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April 16th, 2012 F F ac
No. 297
Taxmageddon Looms, Potentially Pushing Tax Freedom
Day Later than Ever
By
William McBride
While Tax Freedom Day1 is just around the corner, on April 17 this year, try to enjoy it. If Congress fails to
act, Taxmageddon-the roughly $500 billion tax increase scheduled to occur January 1, 2013-could push
Tax Freedom Day to the end of April or beyond.
Taxmageddon, as Curtis Dubay and others3 have described it, is the result of a litany of expiring tax
provisions, all occurring at the end of this year. The biggest expiring provisions are the Bush tax cuts, the
payroll tax holiday, and the Alternative Minimum Tax (AMT) patch.
The table below shows the effect of all expiring provisions in terms of days added to America's total tax
burden. While this year it will take Americans 107 days to pay the total tax burden, these federal tax increases
will add another 11 days, pushing Tax Freedom Day to the end of April. Add to this the fact that state and
local tax collections are surging and it means that Tax Freedom Day next year could easily be a record
breaker.4 The all-time latest Tax Freedom Day occurred on May 1, 2000, after huge stock market gains
produced huge capital gains tax collections.
The table breaks Taxmageddon down according to the major tax types. The biggest effect is on the federal
individual income tax, the burden of which would increase more than 5 days unless these tax increases are
halted. This is mainly the result of expiration of the Bush tax cuts and the AMT patch, which would each add
more than 2 days to the burden. Another partial day would be added by the expiration of various tax-
extenders, most of which affect businesses, and are included here to the extent that they are used by pass-
through businesses, such as S-corporations, partnerships, and sole proprietorships, that file under the
1 See William McBride, Tax Freedom Day 2012, Special Report No. 298,
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2 See Curtis Dubay, Taxmageddon: Massive Tax Increase Coming in 2013, Heritage Foundation Issue Brief (Apr. 4,
2012), btrp:ii,-N/woheritage.org/researchreports/2O12/04/taxmageddon-massive- ax-increase-coming-i-20 i3.
3 Ezra Klein, 'Taxmageddon' in one table, Washington Post (Mar. 30, 2012),
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4 State tax collections are up 9 percent in 2011 over the year before. See Joseph Henchman, State Tax Collections Rise 9
Percent, Tax Foundation Tax Policy Blog, htp:/riaxfoun dation .orgibiog/show/28125.html.](ViewImageLocal?handle=hein.taxfoundation/ffcjhxz0001&div=1&collection=&method=preview&ext=.png&size=3)