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REJOICE! TAX FREEDOM DAY IS FRIDAY, 9 APRIL
Australians will spend the first 98 days of this year working for the government. ‘April 9 marks the first day Australians will start working for themselves, or Tax Freedom Day,’ according to Centre for Independent Studies economist, Robert Carling.
Every year the CIS looks at the total tax bill at all levels of government – federal, state and local – and compares it with the total wealth Australians are creating through economic activity. From this comparison we calculate how many days of the year, beginning 1 January, Australians would have to work before the annual tax bill is paid, assuming that all they produce goes to the tax man.
Tax Freedom Day marks the first day of the calendar year when the tax bill is cleared and we are working for ourselves rather than to satisfy the demands of government.
Normally by now the Australian Bureau of Statistics would have released all the data needed for this calculation. But this year the Bureau has not yet published its annual collation of all governments’ tax revenue and does not plan to do so until April 27. CIS has therefore estimated tax revenue from federal and state governments’ 2008-09 budget outcome statements.
‘Tax Freedom Day is 10 days earlier than last year, which is good news for the taxpayer, but to put the latest result into perspective, it is still one of the latest dates on record.’
Until the 1920s the tax burden was so low that the day fell in January and until the Second World War in February. As illustrated below it has steadily become later:
Decade: Average Tax Freedom Day:
1960s 14 March
1970s 28 March
1980s 12 April
1990s 12 April
2000s 18 April
‘This earlier date for Tax Freedom Day is likely to be temporary as it essentially just reflects the decrease of tax revenue due to the recession rather than fewer taxes’ warns Mr Carling.
A similar thing happened in the early 1990s recession, when Tax Freedom Day was pegged back by 11 days. Within four years, however, it was back to its pre-recession level and then in the 2000s became later than ever before.
Whether we see a repeat of that experience in the years ahead depends on how governments manage their finances. Government spending now far exceeds tax revenue and there are large deficits. The more those deficits are closed by taxes catching up with spending, the later Tax Freedom Day will become in the years ahead.
Robert Carling is a Senior Fellow at the Centre for Independent Studies. He is available for comment.
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