US Tax Rates Compared to the Rest of the Developed World
No one likes to pay taxes, but Americans are especially disgruntled taxpayers and we often seem eager to believe politicians who argue that we are over-burdened. And Republican politicians learned back in the Reagan days that campaigning on lower taxes was a winning issue even if it means providing less government services, especially for the less fortunate.
After decades of tax cuts that slashed the income tax burden on Americans, President Trump and some Republicans in Congress still argue that we are some of the highest taxed people in the world, but, that simply isn't true, not even close.
If you compare nations based on all tax sources [income, social welfare taxes, property, sales/vat] at the local, state and federal levels, Americans have one of the lowest tax burdens in the world. The Organisation for Economic Co-operation and Development provided new numbers that show that total US tax revenue [from all sources] equaled 24.3% of gross domestic product, down from 26.8% a year earlier and about 10 points below the average rate among developed nations. Only three countries [ Chile, Ireland, and Mexico] have a lower tax burden [see chart below]. France [46.1%] has the highest taxes and Mexico [16.1%] the lowest, which makes sense based on the level of services provided by those governments.
America's low tax rates are not necessarily a reason to celebrate. Our state and federal governments provide fewer services than high tax nations, like France, Denmark and Sweden, which offer universal health care, child care assistance, and free college tuition. And because of that, we have a higher level of income inequality than most other developed nations.
Moreover, tax revenues have not kept up with spending in the United States which means we have to borrow more money each year to pay the bills. The 2017 corporate tax reductions along with increased spending has driven the federal budget deficit to new heights. In the year since the new tax law took effect in January 2018, tax revenue declined even as economic growth ticked up. The gap between federal tax receipts and spending will exceed $1 trillion in the 2020 fiscal year. That isn't sustainable and Federal Reserve Chairman Jerome Powell warned Congress in November that if they didn't address the issue, "our children will wind up spending their tax dollars on interest rather than things they really need."
By: Don Lam & Curated Content
Chart from the Organisation for Economic Co-operation and Development