By Chris Edwards
Sunday, April 22, 2012
The Tax Foundation reported that Tuesday was Tax Freedom
Day (TFD), which is the day that Americans stop “working for the government”
through their tax payments and start working for themselves.
TFD is calculated by taking total federal, state, and
local taxes and dividing by national income to get a ratio representing the
share of income that the average person pays in all taxes. That ratio is
applied to the 365-day calendar. This year the ratio is 29.2 percent, which
translates into April 17 for TFD. Time to party!
But maybe not quite yet…
When I worked at Tax Foundation in 1993, I mailed a
letter to Milton Friedman asking about his view on TFD. He kindly responded
with a letter and a 1974 Newsweek article in which he proposed a “Personal
Independence Day.” That day would be based on total government spending, which
is larger than total taxes, and thus our day to celebrate freedom from the
government hasn’t yet arrived this year.
In his letter to me, Friedman stressed that total
spending is the important variable in assessing the burden of government: “If
government spends an amount equal to 50 percent of the national income, only 50
percent is left to be available for private purposes, and that is true however
the 50 percent that government spends is financed.” And while some economists focus
on how government borrowing may “crowd out” private investment, Friedman said,
“What does the crowding out is government spending, however financed, not
government deficits.”
In its TFD report, Tax Foundation includes a supplemental
calculation looking at spending. The thinktank figures that Americans will work
until May 14 this year to be free from the burden of federal, state, and local
spending. The Foundation is lacking a snappy name for that important day, but
now we are reminded that Friedman has already suggested one.
Friedman hoped that “Personal Independence Day” would
complement our national Independence Day of July 4. The latter is the day we
celebrate independence from the “Royal Brute of Britain,” as Tom Paine called
him in Common Sense. But for Paine and the other Founders, the deeper goal of
July 4, 1776 was to create a limited government to ensure the maximum space for
the exercise of individual freedom. As Paine noted, private “society in every
state is a blessing, but government, even in its best state, is but a necessary
evil.”
So Milton Friedman’s Personal Independence Day can be our
annual reminder that while our forefathers gave the boot to the “crowned
ruffians” of Old Europe, we’ve still got work to do in limiting the power grabbing
of our own elected ruffians in Washington.
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