Tax Freedom Day, 2009

Here's the rundown on Tax Freedom Day 2009. The concept is simple: If, when you started working on January 1, you first paid all of your taxes before you kept any money for yourself, when would you begin earning money for yourself? It's a nice way to get a sense for the magnitude of taxes.

Their calculations-- and they admit this in certain places-- are skewed a bit by income levels. You'll notice that the states they project to have the earliest Tax Freedom Days next year are Louisiana, Mississippi, South Dakota, and West Virginia-- not exactly the top of the income charts. Of course, higher income states pay more in taxes due to the progressive income tax system at the federal level (and in a number of states, too). So that needs to be kept in mind when looking at these listings-- it's tempting to look at the earliest date and say that its citizens are subject to the kindest tax system, in relative terms. Well, they are the least burdened-- but that's not entirely a function of their state's tax system compared to everyone else's. In fact, you could have an elasticity issue here-- the increase in taxes paid due to a poor system balanced by the decrease in taxes paid due to the poor system harming economic growth. (Though there are a number of margins here-- corporate, income, property, etc.-- this is just a generalization.) The Tax Freedom Day figures would suggest that the latter is winning. Which could also suggest we're all on the upper portion of the Laffer curve.

I'm trying to imagine how one could adjust for this; though maybe you wouldn't want to?