Now that April 15 has come and gone, Americans await another tax milestone: tax freedom day. Tax freedom day is the Tax Foundations way of dramatizing how many days each year the average citizen must work to earn enough to pay his taxes, after which he can start earning for himself. This year, says the Tax Foundation, tax freedom day falls on April 27; but if you live in New York State, with its inflated local tax rates and high-income levels, youve got to wait until May 9 to win tax freedom. Moreover, if current efforts to raise taxes in New York City succeed, many Gotham residents may soon be working even longer for the government.
For most Americans, tax freedom day has been extending later and later into the year, thanks to tax increases and to the 1990s booming economy, which pushed more people into higher tax brackets. This year, Americans will have to work an average of 117 days to pay off their tax billlonger than they will have to work to pay for food, clothing, and shelter combined. A decade ago, Americans paid off their tax bill eight days earlier.
The federal tax bill has grown especially rapidly for the wealthiest Americans. Those with incomes in the top 5 percent nationwide paid 55.5 percent of all federal income tax in 1999, the last year for which statistics are available, up from 44 percent ten years earlier, according to the Tax Foundation. The top 1 percent paid 36.2 percent of all taxes, up from 25.2 percent in 1989.
Residents of the Empire State get hit harder than most Americans. When you add state and local taxes to the tax freedom equation, only residents of Connecticut and Washington wait longer for tax freedom. Moreover, the tax burden in New York State falls even more disproportionately on those in higher income brackets than in the nation as a whole, because the countrys progressive tax code hits New Yorkers, with their higher than average incomes, much harder than residents of most states. IRS data show that the top 5 percent of wage earners in New York State paid a whopping 58.2 percent of all federal taxes collected in the state.
The Tax Foundation hasnt calculated tax freedom day for residents of New York City, but with the citys additional income tax on top of the state levy, tax freedom day falls even later in Gotham than in the rest of New York State. Despite that burden, many of the citys elected representatives seem to think that New Yorkers still arent paying enough in taxes. One component of the new city budget proposed by the City Council is nearly $400 million in new personal income taxes, designed to fall disproportionately on those earning $150,000 a year or moreabout 3 percent of the taxpaying public. They would pay $350 million, or 88 percent, of the tax hike under the City Council plan.
Mayor Bloomberg is right to resist this tax hike. New Yorkers, especially those earning more than $150,000 a year, already pay the highest personal income taxes in the country. Many people who fall into this income bracket can hardly be considered rich, especially in a city as expensive as New York. Taxing them even more heavily drains money out of the private economy just when New York needs it to spur an economic revival, and higher taxes are likely to drive more of these families out of the city to escape its tax burden. That sends exactly the wrong message for a city trying to rebuild confidence in its economy.