Tax Freedom Day, Part 2

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As of June 2024, this is out of date. Please refer to Tax Freedom Day 2024 for the updated statistics.

Tax Freedom Day 2011 came on May 30, three days later than in 2010. That means that for the first 149 days of the year, Britons were earning for the taxman. Only on May 30 did they start earning for themselves.

But even this alarming figure understates the heavy financial burden imposed by the British state. If the government had to finance all its spending through taxes, rather than relying on borrowing, Tax Freedom Day would not have come until today, July 1.

To put it another way, the government would have to take every penny earned in the United Kingdom from January 1 to June 30 – a full six months – in order to balance the books for the year at current levels of spending.

What’s our money being spent on? If Britons were funding all public spending through taxes, they would have to work 50 days to cover the cost of benefits, tax credits and pensions, and a further 8 days to cover personal social services. Paying for healthcare would take them 32 days. Education would take 23.

Shockingly, Britons would have to work a full 11 days to finance debt interest payments – that’s longer than they’d have to work to pay for defence (10 days) or law and order (9 days).

How big is the funding gap? The gap between Tax Freedom Day based on tax revenues – the traditional figure – and Tax Freedom Day based on government spending now stands at 32 days. That is a smaller gap than in 2009 (37 days) and in 2010 (40 days) thanks to the government’s efforts to reduce the budget deficit. But as recently as 2001, there was no gap at all – then, the government could fund all its spending commitments through taxes, without having to borrow money.

What’s going to happen over the next five years? Assuming that the coalition governments delivers on its promise to reduce spending, then Tax Freedom Day based on government spending will continue to come earlier in the year, and the gap between it and Tax Freedom Day based on tax revenues will continue to get smaller. Based on Office of Budget Responsibility forecasts:

  • In 2012, Tax Freedom Day will be May 30 based on tax revenue and June 23 based on government spending – a gap of 24 days.

  • In 2013, it will be May 31 based on tax revenue and June 16 based on government spending – a gap of 16 days.

  • In 2014, it will be June 1 based on tax revenue and June 11 based on government spending – a gap of 10 days.

  • In 2015, it will be May 31 based on tax revenue and June 6 based on government spending – a gap of 6 days.

No doubt the actual figures will turn out different from that – government forecasts are rarely correct a year in advance, let alone five. But I do think these figures provide an interesting indication of what is to come. The tax burden will get worse, but only marginally, and government borrowing will be reduced, but not eliminated. 

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