Tax Freedom Day

AAA

DEFINITION of 'Tax Freedom Day'

The day that the average American has earned enough money (in theory) to pay off his or her total tax obligations for the year. The calculation used to determine this date assumes that everyone in the nation works for eight hours a day beginning January 1, and that every dollar earned is not spent. The Tax Foundation calculates Tax Freedom Day and also publishes a short report that summarizes trends relating to this measure.

INVESTOPEDIA EXPLAINS 'Tax Freedom Day'

In 2008, Tax Freedom Day was calculated as April 23, which means that it took Americans 113 days of work to pay their tax obligations.

Tax Freedom Day is a useful indicator for gauging the impact of taxes each year. The calculation includes all taxes incurred, including income tax, federal tax, state tax, medicare and excise taxes. Examination of the trends related to Tax Freedom Day illustrates how changes in tax law, government monetary policy, and even World War I and II have affected when Tax Freedom Day will fall.

RELATED TERMS
  1. Longtime Homebuyer Tax Credit

    The Longtime Homebuyer Tax Credit was a federal income tax credit ...
  2. Total Tax

    The composite total of all taxes that is owed by a taxpayer for ...
  3. Progressive Tax

    A tax that takes a larger percentage from the income of high-income ...
  4. Corporate Tax

    A levy placed on the profit of a firm, with different rates used ...
  5. Income Tax

    A tax that governments impose on financial income generated by ...
  6. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
Related Articles
  1. Tax Tips For The Individual Investor
    Retirement

    Tax Tips For The Individual Investor

  2. Using Tax Lots: A Way To Minimize Taxes
    Taxes

    Using Tax Lots: A Way To Minimize Taxes

  3. 10 Money-Saving Year-End Tax Tips
    Taxes

    10 Money-Saving Year-End Tax Tips

  4. How are savings bonds taxed?
    Taxes

    How are savings bonds taxed?

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center