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There is Tax Freedom Day which falls in April and is:

the first day of the year in which a nation as a whole has theoretically earned enough income to fund its annual tax burden. It is annually calculated in the United States by the Tax Foundation—a Washington, D.C.-based tax research organization. Every dollar that is officially considered income by the government is counted, and every payment to the government that is officially considered a tax is counted. Taxes at all levels of government—local, state and federal—are included.

Then there is Cost of Government day which falls much later in the year, recently in July-August:

Americans for Tax Reform Foundation and the Center for Fiscal Accountability calculate Cost of Government Day, the day of the calendar year when the average American worker is done paying off his or her share of the cost of government. While other indices look primarily at taxation as a measure of the cost imposed by government, the annual Cost of Government Day Report takes into account the total spending burden as a percentage of GDP coupled with government regulations

How are the two days calculated?

Why is Cost of Government day nearly twice as far into the year as Tax Freedom day?

  • "What is the estimated cost of government regulations?" = as defined by who? Grover Norquist? – user1530 Sep 3 '13 at 22:38
  • I don't know if that's really an answerable question on SE, then. Each partisan think tank is likely going to make it's own calculations to serve its own interests. – user1530 Sep 3 '13 at 22:46
  • @DA. - so compare #s from 2 opposite think tanks and attribute the differences to methodologies and data. – user4012 Sep 4 '13 at 0:58
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    This is unanswerable. This "cost" cannot be measured without substantial speculative value judgments of benefit/harm in many dimensions. E.g. Prohibiting a behavior may impose no direct costs but may create market conditions that spur economic growth. Requiring some paperwork could prevent a lot of people from being harmed economically, physically, or emotionally. – Steve Clay Sep 6 '13 at 22:36
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    @SteveClay, surely some regulation cost can be calculated (non-opportunity cost) . People are hired to ensure that government regulations are followed. Remember that Obamacare supposedly was cost neutral before they passed the bill (it wasn't recently until they discovered their calculations were way wrong). If is unanswerable, you might tell the OMB they are out of a job – user1873 Sep 6 '13 at 22:52
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For a two-part question, you get a two-part answer.

Tax Freedom Day

Tax Freedom Day is a fairly straightforward calculation.

We count in the denominator every dollar that is officially part of national income according to the Department of Commerce’s Bureau of Economic Analysis, and in the numerator every payment to the government that is officially considered a tax is counted. Taxes at all levels of government are included, whether levied by Uncle Sam or state and local governments.

For a very rough example, if income was $120T and taxes were $10T of that, then Tax Freedom day would be 10/120 = 1/12 of the way through the year - January 30th.

It's worth noting that because of varying individual tax burdens, the country's Tax Freedom Day may nor not be an individual's Tax Freedom Day.

For further reading on this, check out the PDF available here.


Cost of Government Day

As best as I can tell from their methodology, this is calculated similarly to Tax Freedom Day, except the numerator is different. Instead of counting tax payments, it counts "Federal Spending + State Spending + Regulatory Costs". The first two are fairly straightforward, but the third bears further investigation.

According to this part of the report:

Our conservative estimate of total regulatory costs takes into account only the cost of complying with regulations: the material resources and labor needed to carry out compliance. For example, if a regulation requires new pollution control equipment power plants, compliance costs include the costs of manufacturing, installing, operating and maintaining equipment.

Thus, unlike the first two components, which are relatively easy to account for (governments release their budget figures), they're estimating the cost to all businesses to implement a given regulation. They base some of this number off a "Crain report" which they don't link to anywhere in their articles. With some persistent googling, I found this WSJ article where they announce the results of their study. However, they don't go into their methodology there, so I can't comment on it. According to the original site:

Crain uses a World Bank index that is more comprehensive than the OECD index. The index values come from 1,751 data points. Significant advantages over the OECD index include: 1) larger data series, 2) Regulatory Quality Index (RGI) covering international economic regulations in addition to domestic that newly includes rules and mandates affecting factor markets (for example, Americans with Disabilities Act), and 3) the World Bank index covers all business sectors.

Side note: The graph on that page is highly misleading. It shows a huge spike in days to meet the burden (~50 days -> ~70 days), but this is apparently due to a methodology change explained by the above quote. No attempt is made to recalculate previous data using the new methodology or to describe the relationship, so you can't draw any direct correlations between pre-2009 data and 2009-and-on data. This also plagues their overall summary data.

I'm not qualified to pass judgement on their numbers, and they don't provide enough information for me to research them. However, there's some criticism of the Crain report's methodology you can follow up on here, the biggest point of which appears to be that they don't factor in the benefits of regulation to balance out the costs. After all, if a corporation has to pay to install something to meet a new regulation, they're probably going to buy it and have it installed - which is money flowing to another company that wouldn't have gotten the business otherwise. I don't have any hard numbers on that, but it seems logical that the money doesn't suddenly disappear.


As to why they differ so much, you may as well ask why a quantity of kilograms and a quantity of kilometers differ so much - they're measuring two different things, which aren't directly comparable. They're using the same system of numbers, but there's no meaningful comparison.

Tax Freedom Day measures the income from all taxpayers to the government at all levels. This includes everything from income taxes to estate taxes, and corporate gains taxes to city wage taxes. In 2010, this figure was $4.7T (source), of which $2.2T of which was federal. The same year, the federal government budgeted $2.1T and spent $3.4T (source). The difference between the two numbers ($1.2T) becomes an increase in the federal debt. I don't have numbers for each state/local government, but it's on the same principles.

If that was all of what Cost of Government day measured, it would be an easy calculation. However, it's not. Instead, it attempts to measure how much money every company in the country had to spend to comply with regulations. However, unlike federal budget numbers, there's no hard data on this. Most companies don't reveal their books to that level of detail, and even if they did, it'd likely be rolled into "Operating Expenses", "Salaries", or something similar (no source) This is a burden on the company in addition to taxes (or possibly including taxes - since the methodology is unclear, I can't say for sure). But you can't track these payments and quantify them, because they include actions not taken as well as actions taken, money not made in addition to money spent, and so on. You can take the dollar value estimate and project that over the calendar year, the same as you can with tax revenue, but there's no relationship between the two sets of numbers at all. The government could suddenly double everyone's taxes without increasing spending, and TFD would move and CoGD wouldn't. Or vice versa.

All we can say for sure is that CoGD will be later in the year than TFD in every year the government runs a deficit (because the government spending portion of their number is larger than taxes), and CoGD may be earlier than TFD in a year the government has a surplus. But there's no way to correlate the actual dates.


TL;DR

  • Tax Freedom Day is a straightforward calculation of
    • (tax/income * days/year) = days to pay tax
  • Cost of Government Day is a calculation of
    • ((federal spending + state spending + unsubstantiated numbers)/income * days/year) = days to pay for government.
  • The two days have no relation as to when they fall, other than TFD is before CoGD.
  • @user1873 while I applaud your attempt at seeking non-partisan commentary, your question is quoting Grover Norquist's organization. You really can't get more partisan than that. As such, your comment seems a tad disingenuous. – user1530 Oct 31 '13 at 21:31
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    @user1873 - I tried to keep all partisan commentary out of my post, but statistical and methodological commentary I feel fully justified in including, to the extent that I understand them. If I failed at that balance, please point out where and I'll fix it. I'm aware of my own biases, and I'll freely admit that I may not be as aware of them peeking through as someone else looking at it would be. – Bobson Oct 31 '13 at 21:46
  • @user1873 - That being said, you are entirely correct that I missed addressing why the dates differ. My instinct is that the difference represents the increase in debt, but I'm going to look into it a bit more before I include that. – Bobson Oct 31 '13 at 21:53
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    @user1873 I tried. I tried really hard to hold any further commentary on partisan behaviour on the main politics.se until I know this site even has a future - but this comment (for the duration it exists...) is too much: "In my ongoing attempt to discover the capabilities of our more liberal users, i will hold off on specifics at this time. Perhaps our more liberal users can stretch thier bias identification muscles and point out what might be considered objectionable." You link to a vile partisan meta question. You ARE partisan. – LateralFractal Nov 1 '13 at 1:32
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    @user1873 - Honestly, the only thing I can see would be my choice of example. I'll remove it if you'd like. But I'll point out that "holding off on specifics" is exactly the problem I have with the Cost of Government study. If it is a partisan thing to demand addressable specifics instead of vague rhetoric, then this site is doomed, and probably the country too... – Bobson Nov 1 '13 at 2:08
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One calculation is a very straightforward, objective rendering of costs and income.

The second is largely an invented metric for a specific and narrow political viewpoint. Claiming to put a number to an unmeasurable concept like "cost of regulations" is pretty much an exercise in "make up a number that will advance your agenda, and then pretend that it is some kind of valid calculation."

It's not surprising that something rooted in reality and something not would differ widely.

  • That you disagree with the details of the valuation, and thus about what particular day it falls upon, is not support for claiming the difference between the two dates is just pushing a partisan agenda. The US government operates with a significant financial deficit - it takes in considerably less tax than it spends - this is not controversial or just a rhetorical trick. Even completely ignoring the cost of regulations by engaging in the disingenuous concept that regulations have no cost, would not make those two dates as close as you imply they should be. – pluckedkiwi Dec 14 '16 at 15:34
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    @pluckedwi - I'm saying that the measurement is so vague and subjective that it is meaningless, not that I disagree with the final outcome. To choose something that can't be measured and to put a number to it is absolutely a rhetorical trick. I'm not saying the number should be closer, or farther, I'm saying it's completely worthless and meaningless. There are significant costs to society caused by lack of enough regulation, in certain situations. Were those exhaustively researched and included? Of course not. Because it's made up to push an agenda. – PoloHoleSet Dec 14 '16 at 17:10

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