five percent said "poor" or "only fair," while just 2% said "excellent." That's pretty lousy customer satisfaction for something that devours one-third of our paychecks.

When we asked, "What is the maximum percentage of a person's income that should go to taxes - that is, all taxes, state, federal, and local?" the answer to whether today's tax burden is worth it seemed even more clear.

The average response was just 15% percent, less than half today's tax bite.

To be sure, many Americans believe it's fair to work four months a year for taxes. After all, governments today do a lot of things for a lot of people.

But one thing is clear: the price of government isn't what it used to be. And if you ask Americans about it, they seem ready to shop around for a better deal.

Andrew Chamberlain is a staff economist at the Tax Foundation in Washington, D.C.