from: http://www.azcentral.com/arizonarepublic/business/articles/0413Wiles13.html
Tax Freedom Day in Arizona arrives earlier this year
Russ Wiles
Republic columnist
Apr. 13, 2003 12:00 AM
April 15 marks the tax return filing deadline, but Arizonans won't celebrate Tax Freedom Day until April 17.
That's the unofficial gauge when people have earned enough to pay their annual obligations to various government entities.
Tax Freedom Day in Arizona comes a day earlier this year compared with last. Nationally, April 19 marks Tax Freedom Day, the same as in 2002.
This measure is the brainchild of the Tax Foundation in Washington, D.C., which includes all types of federal, state and local levies in its calculation, such as income, payroll, sales and property taxes, as well as individuals' share of corporate income taxes.
Connecticut residents face the highest tax burden, with their liberation not arriving until May 9. Massachusetts is next, followed by New York and California. Arizona ranks 16th. Alaskans finish paying taxes soonest, by March 30.
The latest-ever Tax Freedom Day came in 2000, when Arizonans didn't satisfy their burdens until April 28 and Americans overall needed until April 30. The improvement since then reflects lower tax rates, the weaker economy and the stock market slump, which eroded capital gains.
If President Bush's latest tax proposals become law, the freedom date will come a day earlier, predicts Scott Hodge, executive director of the Tax Foundation.
Looked at another way, the 74 days Americans work to pay federal taxes is the lengthiest period for 10 personal budget items tracked by the Tax Foundation. Housing was next at 61 days, followed by medical care, 44 days; state/local taxes, 35 days; and food, 30. Savings finished last at 11 days.
Mutual fund investors have many ways to cut their tax bills, but generally aren't taking advantage of them.
That's the word from research firm Lipper Inc. in New York, which estimates investors in taxable funds lose 1.5 percent to 1.8 percent to the tax bite. About half of fund assets are held in unsheltered accounts.
Lipper suggests investors pay closer attention to tax-shaving options such as Individual Retirement Accounts, "tax-managed" stock funds, index funds, municipal-bond portfolios and exchange-traded funds.
For example, 43 groups, including Vanguard, Eaton Vance, Alliance, Fidelity, Dreyfus, Pimco, T. Rowe Price and USAA, offer tax-managed funds that rely on such strategies as "harvesting" capital losses to minimize taxes. Yet less than 1 percent of investor assets are in such funds. Index funds, which also are tax-efficient, make up 11 percent.
The American Enterprise Institute in Washington, D.C., recently examined dozens of opinion polls dating to the 1930s and reported no instance when Americans on balance said their federal income taxes were too low.
But in a Gallup/CNN/USA Today poll taken in January, 50 percent of respondents said their taxes were "about right," vs. 47 percent complaining of taxes being too high, and the rest voicing no opinion or stating taxes were too low. It was the first survey since 1949 in which the "about right" faction accounted for at least 50 percent.
Surveys have indicated Americans generally fear tax audits, yet the odds of facing an examination remain low.
New figures show the Internal Revenue Service audited just 0.57 percent of individual tax returns in 2002, down from 0.58 percent the prior year.
The trend has been toward relatively fewer audits, said Sidney Weinman, a senior tax analyst at researcher RIA in New York.
In 1992, for example, the audit rate was 1.06 percent, and in the 1980s, it was typically near 2 percent.
Among individuals, the highest audit odds of 2.67 percent are borne by people filing Schedule C with less than $25,000 in income.
Many people in this group are suspected of deducting expenses for hobbies and other non-business purposes.
Reach Wiles at russ.wiles@arizonarepublic.com or (602) 444-8616.