You’re finally working for yourself!

Today is Tax Freedom Day!

On April 24, 2015, at 3:36AM, the average U.S. taxpayer finally worked long enough this year, to have earned enough to pay his taxes for the year.

Tax Freedom Day the day when the average U.S. taxpayer has finally earned enough to pay his taxes for the year. Each year, the Tax Foundation gathers massive amounts of government tax data and from that data, calculates what portion of our income we pay in taxes and how many days the average taxpayer will have to work to pay his taxes. They then count that many days into the year and that day is Tax Freedom Day. This year, that day is April 24.

We actually take it a step further, with our Tax Freedom Clock. We use the Tax Foundation report to calculate the exact second of Tax Freedom. The Tax Foundation has calculated that in 2015, Americans will pay 31.0% of their total income in taxes. Using that number, we calculated that the exact moment of Tax Freedom occurred at 3:36AM this morning.

The Tax Freedom Clock was updated to this date and time on March 31, when the Tax Foundation announced the 2015 Tax Freedom Day. This clock counts down from the beginning of the year, to Tax Freedom (second). Then, it begins counting up, to inform the user how long he has been working for himself. At the end of the year, the clock resets and begins counting down to Tax Freedom again, using the prior year’s date and time, until such time as the new Tax Foundation report is issued.

The Tax Freedom Clock is a Flash applet, so it should work on any web site or blog that allows web widgets (object code or embed code) and display properly on all modern browsers.

Sorry, but Flash doesn’t work on iPhones or iPads. We have considered developing an iOS app and it still may happen in the future. But we are busy preparing a 2nd edition to “The Rich Don’t Pay Tax! …Or Do They?”, finishing up another book, “The Tax Deception”, for publication this summer, and simultaneously preparing speeches to be presented at several large political conventions this summer.

Allegiance Books encourages you to share this widget with your friends, by placing it on your own web site, on social networking sites and in the signature area of your various forum postings.

There are two ways to place this widget on a web page. The most common is the “object” code version. But we also include the “embed” code version, in the event that the object code version doesn’t work on a particular site. Please note that some blogs and forums may not allow either “object” or “embed” code. In fact, embedding a widget on a Facebook page requires a special app. But in general, you’ll probably find that Flash web widgets are accepted on a wide variety of social forums.

Of course, if it’s your own site, then either of the methods of embedding the widget should work.

To share this widget with others, just select all of the text in one of the following boxes and copy it (Ctrl–C on a PC or Cmd–C on a Mac). Then, paste it into the HTML code of your web site, blog or forum posting (Ctrl–V on a PC or Cmd–V on a Mac), where you want the Tax Freedom Day Clock to appear on that page. Look for a button on forums that say something like “HTML” or “CODE”, to get to the point where you can paste this code into the page. That’s all there is to it.

>> Use just one of the following… not both. <<

This is the “object” code version that is most widely allowed on forum postings.

For those sites that do not allow “object” code, you might try the following “embed” code.

The underlying data that makes the US Tax Freedom Clock possible comes from annual calculations by the non-partisan Tax Foundation, who are the official keepers of the US Tax Freedom Day.

The Tax Foundation uses the most unbiased method possible for calculating the national Tax Freedom Day. As you can see below, it is very straight forward:

Dividing the total of federal, state and local taxes, by the total income of all Americans, gives us the percentage of our annual income that goes to taxes and likewise the percentage of the year that we have to work for the government to pay those taxes. Take that percentage and multiply it by the number of days in the year and you know how many days you have to work to pay your taxes for that year.

In the past, some people have suggested that Tax Freedom Day is not really representative of most working Americans, since it is skewed by the the large amount of taxes paid by the very rich. They try to spin the story that that the average taxpayer doesn’t really work that long, by ignoring other even more significant facts. But that’s all their argument is – spin. It has no basis in fact.

You see, like most spin, their argument focuses on just one point that is part of a much larger picture and, by itself, would tend to support their position. But in order to make their spin work, they completely ignore the fact that, according to the bi-partisan Joint Committee on Taxation, roughly half of Americans don’t earn enough to have any tax liability. It should be noted that those who pay zero federal income tax also pay very little of any other taxes. They want us to forget that important fact, because they know that it more than offsets the effect of a handful of the rich paying huge amounts of tax. In the end, Tax Freedom Day is very representative of the average working American and may actually be skewed ever so slightly toward lower-income taxpayers. Because of this, there is a very good likelihood that your personal tax freedom day could be later than the one calculated by the Tax Foundation.

We hope that you will use the Tax Freedom Day Clock web widget on your site and tell others about it, to help emphasize how much of our work actually benefits the government and not those of us who worked to earn that money.

Please visit the Tax Foundation for more information on Tax Freedom Day.

A flat income tax will benefit the rich at the expense of the middle-class

With the surging popularity of the FairTax (H.R.25 and S.155) DC power-brokers and members of the leadership of both parties are beginning to worry that they might lose their Golden Goose – the one thing that gives them the most power – the income tax. So they have taken a new tack, in order to kill any real tax reform.

It seems that they learned two things from their failure to stop President Reagan from cutting the number of tax brackets from 16 rates to just two and eliminating most carve-outs. First, they learned that that fighting tax reform head-on, won’t work. Second, they learned that a flat income tax or even a nearly flat income tax won’t stay flat. So in their desperation to save the income tax, they’re resorting to subterfuge. While the leaders in Congress aren’t out promoting it, they have a number of candidates out talking about implementing a flat income tax. They are telling voters, “We need to pass a flat income tax, so we can abolish the IRS and send our tax returns in on a postcard.” It all sounds well and good… at least, so long as you don’t look too deeply at the facts.

The first fallacy of that statement should be obvious. If we had a flat income tax and abolished the IRS, where would taxpayers send all those postcards? Think about it… That’s right. As pointed out in a previous article, as long as the government taxes income, there will, by necessity, be an IRS.

But the most important issue, concerning a flat income tax, is not so obvious. You see, a flat income tax would result in an increased tax load on the middle-class. This isn’t just some projection or hypothesis, either. It’s based on solid facts that are available to everyone and easy to understand. Consider the following.

  1. The only flat income tax bills currently in Congress, H.R.1040 and H.R.5882, both maintain the standard deduction.
  2. The ongoing flat tax rate in H.R.1040 is 17% and it’s 15% in H.R.5882. Also, 17% is the rate most often cited by flat income tax supporters.
  3. The IRS reports that under the current income tax, the top 1% of taxpayers pay an average tax rate of 22.83% in 2012.
  4. The CBO (Congressional Budget Office) reports that the middle quintile (fifth) paid an 11.1% tax rate in 2009.

Look at those sources – the text of the Flat Tax Act, IRS Collections Data, and the CBO Distribution of Household Income and Federal Taxes Report. These are solid numbers. So let’s put these facts together and look at the picture they clearly paint. The standard deduction that remains in both H.R.1040 and H.R.5882 (and will certainly remain in any other flat income tax bill) insures that the poor will not see any appreciable change in their tax rate under a flat income tax. (There is one other flat income tax plan that I would normally not mention, since it has never been introduced as a bill in Congress. But I feel that, I should address the Gohmert plan, since it is the plan that presidential candidate Sen. Ted Cruz heartily endorsed in 2012, even calling it, “ideal”. The Gohmert plan departs from the rest, in that it does eliminate the standard deduction and so, would amount to a huge tax increase for the poor and lower-middle-class.) But the rich, who currently pay an average of 22.83% income tax would see their tax rate drop almost six percent (5.83%), under H.R.1040 and almost eight percent (7.83%), under H.R.5882. Under H.R.1040, a 5.83% drop, from 22.83%, amounts to a 25% tax cut for that top 1% of taxpayers ( 5.83% / 22.83% = 25.5% ). Under H.R.5882, a 7.83 drop, from 22.83%, amounts to a 34% tax cut for the top 1% of taxpayers ( 7.83% / 22.83% = 34.3% ). The same data source shows us similar tax savings for other high income brackets. Using H.R.1040, which is the best-case scenario, we find that the average tax rate for the top 2% is currently 22.52%, which would amount to a 24.5% tax savings under H.R.1040 and it’s 21.97 for the top 3%, giving them a 22.6% tax savings. Those numbers are even larger under H.R.5882.

With those facts in mind, ask yourself this question. If the poor continue to pay a flat income tax at about the same rates as today and the rich get a 25% to 34% tax break, who will make up the difference? But if Gohmert and Cruz have their way, it won’t be just the middle-class who will take a tax hit. It will seriously impact the poor, who will no longer have access to the standard deduction.

Actually, we don’t have to surmise who will pay the difference. This is where the data from the CBO comes in. The IRS data is only broken down as top 1%, top 5%, etc. So, to see how middle-class taxpayers will fare, we’ll go to the CBO numbers, that are broken down in quintiles. That data is three years older than the IRS data, which ends at 2012. But that data should still be fairly close to today’s numbers. Using the CBO data, that middle quintile paid income tax at 11.1% in 2009. So under a flat income tax, they will pay tax at a rate either 3.9% or 5.9% higher than under the current income tax. As a percentage of what they pay now, that amounts to a 53% tax increase, under H.R. 1040 ( 5.9% / 11.1% = 53.2% ) and a 35% tax increase under H.R.5882 ( 3.9% / 11.1% = 35.1% ). Of course, under the Gohmert/Cruz plan those numbers would drop somewhat, since the poor would pick up a portion of that tax load.

In fairness, a flat income tax typically includes a higher standard deduction than does a progressive income tax, so this would have the effect of un-taxing a few more people at the low end. But when you un-tax more people at the low end, all it does is shrink the middle and increase the tax rates on that smaller middle-class.

Make no mistake, under a flat income tax, it’s always the middle-class who end up bearing the additional tax load.

Remember that Ronald Reagan reduced the number of tax brackets from 16 to just two (15% and 28%). But before one term of Congress had expired after he left office, George H.W. Bush signed into law a third, higher tax bracket. Although the economy was doing great, due to the fact that Reagan had also lowered the top marginal rate from 70% to 28%, the middle class were paying a larger share of the tax load. This was seen as unfair, so a 31% bracket was proposed and ultimately signed into law in November of 1990 (less than two years after Reagan left office). The idea was to tax the rich more, to make up for the effective tax cuts they received and thereby relieve some of the additional tax load on the middle-class. Of course, one of the primary reasons why the power brokers in DC are willing to consider a flat income tax, is because they know that it will give them this exact excuse for making the tax code progressive again.

Under currently proposed flat income tax plans, the poor will likely see little change (except for the Gohmert plan), the rich will get a massive break and the middle-class will end up shouldering the additional tax load.

Now you know why a number of very rich people, who shall remain nameless, are out there promoting a flat income tax. They know that if a flat income tax becomes law, they will get a major tax break and all they would have to do to get this break, is keep the middle class from realizing that they will paying more, till it’s too late.

Only the FairTax completely un-taxes poverty. Only the FairTax eliminates, or even can eliminate, the IRS. Only the FairTax provides true tax reform without placing a heavy burden on the producers who make up the middle class.