Tax Freedom Day 2009, the day in the year when the average Brit has earned enough to pay his tax bill, is today, May 14. That’s the earliest date since 1973.
But of course, it’s not really lower taxes that have shifted Tax Freedom Day so much earlier in the year (although the temporary VAT cut has helped). Rather, it’s that the economy is in serious trouble and less tax is being paid.
Along with the headline Tax Freedom Day figure, we also calculate a secondary figure every year, based on what the government actually spends, rather than merely what it collects in taxes. And when you factor in this deficit spending, Tax Freedom Day 2009 does not come until June 25 – the latest figure since 1984. To put it another way, you’d have to work for the taxman for another 42 days to pay off the bills the government is running up.
That gap of 42 days is wider than it was at its previous peak in 1975. It probably represents the biggest gap between revenue and expenditure since the Second World War. That’s really no surprise when you consider that the government is now overspending at a rate of £20m per hour, twenty-four hours a day, seven days a week. And needless to say, it means we’re going to be paying higher taxes in the years to come.
We’ve have an early morning here at the ASI doing media work for Tax Freedom Day. Eamonn Butler talked to John Humphreys on the Today Programme, while I appeared on Radio 5′s Wake Up to Money (click here and fast-forward to 22.45 to listen). By coincidence, ASI Fellow Nigel Hawkins was on the same programme in his everyday guise as an investment analyst. Fast-forward to 6.20 to hear him talking about BT.