Happy Tax Freedom Day 2010!

How's the party going? Wait, aren't you celebrating? You should be. Today is Tax Freedom Day.

OK, so it's not an official U.S. holiday. And it's slightly less festive than last year.

As a nation, we had to work a day longer in 2010 than we did in 2009 to reach the point that the Tax Foundation calculates as the day we've earned enough money to pay this year's tax obligations at the
federal, state and local levels.

Basically, Tax Freedom Day answers the question, "What price is the nation
paying for government?" Using the latest government data on income and taxes, the Tax Foundation takes total tax
collections and divides that amount by the total U.S. income.

The 2010 math showed that taxes will amount to 26.89 percent of our income, and the
stretch of 99 days from January 1 to April 9 is 26.89 percent of the
year.

In the larger scheme of things, however, today's Tax Freedom Day is two weeks earlier than in 2007. And in 2000, the day was celebrated May 1, the latest date ever.

The overall U.S. tax burden has been moving lower over the last few years, say Tax Foundation researchers, because of three factors:

1. The recession has
   reduced tax collections even faster than it has reduced income. 
   
2. Obama and Congress have enacted large but temporary income
   tax cuts for 2009 and 2010, just as Dubya did in 2009.  
   
3. Two significant collection areas, the estate tax and personal exemption phaseouts and limitations on itemized deductions, were repealed for 2010 as part of earlier tax-cut legislation.

But even with these tax reductions, Americans will pay more taxes in 2010
than they will spend on food, clothing and shelter combined.

Where our tax money goes: Five major categories of taxes dominate the tax burden.

Individual
income taxes, including federal, state and local, require 32 days of 
work. 

Payroll taxes take another 25 days to pay off.

Sales and excise taxes,
mostly state and local, demand that we work 15 days.

Property taxes require 12 days of work.

Corporate income taxes
take eight days. 

Budget deficit discounted: Since Capitol Hill seems for the most part to ignore the budget deficit, Tax Freedom Day doesn't count that escalating figure either.

If American taxpayers were required to pay for all government
spending this year, including the $1.3 trillion federal budget deficit, The Tax Foundation figures we'd be working an additional 38 days, until May 17, before we had earned enough to pay
our  taxes.

That would be the second latest deficit-inclusive Tax Freedom Day since World War II. Only in 2009 was it later, when an unprecedented
budget deficit of close to $1.5 trillion produced a deficit-inclusive
date Tax Freedom Day of May 21.

Separate state days: Each state also has its own Tax Freedom Day.

Because of modest incomes and
low state and local tax burdens, Alaska and Louisiana celebrate Tax
Freedom Day the earliest, on March 26. 

Other early state celebrants live in 
Mississippi (March 28), South Dakota (March 29) and West Virginia (March
30).

Connecticut
celebrates its Tax Freedom Day last, on April 27.

Joining Connecticut in the latest celebrations are New Jersey
(April 25), New York (April 23), Maryland (April 19) and Washington
(April 15).

The major difference between the state days is that states whose residents have higher incomes pay
much more in federal taxes, and they often have higher state and local taxes
as well.

Here in Texas, our Tax Freedom Day arrived in Texas on April 5.

The map below shows each state's special day and ranking for 2010.

Full details on the national and state data and implications are in the Tax Freedom Day 2010 special report.