UK Accounting Glossary
Tax freedom day is the day the average working American citizen has theoretically earned enough income to pay their income taxes for the year. Calculation of tax freedom day is estimated total tax collections in the U.S. divided by estimated total U.S. income (as projected by the Tax Foundation) multiplied by the number of calendar days in a year (i.e 365 days). All income tax, Social Security and Medicare tax, other federal taxes, state taxes, and excise taxes are included in the tax freedom day calculation. The tax freedom day calculation assumes people work eight hours a day starting on January 1st and don’t spend any of the income they earn. Individual states also have a tax freedom day. In 2010, state-level tax freedom day came earliest in Alaska and Louisiana and latest in Connecticut and New Jersey. Since its debut in 1948, tax freedom day has been as early as March 31 in 1950 and as late as May 1 in 2000. Florida businessman Dallas Hostetler first calculated tax freedom day in 1948 and every year thereafter until 1971, when he transferred his trademark on tax freedom day to the Tax Foundation.
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This glossary post was last updated: 5th February 2020.