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- Taxmageddon Could Push Tax Freedom Day Later than Ever
Taxmageddon Could Push Tax Freedom Day Later than Ever
Expiring Provisions Would Raise Taxes across the Board
Washington, DC, April 16, 2012—Significant elements of the current federal income tax code are set to expire at the end of the year, which if not addressed by Congress and the President will result in a dramatic tax increase that has come to be known by pundits as “Taxmageddon.” That huge tax hike would mean that Tax Freedom Day – the date by which Americans have worked long enough to pay their entire tax burden – would fall on one of the latest dates in American history according to a new analysis by the Tax Foundation.
"Taxmageddon is the result of a litany of expiring tax provisions, all occurring at the end of this year," said Tax Foundation economist Will McBride, Ph.D. "The biggest expiring provisions are the Bush tax cuts of 2001 and 2003, the payroll tax holiday, and the Alternative Minimum Tax (AMT) patch."
This year it will take Americans 107 days to pay their total tax burden and these federal tax increases will add more than 11 days, pushing Tax Freedom Day to the end of April. In addition, state and local tax collections are surging, meaning that Tax Freedom Day 2013 next year could easily be a record breaker. The all-time latest Tax Freedom Day occurred on May 1, 2000, after huge stock market gains produced exceptionally high capital gains tax collections.
The biggest effect is on the federal individual income tax, the burden of which would increase more than 5 days unless these tax increases are halted. This is mainly the result of expiration of the Bush tax cuts and the AMT patch, which would each add more than 2 days to the burden. The corporate income tax burden would increase more than 3 days, partly as a result of expiring tax-extenders mainly used by businesses. More than 2 days would be added by expiration of the payroll tax holiday. Finally, expiration of the Bush tax cuts would increase the estate tax burden considerably, but because the estate tax is such a small part of the total burden, it would add only a partial day.
Tax Foundation Fiscal Fact No. 297, “Taxmageddon Looms, Potentially Pushing Tax Freedom Day Later than Ever” by Will McBride, Ph.D. is available online.
The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or firstname.lastname@example.org.
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