Early next month, Ted Dwyer and 70 or 80 of his friends, coworkers and clients will gather at a Flagstaff, Ariz., country club, feast on cider-roasted pork, Chicken Florentine and cake, toast one another and dance to the music of a pianist or maybe a harpist. And then they’ll sit down to a cozy lecture on income-tax and estate-tax liability.
The occasion: Tax Freedom Day, the day to celebrate the moment each year that the average American sheds his tax burden and finally begins to make some money for himself, according to Tax Foundation, the Washington, D.C. nonprofit group that announces the date of the "holiday" every year.
"It’s the first four or five months each we’re working to meet our tax obligations," said Dwyer, a certified financial planner. "I guess [the Tax Foundation has] come up with a rather unique spin on how things work, tax-wise and government-wise. I think they’re telling it like it is."
The foundation announced Friday the dates for 2001’s Tax Freedom Days for each state as well as nationwide. Each Tax Freedom Day signifies the day of the year that all the work Americans have put in since January 1 finally pays off the debt they’ll owe to the government in federal, state, local taxes, excise, sales and corporate taxes.
For relatively tax-free Alaskans, the foundation claims, the day is right around the corner, on April 16. While the nation’s most heavily taxed citizens -- Connecticut residents -- will have their noses to the grindstone right up to May 22. Taken together, the average American won’t be free of his annual financial debt to society until May 3, the foundation says.
"The goal is to make sure the public understands just how the tax burden adds up," said foundation spokesman Bill Ahern. "The way Tax Freedom Day should make people feel is, ‘We’ve finally got that monkey off our back.’"
Though it might not be marked on the calendar you’ve been getting at the bank, there have been Tax Freedom Days since 1948, when Florida businessman Dallas Hostetler came up with the idea of figuring out how many days of the year Americans spent working for Washington. In 1972, he retired from the holiday-making business and passed it on to the Tax Foundation, which had been providing educational materials on taxes since the 1930s, about 20 years after Congress passed a constitutional amendment giving the federal government the power to levy an income tax.
Tax Freedom Day, Ahern said, is simply an easy-to-digest way for Americans to understand how much the tax burden has risen by observing how much later Tax Freedom Day falls each year.
"We’re not making any judgments about when it should be, but you can look back to 1975 when it was about three or four weeks earlier than it is now," he said. "Right now, taxes are at an historic high. You can make your judgment on that basis."
Other tax watchdogs had a problem with Tax Freedom Day and the foundation’s numbers.
"It’s a pretty dumb concept," Bob McIntyre, director of Citizens for Tax Justice, said. "It works on the concept that the government’s a black hole so your taxes go straight into the Potomac and not back to the people in the form of Social Security and roads and the military and things you need to have a civilized society."
McIntyre also criticised the foundation’s methods -- using the average American’s tax payout and the not the median -- saying they skew the numbers far upward.
"If you’re a middle-income family -- making between $30,000 and $50,000 a year -- then you finish paying your taxes on Jan. 23," McIntyre said from his Washington, D.C., office. "If you’re low income, you’re finished by the first week of the month."
For Joel Friedman, a senior fellow at the Center on Budget and Public Policies, also in Washington, Tax Freedom Day also shifts the focus to a simplistic dollar-and-cents approach to taxes and government funding instead of where it ought to be.
"It is only one side of the equation," he said. "There has to be a wider debate on the priorities of the tax system. There’s a been a widening gap in after-tax income between the wealthy and the middle- and lower-class. Steps to narrow that gap would be in order."
But the foundation’s economist, Scott Moody, said that the criticisms about the way he calculated Tax Freedom Day miss the point.
"We’re not trying to say what the tax burden is on the average American or the typical American family," he said from his Richmond, Va., office. "We’re just using this because it’s an easy way to measure taxes that’s consistent over time. The critics are looking at only a specific segment of the taxpayers (the middle- and lower-income) without taking into account the big picture."
The foundation, he noted, has published a paper on the median family separately.
On May 3, for Ted Dwyer, though, the important thing will be deciding whether to go with the pianist or harpist for the night’s entertainment.
"It’s really just a nice opportunity to show our appreciation to our clients and provide them with a nice dinner and little bit of entertainment and education," he said.
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