By: William Hussey
While April 15th is the due date by which most taxpayers have to file and pay any taxes due for 2018, April 16th marks “Tax Freedom Day” for United States taxpayers this year. Tax Freedom Day is the date each on which U.S. economic output equals the aggregate federal, state and local taxes (some $5.2 trillion) due to all the governmental entities that impose them. So, it is time to celebrate as we are now (largely) working for ourselves for the rest of the year!
It is important to note that Tax Freedom Day for residents of states with higher state and local tax rates, such as New York, New Jersey and Connecticut, won’t actually be able to celebrate until early May. Residents of other states with lower overall tax burdens — e.g., Florida, Alaska and Oklahoma — have already celebrated Tax Freedom Day. Residents of Pennsylvania, where White and Williams LLP was founded over a 100 years ago, are able to celebrate today as aggregate taxes collected in the commonwealth are about the national average.
Finally, we note that the early empirical evidence suggests that most (approximately 70%) of all taxpayers realized an overall reduction in their federal tax burden in 2018 versus the prior year as a result of the Tax Cuts and Jobs Act that took effect on January 1st of last year. Again, however, taxpayers in states with lower state and local tax burdens tended to make out better than those who do not enjoy those lower local taxes. Many taxpayers also did not appreciate the lower federal tax burden as the adjustments made to the federal withholding tables largely caused those savings to show up in normal payroll checks rather than resulting in higher refunds (or smaller payments) when tax returns were filed by April 15th.
In any event, those of us who prepare tax returns for a living will be celebrating and getting a little more sleep until the extended due date filing season starts again in earnest in the fall.
