Friday April 13 12:17 PM ET
Study: Americans Work More of Year to Pay Taxes

By Jeremy Pelofsky

WASHINGTON (Reuters) - On average, Americans are working a longer part of the year to pay their federal, state and local taxes -- effectively having to wait until May 3 to earn money for themselves, the Tax Foundation group said on Friday.

The nonprofit tax education group also said the $1.6 trillion in tax cuts proposed by President Bush was not likely to prevent the tax freedom date from advancing further into May over the next 10 years.

The Tax Foundation said the tax relief would be offset by the tendency of the progressive income tax code to extract a larger and larger fraction of income in taxes as people advance into higher income brackets.

In its annual reminder of the tax burden, the foundation said the average taxpayer would have to work 122 days to earn enough to meet all their tax obligations for 2001. That was up from 121
days in 2000 and continued a decade-long trend.

``The bottom line is Americans will work longer into the year to pay their tax bill than they will work to pay for food, clothing and shelter combined,'' said Scott Hodge, executive director for the foundation.

``Even if President Bush's $1.6 trillion tax cut plan were to be enacted in its entirety with absolutely no changes by Congress, it would only have a modest impact,'' he said.

Tax freedom days can vary widely from state to state, depending on local tax rates, and from individual to individual. Those who make less money, pay less in taxes and therefore would earn enough to cover their tax payments within a few weeks rather than months.

Connecticut's total tax burden was the heaviest among the 50 U.S. states, so taxpayers there would not celebrate until May 25, the Tax Foundation said. At the other end of spectrum, Alaska's tax freedom day arrives the earliest, on April 16.

The study was criticized by opponents who argued the methodology was flawed because it left out certain income like capital gains and did not reflect the experience of most taxpayers.

``For the vast majority of Americans, this does not apply to them at all,'' Iris Liv, deputy director of the Center on Budget and Policy Priorities, said at a briefing just before the Tax Foundation's news conference.

``Taxes on average is not a meaningful figure, it's not characteristic of the taxes middle-income people pay, the vast majority of Americans pay, it is in fact a distortion,'' Liv said, arguing most earn enough to cover tax payments by January.

The Tax Foundation study offered the following breakdown of how many days Americans will have to work in 2001 to meet various tax obligations:

-- 50 days to pay individual income taxes.

-- 29 days will be spent working to pay payroll taxes.

-- 16 days of work to pay ``hidden taxes'' such as sales and excise taxes that drive up the cost of nearly all goods and services.

-- 10 days will be spent working to pay property taxes.

-- 12 days of work to pay their share of corporate income taxes, which are collected from companies but ultimately paid by consumers, employees and shareholders.

-- Finally, five days working to pay other business and miscellaneous taxes.

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