April 15 has come and gone, and most Americans have fulfilled
their duty to the IRS for the year. But even with that task
behind them, American taxpayers still haven't managed to earn
enough money this year to pay off all the taxes they'll owe in
The nonprofit Tax Foundation came up with the concept of Tax
Freedom Day to make it clear just how long Americans have to work
just to pay their overall tax burden to federal, state, and local
governments. The concept is simple: When you take the total
amount of all the taxes that people have to pay and then divide
it by their income, you can figure out what percentage of the
year you spend working to earn enough to pay your share of those
This year, Tax Freedom Day for America as a whole won't come
until tomorrow, April 18. That's five days later than it was last
year. Let's look at three of the reasons why you still haven't
managed to get free of the tax man this year, and why things
could get even worse in the future.
1. Higher payroll taxes on Social Security.
At the beginning of 2013, the temporary tax holiday on Social
Security taxes expired. As a result,
payroll taxes rose from 4.2% to 6.2%
Because Social Security taxes apply only to a maximum of
$113,700 in earnings for 2013, not everyone saw their overall
taxes go up by 2 percentage points. But for those who fall under
that threshold level, paying 2% more of your income toward
payroll taxes effectively means that you're working more than an
extra week this year to get them paid.
2. Higher marginal rates on high-income taxpayers.
Even though high-income taxpayers don't bear the full brunt of
higher payroll taxes, they don't get off scot-free.
Increases in the highest marginal rates
for single taxpayers making $400,000 or more and joint filers
with more than $450,000 in income amount to 4.6 percentage points
for ordinary income and 5 percentage points for dividends and
Those higher rates only apply to the amount of income above
those threshold levels, so taxpayers won't have to work 4.6% to
5% of the year paying their extra share. But taxpayers with
incomes substantially above the thresholds can expect to work
several extra days to pay it off, with some extreme cases
involving two weeks or more of extra work.
3. New tax surcharges on high-income earners.
high-income earners face some brand-new taxes
this year. For single filers earning more than $200,000 and joint
filers above $250,000, two new tax surcharges could increase your
tax bill. For wages and other employment income, a 0.9% tax
applies to amounts above those thresholds. Moreover, if you have
investment income that when added to your other income puts you
above those levels, you'll have to pay an investment-income tax
Again, how much those taxes will add to individuals' tax
burden depends on their exact income breakdown. But for many
high-income earners, the taxes could add days or even a week or
more to the length of time they work for Uncle Sam.
Moreover, more tax increases look likely to hit ordinary
Americans in the near future.
has been making
agreements with an increasing number of states to
collect sales tax
on online purchases, and a federal law could subject Amazon,
, and other online sellers with the obligation to collect taxes.
That has helped
and other competing brick-and-mortar retailers, but it means
consumers pay more in overall tax. Technically, most taxpayers
already owe uncollected sales taxes to their respective states,
but few states enforce those provisions vigorously. With state
and local sales taxes representing 12 days' worth of the average
American's tax burden, increases would have a small but
significant impact on many people.
So when tomorrow comes, be sure to celebrate your freedom from
taxes for another year. But as you start to earn money for
yourself, keep in mind that you could be working even longer for
the tax man in 2014.
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Fool contributor Dan Caplinger has no position in any stocks
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