Tax Burdens Around the World

Comparing tax burdens around the developed world, I am, as always, left to wonder how the opposite meme has taken hold in the U.S. conciscousness.

[via Globe & Mail]

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  1. The Developed World is Soooo … 2006
  2. Is the Developed World the Developing World?
  3. Food Share of Spending Around the World
  4. How Soccer Changed the Economic World. Or Vice-Versa
  5. The Case for a First-World Debt Relief Conference

Comments

  1. So Crates says:

    We've enjoying three decades of propaganda regarding the alleged benefits of unfettered globalization and free trade, lower taxes on the rich, and decreased government regulation on business and the financial markets. How's that working out for you?

    Hahaha.

  2. Carlo says:

    Denmark is also supposed to be the happiest place on Earth

  3. quantacide says:

    Come'on, this is taxes as a percentage of GDP. These percentages say nothing. It is just rearranging the terms of the equation, not arriving at any meaningful conclusion. It is only fodder for the argument that "taxes are low" that the US falls to the bottom of the chart. Why not compare taxes to personal income for a real comparison? (Because it is difficult and inconvienient.)

    • Paul Kedrosky says:

      There are many ways to normalize such comparisons, but comparing totataxes as a percentage of GDP is one of the most useful. Yes, you couldgo awry if you ignore that some countries are wealthier than others,but you can easily control for that by sticking to developedcountries, for example. Saying, however, that the right comparison is”taxes to personal income” is silly. The point is that the aggregatetax burden in the U.S. on the basis of the size of the economy is nothigh in relative terms. If you want to make an argument about marginaltax rates, or the nutty complexity of the U.S. tax system, or theabsurd cost of collections in this country, I'm right there with you,but it's a different argument.

      • quantacide says:

        I would rather see taxes vs. consumption (or if taking the income approach, taxes vs. wages) for a better picture of how countries stack up when arguing about the individual tax burden, which is where I think people get the "we have such a high tax burden" meme. I think the individual forgets that we ultimately have to pay for the "+G" in the GDP some way or the other.

        • wallyfurthermore says:

          So do the chart and show us. Are you waiting for it on a silver platter?

    • mike says:

      Inconvenient but usually not done because it will show exactly the same thing as looking a GDP. So why bother?

  4. Sam Penrose says:

    "I am, as always, left to wonder how the opposite meme has taken hold in the U.S. consciousness." Surely you speak ironically? A few rich people who hate the modern state have spent billions over decades to ensure its ubiquity.

  5. Buck Smith says:

    Just because taxes are lower in the US than the rest of the developed world, it does not follow that the rest of the developed world has better economic policy than the US. Nor does it follow that US taxes should be raised. What do you get for the extra taxes? More bureaucracy that produces very little of any value as far as I can tell.

    • Centrist says:

      Surely you value national defense, or the FBI, or perhaps the Department of Justice. Surely there is some value in the highway system, or the FAA or maybe Rural Utilities Service. Maybe you find more value in fundamental research such as NASA, the National Science Foundation, and Los Alamos National Laboratory. No love for the Coast Guard, National Weather Service or FEMA? Well if nothing else perhaps you see some value in regulation and the agencies that provide it such as the SEC, FDA, and OSHA. Perhaps we would be better off without any taxes and go back to living in little independent villages …

      • Buck Smith says:

        I see value in most of what you list but in every case there is a point of diminishing and then negative returns. Especially in law enforcement & regulation we are way past that point.

      • Mike says:

        But that evades the difficult questions. Just because some government is good doesn’t mean that more is better.

        Paul, you’ve convinced yourself of something and then only found statistics that support your argument. Check http://www.humanevents.com/article.php?id=19669, most of these countries show up more in the range with the US.

        Mike

  6. Daniel1501 says:

    Yes, I support Buck Smith. For instance a country like Norway to have their own currency, army, etc costs much more in proportion than the USA because of our size advantage. Even if you compare to Canada, it is really not a fair comparison (much smaller population and GDP by far and much larger area in ratio to the population). Also the USA is still Number 1 place to go for immigrants like myself. Let us ask if these tax monies are being spent wisely and what are we getting for it?

  7. Brent Buckner says:

    Comparing 1965 to 2009 for the evolution of the U.S.taxes-as-percentage-of-GDP fails to make cyclical adjustments.

    And "pay the lowest tax rate" might be better than "pay the lowest taxes" – in straight dollars per capita U.S. taxation might be higher on the international ranking.

  8. Alan says:

    How about showing the OECD reports showing how the "rich" in the US shoulder more of the burden than most of the other OECD countries(in both % and $ – http://www.taxfoundation.org/blog/show/27134.html. The lower and middle class in other countries carry a far higher tax burden relative to their income – and that would be the reason for any gap. Are you suggesting we need to increase taxes on the lower and middle class?

    Finally – show me proof for that meme having taken hold in the US consciousness. Any references I find are related to corporate tax rates (why companies hold income off shore).

    Greed – perhaps you are talking about the greed of taking other people's money by coercion through the government.

    • dave says:

      Excellent point Alan. The going US meme is that somehow the middle class and working poor contribute more tax revenue than the evil rich (or should I say "super rich"). I'm sure most US citizens don't realize that the top 5% of income earning households contribute to more than 95% of the income tax revenue. In fact, this recent data support that the Tax Burden of Top 1% Now Exceeds That of Bottom 95%. see: http://www.taxfoundation.org/taxdata/show/24955.h

      • peter thom says:

        It’s easy to show how ‘burdened’ the rich are if you exclude all but federal income taxes from your calculation. But, surprise, surprise, when you factor in all taxes — state and local, payroll (capped at $106.8k), gas, sales, utilities, etc. — you arrive at a different conclusion. All these ‘other’ taxes are more than 50% of all taxes. According to the Institute on Taxation and Economic Policy, only in Vermont do the the rich bear a heavier burden of state and local taxes. Based on IRS data, David Kay Johnston derived a comparison of total taxation rates for the top 400 earners as compared to those earning the median wage in 2007. Surprise again: the average total taxation rate as a percentage of income was, for the top 400 earners 18.7%, and for the median earners 23.4%. See here… http://wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html … So spare us the boohoos for the upper brackets. Using the Fed income rate alone skews the conclusion. I can’t speak to Dave’s intention here, but he should know that rich people are only too happy to pay big bucks for these dishonest calculations, and their paid disseminators, like the Tax Foundation, are completely aware they are arriving at fraudulent conclusions.

      • Jon H says:

        The top 1% take in more income collectively than the bottom 50% combined. It's no surprise if the top 5% contribute to more than 95% of income tax revenue. They've got all the income. If the top 5% want the bottom 95% to contribute more in income tax, they should pay the bottom 95% more.

        • dave says:

          I'm trying to stick to the facts hers. The data are available at http://www.irs.gov.

          Actually, the top 1% share of AGI is 20%, even though they pay 38% of all Federal taxes paid. That turns out to be a net 23% tax rate.

          The bottom 95% share of AGI (the group I'm in) has 65% of the AGI but contributes to only 41% of tax revenue.

          So, If you're in the top 1%, you pay Uncle Sam $23 for every $100 earned, while the rest of us pay $7.75 for every $100 earned. This is clearly a progressive tax plan intended to reallocate wealth

  9. Europe is so high, especially Eastern Europe – surely their governments don't need such high taxes?

    • tour_contact says:

      Actually once again complete nonsense made up to support an untenable position. Eastern European countries tend to have lower taxes than western European countries as a result of the restructures they went through

  10. harvey says:

    I think you blew it again Paul.

    One of the reasons tax/GDP is so low is that GDP is being inflated by deficit spending (denominator is larger than it should be). So rather than "raising taxes", why not a little austerity to crash the denominator and get the ratio to where you think it should be? :-)

    Also, I don't see any methodology in how they are producing this data — the article mentions the US has no VAT, but fails to mention large sales taxes paid by urban areas (about 9% in many CA counties, for example). Is the data including that — who knows? How about payroll taxes? Etc. Etc. I guarantee they are "sampling" our absurdly complex tax base to get those numbers.

    However, I for one would gladly raise our "tax burden" about 7.1 of fake GDP% so it would be ahead of Canada so they could stop lecturing us on what to do. Who's with me? :-)

  11. CK_ says:

    The 'meme' (I assume you're talking tea party) is that we don't want taxes to rise to meet current spending. We don't want to be like Europe. We don't want to climb the chart you have posted. We want to remain exceptional.

    But at least Kedrosky, unlike the President, has a clue what American Exceptionalism means.

  12. QQQ says:

    Is the US tax as % of GDP done on federal taxes or on all taxes including state and local?

  13. Drsilk says:

    Of course you dont mention that in many of those other countries with the high taxes their entire education is paid for through college. US of course doesnt have that. So thats one reason our taxes are lower. There are many other examples like this. These numbers with no context mean virtually nothing.

    • Warrwim says:

      And let's not forget that medical care is socialized in most of the countries listed.

  14. James says:

    As anyone with a passing knowledge of math knows, if you take an average of a list of numbers, the result can be skewed to the downside if there are too many 0's in the set. In reality, more than half of Americans pay no income tax, and 2% pay 35% of all taxes… So, while many say that the reason we are in this fix is that the rich don't pay enough, the sad truth is that it is because too many don't pay anything at all. Sorry, this is hard for many to take.

    • Jon H says:

      "2% pay 35% of all taxes"

      And how much of the total income do they make? And how much of the top 2%'s income is in the form of dividends, or capital gains?

  15. ezag says:

    Give me some statistics and a little math…and I can prove anything you want. Big governments are inefficient, corrupt and ultimately fail. In the meantime, big government advocates make out very well.

  16. FrankD says:

    I just want to know what counts as "taxes". Is this federal taxes, state/provincial taxes, local taxes, sales taxes, excise taxes, capital gains taxes, estate taxes… what?!

    I hate arguments where people refuse or forget to define their terms.

  17. Adam Robinson says:

    I couldn't help but smile at the headline: "Americans PAY among the lowest taxes in the developed world."

    Was the table compiled on the basis of official tax rates, or on tax revenues actually collected?

    The really interesting thing would be a corollary chart comparing the actual % of taxes collected from each country's law-abiding citizenry.

  18. Dave says:

    Americans don't believe that everyone is paying their fair share of the tax burden, plain and simple. From hedge funders who pay a 15% tax rate, to independent contractors who underreport their income to people who make their big electronics purchases on Amazon to avoid sales tax collection, people perceive a lot of cheating in the current system and oppose higher taxes on the basis that all that will just get worse.

  19. dave says:

    I guess this shows how efficient the US utilizes it's tax revenue (relative to GDP of course).

  20. Lightnrod says:

    Hey this just means the US debt finances a whole lot more. What the US needs to do is significantly raise its taxes, if it continues to spend they crazy way they do.

    What the great USA needs is a VAT or GST to support their govt spending policies. The rest of the developed world has it. So….USA get on board. Either that or reduce your spending, or better yet, both!

  21. mcdruid says:

    Boy, a lot of responses showing that denial ain't just a river in some country somewhere.
    Yes, these rankings are for all taxes, local and state and are the best data available and is for taxes paid or owed. No, "more than half of Americans pay no income tax" is false, and this data includes sales tax also. No, real corporate rates are lower in the US than other countries, too. People in these countries are indeed happier (Yes, Denmark is #1); and they live longer, have better healthcare, generally better education, less crime, fewer prisoners, lower GINIs, and more social mobility.

    • Mike says:

      "more than half of Americans pay no income tax," that's a lie of omission.

      About half of American's pay no income tax.

      • Mean Mister Mustard says:

        "About half of American's pay no income tax."

        I'll raise you one on pedantry, should be: "About half of American's pay no FEDERAL income tax."

  22. @gojomo says:

    If compared to the data here…
    http://www.usgovernmentrevenue.com/revenue_histor

    …it appears the referenced chart may include state but leave out local taxes, which would put the US closer to the OECD average.

    But also: why wouldn't taxes as a share of all income be lower in a larger country, with economies of scale? Or decrease over time as society gets richer and technology advances?

    We spend less of our national income on food than in the past, and less than other countries… and that's considered a good thing. Why can't basic good governance, a very ancient social function, be more like food and less like entertainment/health-care?

  23. TWS says:

    My entire family is from Denmark. The country is a lovely place, but it most certainly is not the 'happiest place on Earth'. If this were the case, my family would not have emigrated to the US.

    Lastly, I do not know the data used to compile the tax chart. I've seen few studies providing a fully comprehensive tax burden assessment at all levels of government and taxing authorities. Maybe this chart uses better date; maybe it doesn't. I don't know. What I do know it that I do not aspire to live in a country ranking near the top of this chart.

  24. In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to "fall" upon the group that, at the end of the day, bears the burden of the tax. The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply.

  25. charles says:

    The numbers are for all taxes. In 2010 income taxes made up only 41.58 percent of federal taxes. Taxes on wages (social insurance taxes) maee up 40 percent. The corporate income tax amounted to 8.83 percent, and other receipts to 9.57. Income taxes of the top ten percent amounted to almost 19 percent of all federal taxes. The top ten had 33.5 percent of income, and with a wild guess, probably about 55-60 percent of all assets.

    For the income numbers see CBO website for The Budget and Economic Outlook last January, page 87. A new assessment will be out soon.

  26. Jeremy says:

    Way to post a graph with no study details. I assume that it just included federal taxes, which it didn't bother to state. Our country is uniquely governed by states. Our tax burden is doubled when considering county, state, and city taxes.