America’s Enormous Tax Situation
October 6th, 2017 by Bunch & Brock
Nearly every person has a love/hate relationship with money — earning it, spending it, having enough of it, etc. Among the most common problems is the sensitive issue of taxes, which is a well-placed resentment because it turns out that taxes are the largest financial burden faced by the public. In fact, Americans will spend more on taxes in 2017 than they will on food, housing, and clothing combined. That means $3.5 trillion will go to federal taxes and $1.6 trillion will go to state and local taxes, which adds up to 31% of the national income. Not surprisingly, roughly half of Americans say their federal and state income taxes are too high.
Although the fiscal year may begin each January, U.S. workers labor for several months just to pay Uncle Sam’s annual tax bill. Tax burdens vary among the states, but the Tax Foundation publishes a yearly update to help determine exactly when the taxes are covered. Known as “Tax Freedom Day,” it occurs when the nation has earned enough money to pay the year’s federal, state, and local tax bills. The date is calculated by adding together every official tax dollar that is paid to the government and then dividing that sum by the nation’s income – as determined by the Department of Commerce’s Bureau of Economic Analysis.
National Tax Freedom Day this year is on April 23, which is 113 days into the year. It arrives in Kentucky on April 11 and comes last to Connecticut on May 21. The later the day falls translates into a higher percentage of Americans’ total income that ends up being paid as tax. The year 2000 saw the latest Tax Freedom Day, as Americans paid 33 percent of their total income that year. Consider that 100 years before, Americans paid only 5.9 percent of their income to the government, and therefore Tax Freedom Day fell on January 22!
So, what happened? War. Taxes from World War I pushed Tax Freedom Day from January 24 in 1917 to February 8 in 1921, and World War II’s federal spending and borrowing pushed Tax Freedom Day into April for the first time in 1943. The U.S. has never seen federal tax burdens as low as they were before the wars, and over the last 40 years, Americans have been required to work approximately four months into the year to pay the nation’s taxes.
We’ve all heard of people who don’t pay taxes at all or who find loopholes of some kind in order to escape having to pay what they rightfully owe. The world of taxes is a complicated one and is different for each person and each business. There are many strategies available that can help you lower your tax bill legally. It takes careful planning, however, and in order to follow through in ways that will keep you on the right side of the law, it’s recommended that you seek legal assistance.
Taxes may be a necessary evil, but there are smart ways to structure their assessment and payment. Don’t pay more than your fair share. The Lexington bankruptcy attorneys at Bunch & Brock hope that you have found the information presented here to be useful. If you wish to learn more about how our firm can be of assistance to you, or you want to learn more about this topic, we encourage you to contact us by calling 859-254-5522 or filling out this online form.