Nation Works until 11:13 AM to Pay All Taxes, Lunchtime to Pay off the Deficit: 2011's Tax Bite in the Eight-Hour Day

May 05, 2011

Putting the Cost of Government on the Clock: 2011's Tax Bite in the Eight-Hour Day®

Tax Foundation Fiscal Fact No. 268

Introduction

In 2011, Americans will devote 2 hours and 13 minutes of every eight-hour workday, or over a quarter of their working hours (27.7%), to paying taxes. In a nine-to-five workday, it takes until 11:13 a.m. to earn enough to pay that day's share of taxes at the federal, state and local level.

If we add the federal deficit to the picture—that is, if the federal government were planning to col­lect enough in taxes during 2011 to finance all of its spending—Americans would work until lunchtime, 12:07 p.m., for the government, before keeping any of their earnings for themselves.

The Tax Bite in the Eight-Hour Day, which measures the nation's tax burden in hours and minutes, is an offshoot of the Tax Foundation's annual Tax Freedom Day® calculation, which measures the tax burden in months, weeks, and days. These calendar- and clock-based illustrations are a useful way to explain how much the nation as a whole spends on government. Both Tax Freedom Day and the Tax Bite in the Eight-Hour Day illustrate, in similar ways, what portion of their income Americans keep for themselves and what percentage they spend on government.

How Long Do Americans Work for Each Type of Tax?
Figure 1 shows how long the nation must work in the average workday to earn enough to pay each type of tax:

  • Individual income taxes require the most work. All but seven states, and some localities, levy an income tax. When these are added to the federal income tax burden, income taxes are projected to amount to an average of 46 minutes of work in an eight-hour workday.
  • Social insurance taxes (taxes dedicated to funding social insurance programs such as Social Security and Medicare) require 29 minutes of work.
  • Sales and excise taxes require 20 minutes of work.
  • Property taxes require 16 minutes of work.
  • Corporate income taxes require 16 minutes of work.

Figure 1: How Much of Each Eight-Hour Workday Goes to Paying the Nation's Tax Bills in 2011?

 

Tax Bite in the Eight-Hour Day Varies by State

The tax burdens borne by residents of different states vary considerably, not only because residents of different states pay different amounts of state and local tax, but also because their federal tax payments vary dramatically. Higher-income states face a significantly higher total federal tax rate than lower-income states, even before accounting for the fact that many high-income states also have high state and local tax burdens.

Table 1: Tax Bite in the Eight-Hour Day by State, 2011

State Tax Bite in the Eight-Hour Day Rank (1 is highest tax burden)
Alabama 11:00 a.m. 43
Alaska 11:01 a.m. 38
Arizona 11:01 a.m. 39
Arkansas 11:02 a.m. 35
California 11:19 a.m. 6
Colorado 11:08 a.m. 24
Connecticut 11:40 a.m. 1
Delaware 11:10 a.m. 21
Florida 11:12 a.m. 16
Georgia 11:02 a.m. 37
Hawaii 11:05 a.m. 30
Idaho 11:02 a.m. 36
Illinois 11:17 a.m. 9
Indiana 11:04 a.m. 32
Iowa 11:05 a.m. 29
Kansas 11:11 a.m. 20
Kentucky 11:00 a.m. 42
Louisiana 10:57 a.m. 47
Maine 11:02 a.m. 34
Maryland 11:20 a.m. 4
Massachusetts 11:17 a.m. 10
Michigan 11:07 a.m. 26
Minnesota 11:18 a.m. 8
Mississippi 10:51 a.m. 50
Missouri 11:03 a.m. 33
Montana 11:04 a.m. 31
Nebraska 11:13 a.m. 15
Nevada 11:00 a.m. 40
New Hampshire 11:09 a.m. 22
New Jersey 11:36 a.m. 2
New Mexico 10:58 a.m. 45
New York 11:30 a.m. 3
North Carolina 11:06 a.m. 27
North Dakota 11:12 a.m. 17
Ohio 11:05 a.m. 28
Oklahoma 11:00 a.m. 41
Oregon 11:08 a.m. 23
Pennsylvania 11:16 a.m. 11
Rhode Island 11:15 a.m. 13
South Carolina 10:55 a.m. 48
South Dakota 10:57 a.m. 46
Tennessee 10:53 a.m. 49
Texas 11:07 a.m. 25
Utah 11:11 a.m. 19
Vermont 11:11 a.m. 18
Virginia 11:14 a.m. 14
Washington  11:19 a.m. 5
West Virginia 10:58 a.m. 44
Wisconsin 11:18 a.m. 7
Wyoming 11:15 a.m. 12
District of Columbia 11:18 a.m.  

In 2011, as Table 1 shows, residents of Mississippi will finish working for taxes the earliest, at 10:51 a.m., due to their modest incomes and extremely low state and local tax burden. Next are Tennessee (10:53), South Caro­lina (10:55), Louisiana (10:57), and South Dakota (10:57).  States whose residents work the longest for taxes are Connecticut (11:40), New Jersey (11:36), New York (11:30), and Maryland (11:20).

To calculate the Tax Bite for each state, we look at taxes borne by residents of that state, whether paid to the federal government, their own state or local government, or governments of other states. Where possible, we allocate tax burdens to the taxpayer's state of residence. For example, Massachusetts income tax levied on the wages of New Hampshire residents is allo­cated to New Hampshire, not Massachusetts.

To Pay off the Deficit, Americans Would Have to Work until Lunchtime Every Day

Tax Freedom Day and the Tax Bite in the Eight-Hour Day, like almost all tax burden measures, ignore the federal budget deficit, taking into account only taxes that will actually be collected during 2011. In many years, the deficit is fairly small as a percentage of total government spending, but since 2008, larger federal budget deficits can give the impression that the burden of government is smaller than it is. If the federal government were planning to col­lect enough in taxes during 2011 to finance all of its spending, it would have to collect about $1.48 trillion more, and Americans would not finish working for the government until lunchtime: 12:07 p.m.

Table 2: Tax Bite in the Eight-Hour Day, 1940 - 2011

Year Tax Burden (Taxes as a Percent of Income) Tax Bite in the Eight-Hour Day
1940 17.8% 10:25 a.m.
1941 20.4% 10:38 a.m.
1942 20.9% 10:40 a.m.
1943 25.7% 11:03 a.m.
1944 24.0% 10:55 a.m.
1945 24.2% 10:56 a.m.
1946 24.3% 10:57 a.m.
1947 24.9% 11:00 a.m.
1948 23.3% 10:52 a.m.
1949 21.9% 10:45 a.m.
1950 24.6% 10:58 a.m.
1951 26.3% 11:06 a.m.
1952 26.4% 11:07 a.m.
1953 26.2% 11:06 a.m.
1954 24.8% 10:59 a.m.
1955 25.6% 11:03 a.m.
1956 26.3% 11:06 a.m.
1957 26.4% 11:07 a.m.
1958 25.7% 11:03 a.m.
1959 26.7% 11:08 a.m.
1960 27.7% 11:13 a.m.
1961 27.6% 11:12 a.m.
1962 27.7% 11:13 a.m.
1963 28.2% 11:15 a.m.
1964 26.9% 11:09 a.m.
1965 26.8% 11:09 a.m.
1966 27.5% 11:12 a.m.
1967 27.9% 11:14 a.m.
1968 29.5% 11:22 a.m.
1969 30.8% 11:28 a.m.
1970 29.6% 11:22 a.m.
1971 28.9% 11:19 a.m.
1972 30.1% 11:24 a.m.
1973 30.1% 11:25 a.m.
1974 30.8% 11:28 a.m.
1975 29.1% 11:20 a.m.
1976 29.8% 11:23 a.m.
1977 30.1% 11:25 a.m.
1978 30.0% 11:24 a.m.
1979 30.1% 11:24 a.m.
1980 30.4% 11:26 a.m.
1981 31.1% 11:29 a.m.
1982 30.4% 11:26 a.m.
1983 29.4% 11:21 a.m.
1984 29.2% 11:20 a.m.
1985 29.5% 11:21 a.m.
1986 29.7% 11:22 a.m.
1987 30.7% 11:27 a.m.
1988 30.4% 11:26 a.m.
1989 30.5% 11:26 a.m.
1990 30.4% 11:26 a.m.
1991 30.2% 11:25 a.m.
1992 29.8% 11:23 a.m.
1993 30.0% 11:24 a.m.
1994 30.5% 11:26 a.m.
1995 30.9% 11:28 a.m.
1996 31.3% 11:30 a.m.
1997 31.9% 11:33 a.m.
1998 32.5% 11:36 a.m.
1999 32.5% 11:36 a.m.
2000 33.0% 11:38 a.m.
2001 31.8% 11:33 a.m.
2002 29.2% 11:20 a.m.
2003 28.4% 11:16 a.m.
2004 28.5% 11:17 a.m.
2005 30.2% 11:25 a.m.
2006 31.2% 11:30 a.m.
2007 31.1% 11:29 a.m.
2008 29.0% 11:19 a.m.
2009 26.6% 11:08 a.m.
2010 26.9% 11:09 a.m.
2011 27.7% 11:13 a.m.

Source: Tax Foundation calculations based on data from the Bureau of Economic Analysis, Congressional Budget Office, Joint Committee on Taxation, Office of Management and Budget, Internal Revenue Service, Congressional Research Service, and National Bureau of Economic Research.
Note: A longer version of this table, with data from 1900 to 2011, is available at www.taxfoundation.org/legacy/show/27257.html.

History of Tax Freedom Day and the Tax Bite in the Eight-Hour Day

Tax Freedom Day was conceived by Florida businessman Dallas Hostetler in 1948. He per­formed the calculation himself and promoted his copyrighted concept until his retirement in 1971. He deeded the intellectual property to the Tax Foundation, which was publishing the Tax Bite in the Eight-Hour Day at the time. Since then the Tax Foundation has used historical data to calculate both Tax Freedom Day and the Tax Bite in the Eight-Hour Day. In 1990, sufficient data became available to calculate both tax burden measures for each state.

Methodology
Both Tax Freedom Day and the Tax Bite in the Eight-Hour Day measure the percentage of the nation's income that is taken in taxes. We count in the denominator every dollar that is officially part of national income according to the Department of Commerce's Bureau of Economic Analysis, and in the numerator every payment to the government that is officially considered a tax is counted. Taxes at all levels of government are included, whether levied by Uncle Sam or state and local governments.

For Tax Freedom Day, we assume that the nation starts working on January 1, earning the same amount each day and spending nothing. When the nation has finally earned enough to pay all the taxes that will be due for that year, Tax Freedom Day has arrived.  Similarly, to calculate the Tax Bite in the Eight-Hour Day, we assume the nation works from 9:00 a.m. until 5:00 p.m., devoting all income to taxes until that day's portion of the tax bill is paid.

Determining both measures involves calculating an overall average tax rate for the country. This is done by dividing the nation's total tax payments by the nation's income as projected by the Tax Foundation for 2011. The following formula presents this calculation:

Federal, state & local taxes     =   $3,628 billion          = 27.68%

             Total income                          =   $13,107 billion

We then convert the average tax rate into hours and minutes to arrive at the Tax Bite in the Eight-Hour Day:

27.68% x 480 minutes (number of minutes in eight hours) = 133 minutes = 11:13 a.m.

The source for income and tax data is the National Income and Product Accounts pub­lished by the Bureau of Economic Analysis in the Department of Commerce. For a more detailed description of Tax Freedom Day's methodology, which also applies to the Tax Bite in the Eight-Hour Day, see the full Tax Freedom Day Special Report (www.taxfoundation.org/files/sr190.pdf) and "Tax Freedom Day: A Description of Its Calculation and Answers to Some Methodological Questions" (www.taxfoundation.org/legacy/show/23039.html).

Follow Us

Tax Policy Blog

The official weblog of the Tax Foundation.

Go

Tax By State

For information on your state, select it from the drop-down menu.

 

Ask a Tax Expert

Contact information for Tax Foundation policy staff Ask