NCPA - National Center for Policy Analysis

Tax Slavery Day Is Coming!

August 18, 1999

Tax Freedom Day fell on May 11 this year. This is the day, the Tax Foundation says, when Americans stop working for government and start working for themselves. Tax Freedom Day has moved from April 30 in 1993, showing that Americans will work 11 extra days this year just to pay the higher taxes imposed during the Clinton Administration.

If done in reverse, we would be talking about Tax Slavery Day -- the day when we stop working for ourselves and start working full time for government. Using the Tax Foundation's methodology, Tax Slavery Day falls on Sunday, August 22 this year. Up until then we work for ourselves, after that government gets everything.

Tax Slavery Day more accurately conveys the impact of taxation on incentives. Because we have steeply progressive income tax rates, the more we work the more taxes we pay on each additional dollar we earn -- the marginal tax rate.

In a nutshell, this is what progressive tax rates do to all workers over the course of the year. For the first month or two, the federal income tax allows most workers to keep all that they make, due to the personal exemption and standard deduction. After that, it starts to take 15 percent of everything. In a few more months, it starts to take 28 percent. And for those who are highly skilled or have working spouses, the rates climb to 31 percent, 36 percent and, finally, 39.6 percent.

For many with high incomes and flexible work schedules, it doesn't really pay for them to work past Labor Day. The cost to them in terms of foregone income is small, since Uncle Sam in effect subsidizes their vacation at a 39.6 percent rate.

As a result, the government is actually one of the biggest losers when the tax system discourages work through high marginal tax rates.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, August 18, 1999.


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