Tax Freedom Day today......

Tax freedom day

If you had to pay all of your tax at once, how long would it take you?

How much of the year would you spend working for the government before you get to keep any money yourself?

Well, in 2008, you would have to work until June 2 before you had enough money to pay your tax bill off entirely.

That is according to the Adam Smith Institute – which has declared Monday, June 2, tax freedom day.

The calculation includes all the income the government gets from taxes - both direct (such as income tax) and indirect (such as VAT). At the moment, the government takes about 40% of the total income of the country in taxes. What does it mean?Tax freedom day is purely a concept – in itself it does not really mean much. But it is a good indicator of our overall tax burden - as a rough guide, the later in the year the date freedom day falls the more tax we pay.As a rough guide, every day later that freedom day falls means an extra quarter of a percent tax we pay. Put another way, four days difference in the freedom day means a 1p in the pound change in our tax burden. (eg. June 2 indicates we pay a penny extra tax per pound than May 30.)HistoryTax freedom day has been calculated for many years. Its recent history shows up some interesting statistics. These seem to show that our tax burden does not necessarily increase under a Labour government.

Are you paying too much tax?

For instance, the latest date it has fallen on in the last 30 years was in 1982, when it came as late as June 20. This means our tax burden then was a whole 4.5% higher than it is now. In fact, in the period 1980 to 1997, tax freedom day fell later than June 2 on no less than twelve occasions. It was dramatically earlier in 1993, falling on May 23. Perhaps it was no coincidence that this was the year after a general election.Since New Labour came to power has been something of an upward trend recently, getting gradually later from 1997. In that year it fell on May 26. It is now seven days later, which equates to a 1.75% increase in our tax burden.Is it a bad thing for tax freedom day to be later?Whether having a later tax freedom day is a bad thing or a good thing depends on your ideological stance. If you believe, as the Adam Smith Institute does, that lower taxes are economically desirable, meaning the wealth of the nation is spread more fairly, then an earlier date is better.However, if you believe that the government should be entrusted to handle the economy to a certain extent to ensure a fair society, then a couple of extra pence in the pound is a worthwhile price to pay.by Julian Shaw, TWD Accountants. May 30, 2008.