Many people are beginning to wrap their minds around the House Republicans’ proposed destination-based cash-flow tax and what it means for tax reform. Most people are still looking into the tax’s impacts on trade and how...
- Tax Freedom Day: A Description of Its Calculation and Ans...
Tax Freedom Day: A Description of Its Calculation and Answers to Some Methodological Questions
Working Paper No. 3
Tax Freedom Day is calculated by taking taxes paid in the current year divided by the nation's income for that year, which is derived from BEA statistics, and then projected by Tax Foundation economists using economic and budget projections from various sources, most notably the Congressional Budget Office (CBO). This paper contains an overview of the methodology that goes into calculating the nation's Tax Freedom Day.
This paper also addresses some methodological concerns, including those that have been made in the past, and some still to this day, by the Center on Budget and Policy Priorities (CBPP). Each year, the CBPP releases a criticism of the Tax Foundation's annual calculation of Tax Freedom Day. Their criticisms of Tax Freedom Day have varied over the years but typically center on essentially one main criticism. They object to Tax Freedom Day to describe the tax burden of the nation as a whole, because it may over- or understate the tax burden faced by particular taxpayers.
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