May 13, 2010

If Tax Collections Matched Spending, 2010's Tax Freedom DayŽ Would Fall on May 17

Federal Spending in 2009-10 Highest Since World War II; Deficit Reaches $13,158 Per Household

Washington, DC, May 13, 2010 - Recent news reports in USA Today and elsewhere have highlighted the historically low tax collections in 2009 and 2010, confirmed by the Tax Foundation's annual Tax Freedom Day® calculations of April 8, 2009, and April 9, 2010.

"The importance of the current federal deficit can hardly be overstated," commented Foundation economist Kail Padgitt, Ph.D., author of the Tax Freedom Day report. "Tax Freedom Day doesn't include deficits because it's a snapshot of the current year's tax burden. If current taxes had to cover the deficit this year, however, Americans would be working until Monday, May 17, 2010, before earning enough money to pay for government."

"That would cover all federal, state and local taxes, plus a $1.3 trillion federal budget deficit predicted by the Foundation in February, which the Congressional Budget Office has since revised to 1.5 trillion," said Padgitt.

In 2010, the Foundation projects that federal, state and local taxes will amount to 26.89 percent of the nation's income, considerably less than in 2007. The shift toward a lower tax burden has been driven by three factors:

• The recession has reduced tax collections even faster than it has reduced income;
• President Obama and the Congress have enacted temporary income tax cuts for 2009 and 2010, just as President Bush did in 2008; and
• Two significant taxes were repealed for just one year, 2010, as part of previous legislation, the estate tax and the so-called PEP and Pease provisions of the income tax.

Despite all these tax reductions, Americans will pay more taxes in 2010 than they will spend on food, clothing and shelter combined.

In the study, Tax Foundation Special Report No. 177, "America Celebrates Tax Freedom Day," Padgitt explains that current deficits are so large that they deliver an early Tax Freedom Day now but promise a much later one in years to come.

"These huge deficits must translate into higher taxes or inflation soon," explained Padgitt, "and that will drive Tax Freedom Day much later into the year, likely somewhere near where the deficit-inclusive measure is now, in mid-May."

Using current deficit projections from the Congressional Budget Office, the average household's share of total spending is $31,737, and the average household's share of total taxes is $18,579, leaving a per-household deficit of $13,158.

For more information, go to http://www.taxfoundation.org/taxfreedomday.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.