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How do US taxes compare internationally?

FEDERAL BUDGET

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FEDERAL BUDGET AND ECONOMY
Q.How do US taxes compare internationally?
A.Total US tax revenue equaled 24 percent of gross domestic product, well below the 34 percent weighted average for other OECD countries.Total US tax revenue equaled 24 percent of gross domestic product, well below the 34 percent weighted average for other OECD countries.

TOTAL TAX REVENUE

US taxes are low relative to those in other high-income countries (figure 1). In 2018, taxes at all levels of US government represented 24 percent of gross domestic product (GDP), compared with an average of 34 percent for the other 35 member countries of the Organisation for Economic Co-operation and Development (OECD).

Among OECD countries, only Chile, Ireland, and Mexico collected less tax revenue than the United States as a percentage of GDP. Taxes exceeded 40 percent of GDP in seven European countries, including France, where taxes were 46 percent of GDP. But those countries generally provide more extensive government services than the United States does.

Bar chart showing tax revenue as a share of GDP in OECD countries in 2018. The OECD weighted average is 33.7%, while the US has the fourth lowest share at 24.3%. 

COMPOSITION OF TAX REVENUE

Income and Profits Taxes: Taxes on personal income and business profits made up 45 percent of total US tax revenue in 2018, a higher share than in most other OECD countries, where such taxes averaged 34 percent of the total (figure 2). Australia, Denmark, and New Zealand topped the United States in this category, generating over half of their total revenue from such taxes. In the United States, taxes on income and profits of individuals alone generated 41 percent of total tax revenue, compared with 24 percent on average within the OECD.

Social Security Contributions: The United States collected slightly less revenue from retirement, disability, and other social security programs—25 percent of total tax revenue—than the 26 percent OECD average. Some countries were well above that average: the Czech Republic, Japan, Slovak Republic, and Slovenia each collected 40 percent or more of their revenue from social security contributions.

Property Taxes: Property taxes provided almost twice as large a share of US tax revenue—12 percent in 2018—than the OECD average of 6 percent. Almost all revenue from taxes on property in the United States is collected by state and local governments.

Goods and Services Taxes: The United States relies less on taxes on goods and services (including both general consumption taxes and taxes on specific goods and services) than any other OECD country, collecting 18 percent of tax revenue this way compared with 32 percent for the OECD. The value-added tax (VAT)—a type of general consumption tax collected in stages—is the main source of consumption tax revenue within the OECD. The VAT is employed worldwide in 160 countries, including in all 35 OECD member countries except the United States. Most consumption tax revenue in the United States is collected by state and local governments.

Bar chart showing breakdown of tax revenue by source for each OECD country: income, profits and capital gains; social security contributions; property; goods and services; and other.

Updated May 2020

Data Sources

Organisation for Economic Co-operation and Development. February 2020. OECD Tax Statistics. “Revenue Statistics: OECD Countries—Comparative Tables.”

———. December 2018. “Consumption Tax Trends 2018.”

Further Reading

Congressional Budget Office. 2017. “International Comparisons of Corporate Income Tax Rates.“ Publication 52419. Washington, DC: Congressional Budget Office.

Gleckman, Howard, and Aravind Boddupalli. 2019. “No, The US Is Not Overtaxed.” TaxVox. Washington, DC: Urban-Brookings Tax Policy Center. August 20.

Rick Rule: Why doesn’t the Cost of Living Does include Taxes?

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the second thing and this is astonishing
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to me
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is that the fed’s estimate of the cost
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of living doesn’t
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include tax while
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government expenditures are over 40
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percent of gdp
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the idea that your cost of living
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doesn’t include tax
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i suspect daniella that would be okay
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with you if you didn’t have to pay the
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tax
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but given that you do a calculation of
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cost of living that doesn’t include tax
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seems very odd to me i reck i understand
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that government probably shouldn’t be
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considered to be a consumer good
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unfortunately it’s a good which you are
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forced to consume and fund
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and people when they are thinking about
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the impact of their savings
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and their uh earned income relative to
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their purchasing power
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need to think about inflation very
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differently
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than a slavish reliance on the cpi oh
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that is so well said and i’m happy you
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brought up the point about uh
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tax a rick a real good one um so you
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know
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it seems like we’re living in this world
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of you know fake earnings fake gdp
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fake interest rates and super high
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valuations
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um the feds in a corner
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i think the fed isn’t a corner uh i i
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think
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i think they’re there by popular demand
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when i see what the fed does it reminds
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me of an old
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pogo cartoon from my youth where pogo is
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in the swamp
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and he says i have met the enemy and he
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is us

Former Sprott executive Rick Rule speaks candidly with our Daniela Cambone on everything from the Fed’s current moves to the best safe havens for money right now. Chiming in on the silver squeeze, he also offers insight on why $PSLV has become such a popular vehicle.

In this must-see interview, Rule reflects on his career, explaining the game-changing mindset that has cultivated his success. “The essence of wealth is enhancing your wellbeing— and that isn’t all material,” he says.

History is Just Another Word for Land Speculation

It’s always good to know your roots, to know what you’re up against, to know what to keep and what to change.

The saying was, land speculators “produce more poverty than potatoes and consume more midnight oil in playing poker than of God’s sunshine in the game of raising wheat and corn.” —Prof. Benjamin Hibbard, the earliest land scholar, 1924 (or even earlier).

Ever wonder where those names for towns and downtown streets come from? The names of US universities? Even the names of some military bases?

The successful land dealer of one generation became the banker, the local political oracle and office holder, or the county squire of the next. Scarcely a city or country town in the West but had its first family whose fortune had been made by shrewd selection of lands and their subsequent sale or rental to later comers.”— 1942, Historian Paul W. Gates (1901–1999), widely considered to be the foremost authority on US land policy who wrote 10 books and 75 academic articles.

America has always been a nation of real estate speculatorsReal estate speculation was an integral part of the winning of the west, the construction of our cities, and the transformation of American home life, from tenements to mini-mansions.” — 2013, Economist Edward L. Glaeser of Harvard University and NBER

The original US Constitution, the Articles of Confederation, funded the new, federal US Government with a tax on land. About a decade later, some Founding Fathers met again, yet without Congressional authority and in secret, to replace the land tax with tariffs, at the behest of land speculators, which most of them were. Ben Franklin lost a bundle speculating in land— which may be what motivated him later in life to support the physiocrats, the thinkers who advocated a single tax on land value instead of on people’s labor or capital goods, like houses. (Daniel Friedenberg’s Life, Liberty, and the Pursuit of Land, 1992)

Soon after the colonies protested the taxes that the British levied on them, the farmers of western Pennsylvania protested the tax on their product — whiskey. As a replacement tax, the frontier sodbusters advocated a levy on land. Back then, people clearly saw that a tax on the value of land would collect much more revenue in cities like Philadelphia, where locations were very spendy (still are), than in the countryside like backwoods Pennsy, where land is dirt cheap. To quell the Whiskey Rebellion, president George Washington — the nation’s richest man and biggest landowner — put into the field four times as many soldiers as he ever led against the British (Nathan Miller’s Stealing From America, 1992).

For the first decades of its existence, the young US government supported itself not only with tariffs but also by selling western lands. Most of the sales of prime land were not to settlers but to speculators who eventually sold the fertile land to settlers. If the US had cut out the middle man, it could have directed all those sale proceeds into the public treasury. However, most often the employees of the government’s land office were in cahoots with the speculators; everybody knew what was going on (Everett Dick, The Lure of the Land, 1970). Further, the government did not have to sell the land but could have leased it, just as the modern state of Israel does today. Or, if selling, government could tax or otherwise levy land at its annual rental value (functionally, no different from leasing it).

One of the favorite places to found a city is by the mouth of a river: London on the Thames. New York on the Hudson. New Orleans on the Mississippi. On the Pacific Coast, the major river that drains the western half of North America is the Columbia. Near it’s mouth sits Portland, yet that city is not the region’s premier city. That title belongs to rival Seattle. How did that happen? Recognizing their natural advantage, the founders of Portland kept their prices for land high. The city fathers of Seattle undercut them—and soon outgrew the city to their south, by leaps and bounds. It’d be as if Philadelphia outgrew New York (which did not happen).

The hierarchy of cities was flipped again elsewhere by speculator greed. The natural pass thru the Rocky Mountains is by Cheyenne Wyoming. When railroads started extending westward, speculators figured the iron horse had no choice but to pass through Cheyenne so they kept the price for land high. To their south, the city fathers of Denver undercut them, attracted the railroad, and outgrew their rival to the north. Today, Cheyenne remains a town while Denver is a major American city.

Such is the counterproductive power of land speculation. Conversely, there is a potent, productive stimulant: the public recovery of land value. When Johannesburg South Africa was dying after the nearby mines played out, the city fathers shifted their property tax to fall only on land, not on buildings. So owners developed vacant lots and kept their parcels at highest and best use. Johannesburg grew to become the financial capital of Africa. Its rival city to the south, Cape Town, situated on one of the most strategic ports on the planet, lagged behind. It was as if Albany New York had eclipsed New York City—unfathomable.

“History is bunk,” Henry Ford said. Many Americans have expressed anti-intellectual sentiments. Yet it is good to know one’s roots, what one is up against, and what to keep and what to change. To his credit. Ford also said,“We ought to tax all idle land the way Henry George said—tax it heavily, so that its owners would have to make it productive.”

“We ought to tax all idle land the way Henry George said—tax it heavily, so that its owners would have to make it productive.”—Henry Ford

Will academia tell this tale? One of the major business schools in the US is Wharton’s at the University of Pennsylvania in Philadelphia. The Whartons were one of the early major land speculators. So were the Roosevelts. Later, so was Leland Stanford. And more recently James Irvine (University of California at Irvine). So don’t hold your breath. Instead, for more on the link between speculators and universities, see Dr. Mason Gaffney’s Corruption of EconomicsInformation such as this won’t be fed to you, You have to look for it.

Ever wonder where those names for downtown streets come from? The names of US universities? Even the names of some military bases?

Speculators Are Us. This is a brief, partial History of the United States from the POV of those who benefited the most from it.