Tax Freedom Day - what is it and when does it fall?


Tax Freedom Day is a symbolic date and it has a different effect from year to year. What does it mean for taxpayers? Does it measure the economic level? When does it fall in 2021?

Tax Freedom Day 2021

Tax Freedom Day should be understood as the date on which the (average) total income from the beginning of the year equals the (expected) tax liability for that year. In simple terms, it means a symbolic date when taxpayers stop paying the state and start earning money for themselves. Tax Freedom Day is the cut-off date beyond which the taxpayer stops working for the government and starts on himself. During the year, citizens work, earn money and pay taxes on this basis without dividing them into individual activities. However, in the event that from the beginning of the year, only the taxes for the entire year were to be paid first, then the Tax Freedom Day would mean the date from which the money would remain solely at the disposal of the taxpayer.

Tax Freedom Day over the years

According to Centrum im. Adam Smith: "The calculation of the Tax Freedom Day is based on the ratio of the share of all public expenditure (state budget, local government budgets, government earmarked funds, etc.) to the gross domestic product (GDP). Nominal data come from the justification to the budget prepared by the Ministry of Finance, confronted with Eurostat data, and from other official sources, such as earmarked fund budgets”.

In 2021, Tax Freedom Day falls on June 22. In 2020 it was June 10, in 2019 - June 8, and in 2018 - June 6. It can be seen that since 2018, the number of days required to work to pay off the total sum of state expenses has gradually increased. In 2021, it "jumped" sharply and reached the highest level since 2013.