While last-minute filers across the country rush to a post office or computer terminal to file their 2014 income tax returns, North Carolinians are within 24 hours of reaching an important date for this year — Tax Freedom Day.
Tax Freedom Day, the theoretical date that average taxpayers stop paying the government and start keeping their own earnings, arrives tomorrow, April 16. That’s eight days earlier than the National Tax Freedom Day of April 24, giving the Tar Heel State the 19th-lowest tax burden in America, based on calculations from the nonpartisan Tax Foundation in Washington, D.C.
The national tax bill this year adds up to $3.3 trillion in federal taxes and $1.5 trillion in state and local taxes. The final tally comes to $4.8 trillion, 31.1 percent of the nation’s total income — more than Americans spend annually on food, clothing, and housing.
“Arguments can be made that the tax bill is too high or too low, but in order to have an honest discussion, it’s important for taxpayers to understand cost of government,” said Tax Foundation Economist Kyle Pomerleau. “Tax Freedom Day helps people relate to that cost.”
Tax Freedom Day was created in the 1940s by Florida businessman Dallas Hostetler as a measure of federal, state, and local tax burdens. Since 1971, the Tax Foundation has compiled and published the information.
Variations in federal, state, and local tax burdens result in each state reaching its Tax Freedom Day at a different time.
The national date is one day later than in 2014 due to economic growth, a factor expected to increase revenue from corporate, payroll, and individual income taxes, Pomerleau said.
North Carolina’s Tax Freedom Day comes two days later than last year, but reasons for the shift are harder to discern. While national Tax Freedom Day statistics are comparable from year to year, accurate state-by-state comparisons aren’t possible, Pomerleau said, as states may not report data identically across multiple agencies from one year to the next.
The first states celebrating tax freedom this year were Louisiana and Mississippi on April 2 and April 4, respectively. On May 13, Connecticut and New Jersey will be last to satisfy their tax bills.
Among North Carolina’s neighbors, Tennessee and South Carolina paid their tax bills on April 9 and April 12, while next-door residents Georgia and Virginia will achieve tax freedom on April 15 and April 27.
If the nation’s total tax bill also accounted for current federal borrowing — which represents future taxes owed — Tax Freedom Day would arrive 14 days later, on May 8.
Federal, state, and local income taxes comprise the biggest share of taxes owed this year, amounting to 43 of the 114 days Americans will pay the tax collector. Payroll taxes will take 26 days to pay, sales and excise taxes 15 days, corporate income taxes 12 days, and property taxes 11 days. Seven days are allocated to pay estate and inheritance taxes, customs, duties, and other taxes.
Kari Travis (@karilynntravis) is an associate editor and social media specialist at Carolina Journal.