This is another guest-post from Bob Stoker. Here is part 1:
A common misinterpretation in the media focuses on the relationship between taxes, tax freedom, and work. A 2008 CNN story that echoed the Tax Foundation’s press release claimed that the calculation showed “the date you will have earned enough to pay off all of your taxes for the year.” Beyond this the CNN report suggested that the calculation “assumes Americans work seven days a week.”
CNN’ s claim is misleading because it implies that, since the calculation assumes that people work seven days a week, anyone who works less than seven days a week will have to work even longer into the year to pay their taxes. It would be more accurate to assert that the calculation assumes that income is earned in even increments each and every day of the year whether one is working or not.
The Tax Foundation’s reply is that they cannot be responsible for people who report carelessly about their analysis. They have a point. However, the foundation’s press release contributes to the misleading reports when it says that Tax Freedom Day indicates how many days Americans have to work to pay the costs of government. Many government revenue sources that are included in the calculation are not connected to work. Consider the tax you owe on money you inherited from your uncle. Revenue from federal and state inheritance taxes is counted in the calculation and therefore, in the number of days we must “work” to pay for government. It may have taken some effort to be nice to your rich uncle on holidays, but it isn’t what most people would consider work.
Beyond this, the idea that people work to earn the money to pay the tax does not reflect how the tax is levied. For example, the tax freedom calculations count both halves of the FICA tax that supports OASDI and Medicare, even though only half of the tax is withheld from employees’ checks – the other half is contributed by employers. It is fair enough to call the employers’ share a cost of government, but the claim people are working extra days to pay that tax is misleading.