Done with your taxes . . . finally

By MSN Money staff

You may have licked a stamp or hit the "send" button on April 15, but you weren't free of Uncle Sam's grip -- until now.

Tax Freedom Day, the made-up holiday after which the average American starts working for themselves, is today -- three days earlier than last year, thanks to a slowing economy and the $600-a-head tax-stimulus checks soon headed our way. By April 23, says the Tax Foundation, a research group, Americans will have earned enough, on average, to pay all of their federal, state and local tax obligations for the year.

The more you earn, of course, the later your freedom comes. Residents of the richest state, Connecticut, will toil away on government behalf until May 8, but those in the poorest, Mississippi, began earning real money on April 7.

A combination of moderate incomes and very low state and local taxes made Alaskans the first to claim their tax freedom, this year on March 29. (You'll find a state-by-state table below.)

For 2008, the Tax Foundation estimated that a typical American will work 113 days to pay taxes, longer than the amount of work needed to cover food and shelter combined. Their researchers break it down this way:

How long you work to pay for . . .

Federal taxes	74 days	Transportation	29 days
Housing	60 days	Recreation	21 days
Medical care/health	50 days	Clothing	13 days
State and local taxes	39 days	All other expenses	44 days
Food	35 days

Tax bite growing? Not really

The Tax Foundation was begun in the 1930s by a handful of corporate executives, including the chairman of General Motors and the president of Standard Oil of New Jersey. The foundation has tracked Tax Freedom Day since 1971, part of a continuing effort to make Americans more conscious of what they pay in taxes.

Federal income taxes take up about two-thirds of total tax spending, state and local taxes about a third. Since 1943, the number of days required to meet federal taxes has been roughly the same: about 70. That means that the ratio between what the U.S. government taxes and what people earn has remained relatively unchanged across a dozen presidencies, three major wars, a cold war and a handful of recessions.

2008 Tax Freedom Days by state:

	Days to work	Free on	Rank		Days to work	Free on	Rank
Alabama	99	April 9	46	Montana	98	April 8	48
Alaska	88	March 29	50	Nebraska	109	April 19	25
Arizona	110	April 20	20	Nevada	116	April 26	11
Arkansas	107	April 17	30	New Hampshire	105	April 15	35
California	120	April 30	4	New Jersey	127	May 7	2
Colorado	113	April 23	15	New Mexico	102	April 12	42
Connecticut	128	May 8	1	New York	125	May 5	3
Delaware	104	April 14	37	North Carolina	107	April 17	27
Florida	116	April 26	9	North Dakota	102	April 12	39
Georgia	109	April 19	23	Ohio	107	April 17	28
Hawaii	116	April 26	10	Oklahoma	101	April 11	43
Idaho	110	April 20	19	Oregon	106	April 16	32
Illinois	113	April 23	16	Pennsylvania	111	April 21	18
Indiana	107	April 17	29	Rhode Island	114	April 24	13
Iowa	106	April 16	34	South Carolina	106	April 16	33
Kansas	108	April 18	26	South Dakota	102	April 12	41
Kentucky	100	April 10	45	Tennessee	101	April 11	44
Louisiana	103	April 13	38	Texas	102	April 12	40
Maine	110	April 20	22	Utah	111	April 21	17
Maryland	118	April 28	7	Vermont	109	April 19	24
Massachusetts	118	April 28	6	Virginia	115	April 25	12
Michigan	106	April 16	31	Washington	119	April 29	5
Minnesota	117	April 27	8	West Virginia	98	April 8	47
Mississippi	97	April 7	49	Wisconsin	114	April 24	14
Missouri	104	April 14	36	Wyoming	110	April 20	21

Source: Tax Foundation calculations based on U.S. Department of Commerce data

For the first 40 years of the 20th century, state and local taxes were generally higher than federal taxes, and total taxes remained below 10% until the 1930s. That's when Franklin Roosevelt attacked the Great Depression with the New Deal, expanding the role of the federal government and expanding the taxes needed to pay for the programs. The costs of waging World War II swelled taxes even further in the 1940s.

Americans' total taxes, 5.9% in 1900, had risen to about 30% by 1968 and remain there today, the Tax Foundation says.

The foundation bills itself as politically neutral. "We make no value judgment on whether (the tax rate) is too high or too low," says Curtis Dubay, an economist with the foundation. "That's for the voter to decide, whether they're getting good value for their money."

Maybe the glass is half-full

Critics, however, contend that even the phrase "tax freedom" is heavily freighted.

"It's quite misleading," warns Karen Kraut of United for a Fair Economy, a nonprofit social-justice group. "By using the word 'freedom,' Tax Freedom Day is carefully constructed to associate taxes with freedom's opposite -- slavery, incarceration, oppression -- and promotes the idea that taxes are vile."

Other critics take issue with the way the foundation calculates the date. The Center on Budget and Policy Priorities, a Washington, D.C., think tank representing the interests of low-income families in debates on budget and tax policies, says middle-income Americans "pay significantly less in taxes as a share of their income than the Tax Foundation implies."

The problem has to do with how "average" is defined. The foundation uses the mathematical average: total wages divided by total taxes. But the think tank argues that because the tax system is progressive, people with higher incomes pay a greater percentage of their incomes in taxes.

Though Tax Freedom Day is often referred to as the date when the "average American" has finished "working" for the government, the think tank says families in the middle of the income spectrum work 40% fewer days than the Tax Freedom Day average.

Yet some observers believe that because of hidden fees and accounting artifices, Americans pay even higher taxes than the Tax Foundation asserts.