NCPA - National Center for Policy Analysis


April 13, 2006

Tax Freedom Day will arrive on the 116th day of 2006 -- Wednesday, April 26. Because of the rising tax payments that accompany economic growth, this year's Tax Freedom Day is three days later than it was in 2005 and a remarkable 10 days later than it was in 2004, says the Tax Foundation.

Despite the rapid growth of the total tax burden between 2004 and 2006, Tax Freedom Day still shows the effects of the Bush tax cuts in 2001 and 2003. Even as late as April 26, Tax Freedom Day is still celebrated seven days earlier than it was in 2000 when the tax burden reached its peak and Tax Freedom Day was delayed until May 3.

  • Although a significant tax cut has been enacted in each of the last five years, only two of those were large and long-lasting enough to continue affecting the tax burden in 2006.
  • Those were the Economic Growth and Tax Reform Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).
  • However, these tax cuts did little to diminish the progressivity of the federal income tax. Naturally, then, as economic growth has resumed, so has the growth of the tax burden.

The tax burden will be higher in 2006, says the Tax Foundation, not because of tax increases -- none have been passed at the federal level recently and none are expected in 2006 -- but rather because of rapid economic growth expected by most economists to continue through the year.

  • After a recession in 2001 and 2002's nearly stagnant but slowly growing economy, economic conditions improved significantly.
  • The economy is now producing tax revenue commensurate with its impressive growth.
  • The unemployment rate in February 2006 was 4.8 percent, down from 5.4 percent a year earlier in February 2005 (Bureau of Labor Statistics).

Source: Curtis S. Dubay and Scott A. Hodge, "America Celebrates Tax Freedom Day," Tax Foundation, Special Report No. 140, April 12, 2006.

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