Workers finally get to keep what they earn as tax freedom day arrives
The so-called tax freedom day falls three days later than it did in 2017 and is at its latest since 1995, according to the Adam Smith Institute.
May 29 marks the first day this year that the average worker has theoretically earned enough to pay for taxes and can start earning for themselves, research suggests.
The Adam Smith Institute said the so-called tax freedom day falls three days later than it did in 2017 and is at its latest since 1995 – as far back as “quality data” goes.
This year, every penny the average person earned until May 28 went straight to the taxman, the institute said.
But from May 29 onwards, the average person will get to keep what they earn.
The right-of-centre think tank said tax freedom day was worked out to illustrate the “true size” of the tax burden people face, including both direct taxes such as income tax and indirect ones like VAT.
The thing I've never understood about Tax Freedom Day is how angry it makes some people. For me, anything that helps people understand the size of the overall tax burden is good, whether they decide that it's too high, too low or just right.— Sam Bowman (@s8mb) May 29, 2018
The report’s authors said that every individual would have a different tax freedom day according to the amount they earned.
Theoretically, tax freedom day should come later for high-earners and earlier for those on lower incomes and the unemployed.
But they said that in reality, this might not be the case because of the different rates of tax slapped on consumer goods, investment and “sin” activities.
They also said that measures such as corporation tax muddied the picture because although technically the burden falls on companies, in reality the cost is shouldered by consumers, shareholders and workers.
The institute’s model tries to calculate how much of the corporation tax bill each group pays.
For nearly half of the year we’ve been taxed everything that we’ve earned Sam Dumitriu, Adam Smith Institute
By analysing available data, the institute found that on average 57.6% of the burden for corporation tax falls on company employees in the form of lower wages.
The report said: “(Tax freedom day) does not correspond exactly to any individual’s experience. And yet people do find it shocking to see how large the state really is, expressed in an intuitive way.”
Sam Dumitriu, head of research at the Adam Smith Institute, said: “For nearly half of the year we’ve been taxed everything that we’ve earned.”
He added: “What (this model) means is that members of the public are better informed so they are able to debate the issues properly.
“It also illustrates how the tax burden is changing over the years – in 1995 it nearly crept into April and now it’s nearly creeping into June.
“It gives an idea of how taxes are changing and how the state is growing a lot larger over that period of time.”