REJOICE! TAX FREEDOM DAY IS THURSDAY 5 APRIL 2012

Every year, CIS economists look at the total tax bill at all levels of government – federal, state and local – and compare it with the total wealth Australians have created through economic activity. From this comparison, they calculate how many days of the year, beginning 1 January, Australians work to pay off their annual tax bill, assuming all they produce goes to the Australian Tax Office. 

Tax Freedom Day marks the first day of the calendar year when the tax bill is cleared and taxpayers begin working for themselves rather than for the government. 

Until the 1920s, the tax burden was so low that the tax freedom day fell in January. Since then, the day has been falling steadily later in the year. 

Decade	Average Tax Freedom Day
1950s	February
1960s	14 March
1970s	27 March
1980s	10 April
1990s	12 April
2000s	19 April
2010s	5 April

This year, Tax Freedom Day is few days earlier than a decade ago, which should be good news. After all, it means Australians have had to work less than before for the government. 

On closer inspection, however, the news is actually worrying, says Dr Hartwich. The earlier Tax Freedom Day is not the result government spending less but a fall in tax revenue as a result of the global financial crisis.

Last year, the federal and state governments ran deficits of $59 billion. But today’s borrowing is nothing but tomorrow’s taxes. Eventually, we will have to pay the deficits government is running today.

So for an honest assessment of the real Tax Freedom Day, the deficit should be included in the actual tax revenue. This means the Tax Freedom Day for 2012 will fall a whopping 15 days later, on 20 April, putting it back to where it was before the global financial crisis.

“Australia is on a slippery slope of becoming more like European countries,” says Dr Hartwich. “If the government continues to spend big and finance it through deficits, the future tax burden may have to rise substantially to pay for a growing debt burden.” 

For now, Australians may celebrate the earlier Tax Freedom Day this year. But based on our current trajectory, let us not get complacent about the coming years.

Dr Oliver Marc Hartwich is a Research Fellow at The Centre for Independent Studies.
He is available for comment. p: 02 9438 4377 m: 0403 406 611 e: