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 2014, “Americans will pay $3 trillion in federal taxes and $1.5 trillion in state [and local] taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income.”
Right to Work State Residents Achieved ‘Tax Freedom’ on April 14
Not surprisingly, this burden is not borne equally by all Americans, and regional factors play a significant role in determining when TFD comes for individual taxpayers and households.
The Tax Foundation puts it this way: “The total tax burden borne by residents of different states varies considerably due to differing state tax policies and because of the progressivity of the federal tax system.”
Shortly after the Tax Foundation issued its report on TFD 2014, the National Institute for Labor Relations Research — the “think tank” of the Right to Work movement — calculated average TFD’s for the 24 Right to Work states and the 26 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 2013 as reported by the U.S. Commerce Department and the estimated 2014 TFD’s for the 50 states as reported by the Tax Foundation.
The Institute estimates that this year residents of forced-unionism states will have to fork over 31.9% of their total personal income in taxes, a 5.6% higher share than the national average, and a 12.9% higher share than the Right to Work state average.
TFD in forced-unionism states as a group didn’t come until April 27 this year, or six days later than the national average. In contrast, TFD in Right to Work states as a group came on April 14, or seven days earlier than the national average.
Lower Living Costs Are Key Right to Work State Advantages
National Right to Work Committee Vice President Matthew Leen commented:
“TFD 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 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 21% more expensive to live in than Right to Work states in 2013.
When cost of living differences are taken into account, the average disposable income (as well as average personal 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.
Consequently, explained Mr. Leen, households in high-cost forced-unionism states like California, New York, and New Jersey and in New England “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 forced-unionism system hurts practically everyone, and not just employees and firm owners who are directly affected.