Uncategorized

Flaws in Tax Freedom Day Methodology

Every year the Tax Foundation releases a report announcing the day that Americans have “earned enough money to pay this year’s tax obligations” according to an oversimplified and fundamentally flawed calculation and declares the day Tax Freedom Day. The report, including its state by state analysis, was released yesterday.

At its core, this effort deliberately misrepresents the relationship between taxes and freedom. It fundamentally devalues the public investments made in our country’s economic security and opportunity through taxes – public investments necessary to a free and vibrant society, such as educational opportunities, national security, health care, traversable infrastructure, and a robust and accessible system of justice. It also fails to honor the importance of these public investments to the private sector: the role of schools in educating the state’s workforce, of courts in fairly and efficiently adjudicating business disputes, and of roads and ports in getting goods to market, to name only a few.

As the Center on Budget and Policy Priorities writes here, the Tax Foundation continues to use a fundamentally flawed methodology to generate their annual Tax Freedom Day findings. First and foremost, the Congressional Budget Office has estimated that 4 out of 5 American households actually pay far less in taxes than the study’s “average” taxpayer. That is because the Tax Foundation calculates their “average” tax rate from the total revenue collections as a share of the economy.

Second, state-level Tax Freedom Days are problematic under this methodology because they are primarily driven by the wealth of a state’s residents.  Because the federal tax system is  progressive, the higher federal tax contributions in states with higher-income residents will push the Tax Freedom Day in these states later.

North Carolinians have repeatedly demonstrated their willingness to contribute to the institutions in our communities like public education, community colleges and universities, health care for the elderly and children, fair and impartial courtrooms, and well-maintained roads and highways. Simply declaring a “Tax Freedom Day” does not move us closer to the important discussion of the role of taxes in our society. And it certainly doesn’t help North Carolina continue the still unfinished work of modernizing how we collect  revenue.


One Comment


  1. Doug

    April 5, 2012 at 7:50 am

    Government agencies are very good at spending our taxpayer dollars ! I would start by cutting each one 20% !

Check Also

Price tag for tax cuts in final budget tells half the story

The Locke Foundation was having fun with math ...

Top Stories from NCPW

  • News
  • Commentary

A N.C. General Assembly budget mandate to fire certain North Carolina public education officials wou [...]

More than a month after a deadline to correct faulty campaign finance reports, N.C. Sen. Ralph Hise [...]

Even before he dropped the gavel on the Senate Finance Committee meeting, Sen. Jerry Tillman, a noto [...]

The $23 billion budget deal speeding through the N.C. General Assembly this week includes a platoon [...]

State budget bill is the latest and best example It’s long been a matter of public record that North [...]

By now the strategy is familiar – the strategy used by the N.C. General Assembly’s Republican chiefs [...]

The post The devil and the details appeared first on NC Policy Watch. [...]

18---percentage of people in North Carolina who receive health care coverage from Medicaid or the Ch [...]

Featured | Special Projects

Trump + North Carolina
In dozens of vitally important areas, policy decisions of the Trump administration are dramatically affecting and altering the lives of North Carolinians. This growing collection of stories summarizes and critiques many of the most important decisions and their impacts.
Read more


HB2 - The continuing controversy
Policy Watch’s comprehensive coverage of North Carolina’s sweeping anti-LGBT law.
Read more