You're done working for Uncle Sam

By MSN Money staff

Congratulations. You may not have sent a check or hit the "send" button yet, but you've already put in the work to free yourself from Uncle Sam's grip.

Tax Freedom Day, the made-up holiday when the average American starts working for him- or herself, is today -- eight days earlier than last year, thanks to a slowing economy and the stimulus package in the American Recovery and Reinvestment Act of 2009. By April 13, 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 Connecticut will toil away on government behalf until April 30, but those in Louisiana began earning real money on March 28.

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 23. (You'll find a state-by-state table below.)

For 2009, the Tax Foundation estimated that a typical American will work 103 days to pay taxes, longer than the amount of work needed to cover food and shelter combined.

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.

2009 Tax Freedom Days by state:

	Days to work	Free on	Rank*		Days to work	Free on	Rank*
Alabama	92	April 2	44	Montana	93	April 3	42
Alaska	82	March 23	50	Nebraska	98	April 8	31
Arizona	100	April 10	23	Nevada	98	April 8	29
Arkansas	94	April 4	37	New Hampshire	100	April 10	22
California	110	April 20	4	New Jersey	119	April 29	2
Colorado	102	April 12	16	New Mexico	92	April 2	43
Connecticut	120	April 30	1	New York	115	April 25	3
Delaware	101	April 11	20	North Carolina	99	April 9	25
Florida	99	April 9	27	North Dakota	91	April 1	46
Georgia	102	April 12	17	Ohio	101	April 11	21
Hawaii	103	April 13	14	Oklahoma	94	April 4	40
Idaho	102	April 2	18	Oregon	99	April 9	26
Illinois	103	April 13	15	Pennsylvania	104	April 14	11
Indiana	98	April 8	28	Rhode Island	104	April 14	10
Iowa	94	April 4	39	South Carolina	94	April 4	38
Kansas	98	April 8	30	South Dakota	88	March 29	47
Kentucky	93	April 3	41	Tennessee	95	April 5	36
Louisiana	87	March 28	49	Texas	96	April 6	32
Maine	96	April 6	33	Utah	103	April 13	13
Maryland	109	April 19	5	Vermont	102	April 12	19
Massachusetts	106	April 16	7	Virginia	106	April 16	6
Michigan	100	April 10	24	Washington	106	April 16	8
Minnesota	105	April 15	9	West Virginia	91	April 1	45
Mississippi	87	March 28	48	Wisconsin	103	April 13	12
Missouri	96	April 6	34	Wyoming	95	April 5	35

* Ranked by number of days worked, most to least

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.

Updated April 13, 2009