"Happy" Tax Freedom Day

Today is Tax Freedom Day.  That mythical day when we are done working to pay for our taxes for the year.  Except now that we are running up a huge federal IOU each year in our exploding deficits, a bill we will all have to pay in more ways that one, the Tax Foundation estimates that if we were actually paying now for all of our government spending, Tax Freedom day would occur until May 17th.  Of course that is only for the 53% of Americans who actually pay federal income tax.

A debate going on about Tax Freedom Day between Joseph Henchman at Tax Policy Blog and Chris Bergin at tax.com puts clarity to the basic issues of spending and taxation in America today.

Says Bergin:

"The truth of the matter is that, other than the chuckle I get from the whole thing, Tax Freedom Day doesn't mean a thing. As a society, we will never be free of taxes - that is unless we all want to be bathing down by the river, catching our own dinner, and freezing to death in the dark.

"And currently as a society we don't pay enough taxes, not enough to pay for the government services we demand. A lot of Americans don't want their Medicare, Social Security or new Healthcare touched. They also don't want to pay more taxes.

"Now, how, precisely, does that work? It doesn't. Maybe I can come up with a Tax Stupid Day."

Henchman's reply:

"I'm no anarchist but it sounds like Bergin is alluding to the opposite extreme: that every tax dollar is vital to the functioning of society. This isn't the case: the value from a well-functioning and impartial court system is different from the value from ethanol subsidies, the U.S. Institute of Peace, and the National Watermelon Promotion Board. Those may be nice programs for some people but they aren't exactly vital to keeping the lights on. We could have a smaller tax burden and not be foraging for berries and boar meat....

"The solution to badly-designed social welfare programs should not be knee-jerk higher taxes, but reforms and a sustainable, broad-base/low-rate tax system that encourages economic growth and minimizes interference with individual freedom. And all this means that Bergin, us, readers, and everyone should be working to learn more about tax burdens, who pays and who benefits, and how the trends are going. Tax Freedom Day is one of those tools, and I'm pleased to be a part of the debate."

Since tax rates are one of the most important predictors of entrepreneurial start-up rates and of the longevity of small businesses, I am pleased to continue to be part of the debate, as well.