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The Overheated Rhetoric of "Tax Freedom Day"

August 14, 2009 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis
 
On July 13, 2009, Germans marked "tax remembrance day," Deutschland's equivalent of the American "tax freedom day."  Although the timing of "tax remembrance day" in Germany is much different than in the U.S., the spin surrounding the two "celebrations" is similar.

The U.S. "tax freedom day" is calculated annually by the right wing Tax Foundation, while "tax remembrance day" is calculated by the German Association of Taxpayers.  While the methodology behind the "tax freedom day" has been criticized, this critique will-for the sake of argument-accept the dates established for Germany, the U.S., and Minnesota as valid.

Tax haters in the U.S. should be overjoyed to find out that the 2009 U.S. "tax freedom day" falls on April 13, a full three months ahead of Germany's "tax remembrance day."  The timing of the two dates is consistent with the conventional wisdom that taxes in the U.S. are low relative to other industrialized countries.  By global standards, the residents of the U.S. are not overtaxed.

Before shedding tears for the heavily taxed Germans, it should be noted that residents of the Federal Republic benefit from a universal health care system and a more extensive social safety net than their counterparts in the U.S.  In short, while folks may be paying a lot more taxes in Germany than in the U.S., they are also getting a lot more.

This underscores the limited value of rankings that emphasize the relative level of taxes in various nations or states without examining the level of public services and infrastructure being provided.  Such rankings are at best incomplete and at worst misleading.

Take the case of Minnesota.  Minnesota's 2009 "tax freedom day" (TFD) is April 15, just two days later than the national TFD.  As recently as 1995, Minnesota's TFD was a full seven days behind the national average.  If right wing dogma regarding the pernicious effect of taxation and the benefit of alleviating taxes were true, the "improvement" in Minnesota's TFD relative to the national average should have coincided with an improvement in Minnesota's economic performance relative to other states.

Alas, this has not been the case.  A recent Minnesota 2020 analysis and a comprehensive report from last summer have demonstrated that Minnesota's economy has slipped relative to the national average as the level of taxes and public investment has declined in comparison to other states.  This illustrates that a simplistic comparison of tax levels should by no means be accepted as a measure of the health of a state's or nation's economy or business climate.

A 2008 analysis conducted by Minnesota 2020 demonstrated that "In general, states with late tax freedom days tend to have higher after-tax income than states with early tax freedom days."  Minnesota, for example, has a relatively late TFD but relatively high after-tax income.  Minnesota 2020's analysis of TFD data concludes that "The dark side of 'tax freedom day' is that states with early tax freedom days are generally worse off than states with late tax freedom days."  Economically speaking, those in early TFD states are certainly no more free than those in late TFD states.

While the timing of U.S.'s "tax freedom day" is much different than that of Germany's "tax remembrance day," the rhetoric surrounding both events is remarkably similar.  On both sides of the Atlantic, "tax freedom day" and "tax remembrance day" have been described as "the day you stop working for the taxman."

When conservatives complain about "working for the taxman," they are attempting to create a sense of victimhood among citizens.  It is odd to see conservatives, who have decried the "culture of victimhood" for decades, attempting to play the victimhood card to their own advantage.

The attempt to portray the taxpayer as a victim is a blatant fraud.  Taxes are not imposed on us by some foreign power.  Rather, we impose taxes on ourselves either directly, in the case of referenda, or indirectly through the representatives selected by a majority (or at least a plurality) of the electorate.  When it comes to paying taxes, there are no victims-at least not in a democratic society.

Whines about "working for the taxman" are nothing more than a right wing ploy to alienate citizens from the government they chose.  When we pay taxes, we are paying for the schools our kids attend.  We are subsidizing the roads we use and the buses and trains we ride.  We are paying for health care for our elderly and indigent.  Yes, we are even paying for the wars that our elected officials-rightly or wrongly-committed us to.  Whether we are in Germany or Minnesota, we are not "working for the taxman" when we pay taxes; rather, we are working for ourselves, not as individuals, but collectively by paying for the policies that we had a voice in crafting.

Of course, those who dislike tax policy-be they conservative or progressive-have every right to work to change it.  This too is part of the democratic process.  However, input in this process should be in the form of reasoned argument, not cheap rhetorical stunts designed to create a false sense of victimhood. 

The chief problem with "tax freedom day" and "tax remembrance day" is that they foster false perceptions.  By any definition of freedom, those who reside in states or nations with late tax freedom days are no less free than those who reside in places with early tax freedom days.  And those who pay taxes to a government they elect are by no means victims.


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