Tax Freedom Day is a measure of when the average person stops paying tax and starts putting their earnings into their own pocket. In 2015, every penny the average person earned for working up to and including May 30th went to the taxman—from May 31st onwards they are paying themselves.

Really, it’s a bit more complicated than that. Firstly there is no average person—the UK does not have a perfectly proportional tax system so each individual’s tax freedom day will be different—with higher income people typically being freed later. But this is not strictly accurate because the Treasury does not just tax income; it taxes property, transactions, consumption, investment, capital gains and so on as well.

Secondly, we measure the entire tax take, including those taxes that don’t come directly out of earners’ pockets. The incidence (a fancy economist’s word for ‘burden’) of every tax eventually falls on households. Corporations cannot pay—they are legal constructs—only their shareholders, employees and customers. VAT raises consumer prices. Stamp duty land tax comes out of house prices, and so on. Households eventually pay every tax, even the ones they don’t notice.

Thirdly, we take into account depreciation and foreign investment earnings, as is standard around the world, measuring total taxes over net national income, not gross domestic product, so as to more closely approximate net wealth creation rather than economic activity.

Many of these figures are not available up-to-date for calendar years so they are proxied from government and OBR forecasts and financial year numbers. They are then revised when exact numbers become available. This means the Tax Freedom Day for a given year in the past may well have changed. However, the changes are usually very small, and the overall picture tends to be robust to these alterations.

Tax Freedom Day (and its sister, Cost of Government day, which measures total spending over national income) is not meant as anything but an illustration—an indication of the size of the state. As the complexities detailed above suggest, it does not correspond exactly to any individual’s experience. And yet many people do find it shocking to see how large the state really is, expressed in an intuitive way.

If you want further info, feel free to call up the ASI on 02072224995 or send us an email at ben@adamsmith.org.

Screen Shot 2015-05-18 at 15.49.47

As the graph above, and the table below show, Tax Freedom Day in the UK fell steadily later in the year until the mid-1980s, hitting nearly 180 days (i.e. half way through the year) before steadily trending down in the earl 1990s, and finally bumping around mid-to-late May, or 150 odd days through the year.

YEAR
Tax Freedom Day
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Cost of Govt Day
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196311628th April14526th May
196411527th April14122nd May
19651191st May14223rd May
19661256th May15031st May
196713819th May1555th June
196814425th May16515th June
19691511st June16515th June
19701544th June1577th June
197114627th May1566th June
197213819th May1566th June
197313415th May1511st June
197414930th May1555th June
19751555th Jun1599th June
19761522nd June17828th June
19771533rd June1822nd July
197814930th May17121st June
19791533rd June16616th June
198016414th June16818th June
198117323rd June1877th July
198217222nd June19313th July
198316717th June19313th July
198416515th June19717th July
198516414th June19212th July
198616010th June1888th July
198714728th May16212th June
198814526th May1522nd June
198914324th May14324th May
199014223rd May14425th May
199114223rd May1511st June
199213819th May1577th June
199313314th May16313th June
199413415th May16111th June
199513819th May16010th June
199613617th May1577th June
199714324th May1555th June
199814526th May14728th May
19991533rd June14930th May
20001511st June14324th May
20011544th June14526th May
200214728th May14627th May
200314223rd May14728th May
200414526th May1522nd June
200514526th May1544th June
200615031st May1599th June
200714930th May1588th June
200815031st May16414th June
200914425th May1899th July
201014425th May19212th July
201114627th May19010th July
201214728th May19010th July
201314829th May1899th July
201414930th May1822nd July
201515031st May17929th June