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Tax Freedom Day Arrives Later This Year In Maryland
BERLIN - With taxes increased on seemingly everything in Maryland in recent months, from an increase in sales tax to gasoline tax to the tax on cigarettes, residents in the state will have to work harder and longer this year to meet their combined tax burden, according to a report released last week by the non-profit Tax Federation.
Tax Freedom Day, the point in the year when typical Americans stop working for Uncle Sam and start working for themselves, arrives on April 23 nationwide this year, while Marylanders will reach the milestone five days later on April 28. Calculated annually by the non-profit Tax Foundation, Tax Freedom Day is the point on the calendar when the typical U.S. worker has earned enough to meet his or her federal, state and local tax burden for the year and starts devoting wages to other life essentials such as food, shelter, clothing and recreation.
Tax Freedom Day in the U.S. arrives this year on April 23, or a full week earlier than last year. Maryland residents will reach the milestone on April 30, which puts the state near the end of the finish line. Maryland will be the 43rd state to reach Tax Freedom Day this year. Residents in Alaska were the first, having earned enough to reach their combined tax burden on March 29, while Connecticut residents will not reach the milestone until May 8 this year.
The Tax Foundation formula divides the per capita tax burden, the combination of federal, state and local taxes, by the per capita income to arrive at the date workers across the country have earned enough to meet their tax burden and begin to earn money for themselves. For example, Americans in general will work 113 days to meet their tax burden in 2008, while Marylanders will work 121 days.
In Maryland, the per capita income projected for 2008 comes in around $49,324 with residents paying about $16,000 in federal and state income tax, meaning the typical worker in the state spends about 33 percent of what he or she makes paying taxes. Consequently, Marylanders make more than the national per capita income, but also pay considerably more in taxes. Maryland is ranked seventh in the country in terms of the typical tax burden. Last year, Maryland was ranked 13th in terms of the typical tax burden, which explains why wage earners in the state will have to work longer this year before they can star paying for other life essentials.
Tax Foundation President Scott Hodge, who prepares the annual report, said last week Americans will work 74 days this year to afford their federal taxes and another 39 days to pay state and local taxes. The combined tax burden far outpaces all other major expenditures for typical workers across the country and in Maryland.
'Government continues to dominate the American taxpayers' budget,' said Hodge. 'Americans will spend more on taxes in 2008 than they will spend on food, clothing and housing combined.'
The statistics bear out Hodge's sentiments. For example, it will take the typical American worker another 62 days to earn enough to pay for housing, 52 days for medical care, 30 days for food, and 30 days for transportation. Unfortunately for most wage earners, only 20 days of the year are spent working for recreation and only two days work is devoted to savings.
According to Tax Foundation senior economist Gerald Prante, Tax Freedom Day has been a moving target in recent years. In 2000, the date was reached on May 12, the latest date ever for the milestone. For the next few years, a string of federal and state tax cuts moved the date up by as much as two weeks.
For the last three years, per capita incomes and tax burdens increased at around the same rate, creating some stability in Tax Freedom Day. This year, the promise of the federal economic stimulus checks for most wage-earners has nudged the date earlier in the calendar.
'Tax Freedom has been a see-saw affair in recent years,' said Prante. 'After a few years of heading in the wrong direction, it has moved up earlier in the year in 2008.'
The Tax Foundation has tracked the relationship between income and tax burden for decades. When Tax Freedom Day was first calculated at the turn of the 20th century, the typical American worker met his or her tax burden for the entire year in the first month of the year. The earliest Tax Freedom Day was recorded in 1912 when American workers reached the break-even point on Jan. 22.