Tax Freedom Arrives Sooner in Right to Work States
Right to Work Tax Freedom Day Comes Sooner
Higher Living Costs Exacerbate Forced-Unionism Tax Disadvantage
On April 19, according to the nonpartisan, Washington, D.C.- based Tax Foundation, “Tax Freedom Day” (TFD) 2018 finally arrived.
The Tax Foundation’s entire analysis is available at www.taxfoundation.org — the group’s website.
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.”
TFD “takes all federal, state and local taxes and divides them by the nation’s income.”
According to the Tax Foundation’s current estimate, this year Americans will pay “$3.39 trillion in federal taxes and $1.80 trillion in state and local taxes, for a total tax bill of $5.19 trillion . . ..” That amounts to nearly 30% of all of the nation’s income.
Right to Work State Residents To Receive Nearly Two Extra Weeks of Take-Home Pay
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 of different states varies considerably due to differing state tax policies and the progressivity of the federal tax system.”
Hours after the Tax Foundation issued its report on TFD 2018, the National Institute for Labor Relations Research calculated average TFD’s for the 27 Right to Work states (excluding Missouri, whose 15-month-old law banning forced union dues and fees has not yet not taken effect due to Big Labor obstruction) and the 22 forced-unionism states.
To derive average TFD’s for states where compulsory union dues are either permitted or prohibited, the Institute took aggregate state personal income data for 2017 as reported by the U.S. Commerce Department and the estimated 2018 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 31.6% of their total personal income in taxes, a 13% higher share than the Right to Work state average.
TFD in compulsory-unionism states as a group didn’t come until April 26 this year.
In contrast, TFD in Right to Work states as a group came on April 13, or nearly two weeks earlier than the forced-unionism average.
Cost of Living-Adjusted Disposable Incomes Higher In Right to Work States
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 earlier this year, interstate cost-of-living indices calculated by the Missouri Economic Research and Information Center show that on average forced-unionism states were nearly 29% more expensive to live in than Right to Work states in 2017.
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 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 freedom-loving employees and business owners who are directly affected.