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A Hands-On Budget Deficit Reminder from the Tax Foundation

The Tax Foundation has updated its 2010 issue of the annual Tax Freedom Day study. By assuming that the government actually paid for all its expenses with tax revenues, Tax Foundation expert Kail Padgitt, Ph.D., reports that the national Tax Freedom Day would be pushed from April 9 to May 17:

“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• Two significant taxes were repealed for just one year, 2010, as part of previous legislation, the estate tax and the so-called PEP and Pease provisions of the income tax.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.

Wyoming taxpayers are in better shape than taxpayers in many other states, one reason being that the state budget is in comparatively good shape. However, when all states are ranked from 1 to 50, with 50 being the lowest tax burden, Wyoming ranks 16th with April 11 as the state’s Tax Freedom Day. We would also be hit pretty hard by federal taxes, if the Tax Foundation’s experiment were to become true: if the federal government taxed its way to a balanced budget the Wyoming Tax Freedom Day would be pushed from April 11 to May 5.

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Thursday, 19 October 2017
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