3 Months Into 2014, You're Likely Still Working for the Tax Man
One way to think about its is to figure out how much of your working year goes to covering your taxes. The conservative-leaning Tax Foundation calculates annually how many working days it takes for the average American worker to earn enough to pay all his federal, state and local taxes, plots it on the calendar, and dubs it "Tax Freedom Day."
Last year, that day was April 18, reflecting that Americans on average paid 29.4 percent of their income in federal and state taxes. But that date varies widely from state to state.
Early Freedom From Taxes
Residents in different states see varying percentages of their income go toward taxes for a variety of reasons. State tax rates vary. So does relative income, with less prosperous states tending to pay lower federal tax rates than those with more high-income taxpayers.
The lowest-tax states in 2013 were Louisiana and Mississippi, whose Tax Freedom Days were both March 29. All five lowest-tax states were in the South, with Tennessee, South Carolina and New Mexico rounding out the top five.
All five take a relatively low percentage of their residents' income in state and local taxes. Most rely on sales taxes; South Carolina's the exception, with a high level of revenue from property taxes. Louisiana and Mississippi boast the highest percentage of federal aid of any state, getting back from Washington far more than they send to it.
Paying More Tax, into May
At the other end of the spectrum, Connecticut residents took the longest to account for their taxes in 2013, with a Tax Freedom Day of May 13, outlasting No. 2 New York by a full week. The Northeast dominated the top of the list, with New Jersey and Massachusetts coming in third and fourth, and Illinois taking No. 5.
%VIRTUAL-article-sponsoredlinks%Most of these states are among the highest in terms of state and local taxes paid per person, reflecting their relative wealth. All five also take more than 10 percent of their residents' income in the form of state and local taxes, with New York exceeding the national average by almost 3 percentage points.
Property and state income taxes make up a huge portion of the revenue sources for these states, taking advantage of the extensive property holdings and high income that their residents enjoy.
What's Your Tax Freedom Day?
A Tax Foundation map shows the 2013 Tax Freedom Day for your state. The announcement of Tax Freedom Day 2014 is expected to come soon.
You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.