"You can't really look at it as Tax Freedom Day, because it will be different for everybody, but your personal tax freedom day is important," said Alan J. Dlugash, an accountant and financial planner with the New York firm Marks Paneth & Shron. "The take-home pay is really the money you actually see, so it's really a reminder that your after-tax income is what really matters."
Dlugash said that he advises clients to not even think about their pre-tax earnings when budgeting or considering investment options. He suggests that all budgeting be done as compared to a percentage of after-tax earnings, so as not to overextend personal money and incur debt.
The report breaks down tax burdens by state, noting that Connecticut, with a freedom date of May 3, leads the country as the state with the heaviest tax burden, followed closely by New York, with a date of April 29. Four of the top five latest dates are Northeastern states, with New Jersey, Massachusetts and Wyoming rounding out the top five.
Alaska clocks in with the earliest freedom day, April 2, and citizens of Alabama, Tennessee, South Dakota, North Dakota, Mississippi and Oklahoma all worked enough to pay their taxes by April 7.
The breakdowns of federal, state and local taxes are based on income and tax date from the Department of Commerce's Bureau of Economic Analysis and involve measuring statistics on the country's net national product, personal income and gross domestic product.
The Bush tax cuts alleviated some of the heavy tax burdens of the late 1990s, but it's likely Tax Freedom will continue to arrive later in the year if the economy grows and personal incomes rise.
"It's likely to continue creeping up, because people's incomes are creeping into higher brackets," Dlugash said.
Current political debates could have huge future implications on this trend, as the Bush administration pushes to reform Social Security and revamp the U.S. tax code. And if current law remains in effect, the recent tax cuts are scheduled to expire in 2008 and 2010.
Any one of these issues has the potential to potential to move the annual Tax Freedom Day. Tax Foundation economists predicted that, assuming the status quo remains in effect and the course of the economy unchanged, the date will fall later in April.
For tax and finance professionals, the Tax Freedom Day will continue to serve as a barometer of the level of burden taxes place on their clients. It's a symbolic reminder that 30 percent of our annual earnings are earmarked for government spending.
"The truth of the matter is that the date is probably going to get later and later as the government spends more money," Dlugash said. "The date is really an indication of the amount of money the government is spending."