Forced Unionism and High Taxes Go Hand in Hand

This Year, Right to Work ‘Tax Freedom Day’ Came 14 Days Sooner

On April 23, according to the nonpartisan, Washington, D.C.-based Tax Foundation’s estimate, “Tax Freedom Day” (TFD) 2017 finally arrived.

The Tax Foundation’s entire published analysis remains available at www.taxfoundation.org — the group’s web site.

As the Tax Foundation explains, TFD is “the day when the nation as a whole has earned enough money to pay its total tax bill for the year.”

In 2017, “Americans will pay $3.5 trillion in federal taxes and $1.6 trillion in state [and local] taxes, for a total tax bill of $5.1 trillion,” or 31% of national personal income.

Right to Work State Residents Achieved ‘Tax Freedom’ on April 17

Not surprisingly, this burden is not borne equally by all Americans, and several factors play a significant role in determining when TFD comes for individual taxpayers and households.

The Tax Foundation highlighted two: “The total tax burden borne by residents across states varies considerably due to differing tax policies and the progressivity of the federal tax system.”

Hours after the Tax Foundation issued its report on TFD 2017, the National Institute for Labor Relations Research calculated average TFD’s for the 28 Right to Work states and the 22 forced-unionism states.

To derive average TFD’s for states where compulsory union dues are either permitted or banned, the Institute took aggregate state personal income data for 2016 as reported by the U.S. Commerce Department and the estimated 2017 TFD’s for the 50 states as reported by the Tax Foundation.

The Institute estimates that this year residents of forced-unionism states are forking over 33.2% of their total personal income in taxes, a 13% higher share than the Right to Work state average.

TFD in forced-unionism states as a group didn’t come until May 1 this year.

In contrast, TFD in Right to Work states as a group came on April 17, a full two weeks earlier than the forced-unionism average.

Lower Living Costs Are Key Part of Right to Work States’ Advantage

National Right to Work Committee Vice President Matthew Leen commented: “Tax Freedom Day consistently comes significantly earlier in Right to Work states than in forced-unionism states in part because state and local taxes typically consume a smaller share of personal income in jurisdictions where unionism is voluntary.

“Another advantage for Right to Work states is their lower living costs.”

As the Institute reported in February, interstate cost-of-living indices calculated by the Missouri Economic Research and Information Center show that on average forced-unionism states were nearly 26% more expensive to live in than Right to Work states in 2016.

When cost-of-living differences are taken into account, the average disposable income per capita in Right to Work states is higher than in forced-unionism states.

However, progressive federal income taxes are levied on nominal, rather than cost of living-adjusted, incomes.

Households in High-Cost Big Labor Stronghold States ‘Get Socked Twice’

Consequently, explained Mr. Leen, households in high-cost forced-unionism states like California, New York, New Jersey, Connecticut and Massachusetts “get socked twice.”

“They have to fork over more for housing, food, energy, health care, and other necessities,” Mr. Leen noted.

“And then they have to pay the same income tax rate as a household in a low-cost Right to Work state like Texas or North Carolina making the same nominal income, even though that nominal income goes much further in the Right to Work states.”

The TFD disparity, concluded Mr. Leen, is a prime example of how the compulsory-unionism system hurts practically everyone, and not just employees and business owners who are directly affected.

(Source: June 2017 National Right to Work Committee Newsletter)