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Suppose that officials from federal, state, and local governments developed a new system of collecting revenue at the beginning of the year. Instead of taking portions from each American’s paycheck throughout the year, they decided to take every cent Americans earned from January 1st until the day that all revenue had been collected for the year.
The question is: how many days would it take American taxpayers as a whole—from top CEOs to McDonald’s cashiers—to pay their total tax bill for the year?
This year’s Tax Freedom Day is today, April 24th, meaning the governments will tax away a staggering 114 days-worth of taxpayer income. In other words, Americans have worked 31 percent of 2015 just to pay taxes!
Tax Freedom Day roughly illustrates the magnitude of government intervention in the economy. As the chart below shows, historical intervention has been sporadic, but has significantly grown over the past century.
For example, prior to the passage of the 16th amendment in 1913, government intervention in the economy was a mere pittance compared with today. In 1900 the governments combined to take 5.9 percent of national income, or 22 days-worth of labor from each taxpayer. Fast-forwarding to this year, the governments will combine to take 31 percent of national income, or 114 days-worth of labor from each taxpayer. That’s an increase of 418 percent!
Pundits can use this opportunity to relay the message of Calvin Coolidge, who said,
Such rhetoric today would have President Coolidge under fire for subscribing to a failed ideology of “trickle-down economics” and “tax cuts for the rich.”
Aside from “trickle-down” being nothing but a straw-man for progressives to attack, Coolidge’s tax cuts actually decreased the share of income taxes paid by low income people and increased that of the highest earners. In short, tax cuts aren’t the tool of greed that progressives like to imagine. As Thomas Sowell has observed,
I have never understood why it is ‘greed’ to want to keep the money you have earned, but not ‘greed’ to want to take somebody else’s money.
If “greed” is indeed symbolized by an individual’s desire to keep more of his money, then the Tax Foundation should change the name of Tax Freedom Day to “Greed Celebration Day.”