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Economy & Business

Pennsylvania Reaches 'Tax Freedom Day' On Saturday

Pennsylvania.png
Richard Borean
/
Tax Foundation

In 2015, Americans as a whole will spend less on food, clothing and housing combined than they will on taxes.

That’s according to the Tax Foundation, which announced Saturday marks Pennsylvania’s Tax Freedom Day.

Economist Kyle Pomerleau said this day shows when Pennsylvania residents have earned enough money to pay their total tax bill for the year.  The nonpartisan organization collects this information for all of the states as well as the U.S. as a whole.

“For the nation this means that it will take 114 days into the year, or until April 24, to pay its total $4.8 trillion tax bill for the year,” Pomerleau said. “Pennsylvania’s Tax Freedom Day of course is one day later on April 25t

He said Tax Freedom Day needs to be seen as an aggregate instead of looking at individual paychecks.  It is based on the total share of the income in Pennsylvania that is taken for taxes.

“If you were to take that number – it’s around 31 percent of total income in Pennsylvania is paid in taxes – and put that on the calendar, that means if you were to earn income equally across an entire year, it would take up to April 25 for it to finally be income for the state itself rather than for taxes,” Pomerleau said.

He said the day is important because of the levels of government services such as social security, Medicare and education funding.

“But how much does that cost when you all put it together?” Pomerleau said. “Tax Freedom Day is a really easy way to understand the total cost of government at federal, state and local level.”

The commonwealth is the 36th state to reach Tax Freedom Day this year.  The first state was Louisiana on April 2nd and the last will be Connecticut and New Jersey May 13.

But Pomerleau said in this case, being first isn’t necessarily the ideal situation, adding that the day is pushed farther back for two reasons.

The first is the level of income the nation grosses - the more income that is earned, the more taxes are paid as a share of income.  He gave an example of businesses, which don’t pay corporate income taxes or business income taxes when they are operating at a loss.

“But as the economy gets better, businesses are earning higher profits, they’re paying more in those corporate income taxes or business taxes,” Pomerleau said. “So it’s boosting the share of total income that is going towards taxes.”

The second component is policy Pomerleau said, but he added that this year he attributes the later date to a better economy.

Pennsylvania’s Tax Freedom Day fell on April 21 in 2014.