Tax Foundation Figures Do Not Represent Middle-Income Tax Burdens

Publication Date: April 2004

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Robert Greenstein; David Kamin; Joel Friedman

Research Area: Banking and finance

Keywords: Tax code; Income diversity; Household income; Income tax

Type: Report

Abstract:

On April 6, The Tax Foundation released its report on "Tax Freedom Day," which it describes as the day when "Americans will finally have earned enough money to pay off their total tax bill for the year." Over the years, pundits and policymakers often have misinterpreted the Tax Foundation's reports as reflecting the level of the tax burdens that the broad swath of middle-income families must shoulder; the Tax Foundation's presentations invite this misinterpretation. In fact, however, middle-income taxpayers pay significantly less in taxes as a share of their income than the Tax Foundation's report implies.

The Tax Foundation’s annual Tax Freedom Day report consistently shows significantly higher tax burdens than those that authoritative, nonpartisan sources find middle-income taxpayers actually bear. This can be seen by comparing the Tax Foundation estimates of tax burdens to those that the Congressional Budget Office has just released for years through 2001, which the Center on Budget and Policy Priorities (Washington, D.C.) has updated through 2004. As the table below shows, CBO’s estimates of the share of income that the middle fifth of American households pay in taxes have consistently been well below the levels of taxation that the Tax Foundation reports suggest average Americans pay.