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?

12:01
the second thing and this is astonishing
12:03
to me
12:03
is that the fed’s estimate of the cost
12:05
of living doesn’t
12:07
include tax while
12:10
government expenditures are over 40
12:12
percent of gdp
12:14
the idea that your cost of living
12:15
doesn’t include tax
12:17
i suspect daniella that would be okay
12:19
with you if you didn’t have to pay the
12:20
tax
12:21
but given that you do a calculation of
12:23
cost of living that doesn’t include tax
12:26
seems very odd to me i reck i understand
12:29
that government probably shouldn’t be
12:32
considered to be a consumer good
12:34
unfortunately it’s a good which you are
12:36
forced to consume and fund
12:38
and people when they are thinking about
12:40
the impact of their savings
12:42
and their uh earned income relative to
12:45
their purchasing power
12:47
need to think about inflation very
12:49
differently
12:50
than a slavish reliance on the cpi oh
12:53
that is so well said and i’m happy you
12:55
brought up the point about uh
12:56
tax a rick a real good one um so you
12:59
know
13:00
it seems like we’re living in this world
13:02
of you know fake earnings fake gdp
13:04
fake interest rates and super high
13:06
valuations
13:07
um the feds in a corner
13:11
i think the fed isn’t a corner uh i i
13:14
think
13:14
i think they’re there by popular demand
13:17
when i see what the fed does it reminds
13:19
me of an old
13:20
pogo cartoon from my youth where pogo is
13:23
in the swamp
13:24
and he says i have met the enemy and he
13:27
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.

The Truth About Income Inequality

The census fails to account for taxes and most welfare payments, painting a distorted picture.

Never in American history has the debate over income inequality so dominated the public square, with Democratic presidential candidates and congressional leaders calling for massive tax increases and federal expenditures to redistribute the nation’s income. Unfortunately, official measures of income inequality, the numbers being debated, are profoundly distorted by what the Census Bureau chooses to count as household income.

The published census data for 2017 portray the top quintile of households as having almost 17 times as much income as the bottom quintile. But this picture is false. The measure fails to account for the one-third of all household income paid in federal, state and local taxes. Since households in the top income quintile pay almost two-thirds of all taxes, ignoring the earned income lost to taxes substantially overstates inequality.

Average earned and net income by quintile, 2017

$300,000

Earned income

250,000

200,000

Net transfers

Net taxes

150,000

100,000

Net income

Net income

50,000

Earned income

0

1

2

3

4

5

Source: Calculations by authors based on official government data

The Census Bureau also fails to count $1.9 trillion in annual public transfer payments to American households. The bureau ignores transfer payments from some 95 federal programs such as

  • Medicare,
  • Medicaid and
  • food stamps,

which make up more than 40% of federal spending, along with dozens of state and local programs. Government transfers provide 89% of all resources available to the bottom income quintile of households and more than half of the total resources available to the second quintile.

In all, leaving out taxes and most transfers overstates inequality by more than 300%, as measured by the ratio of the top quintile’s income to the bottom quintile’s. More than 80% of all taxes are paid by the top two quintiles, and more than 70% of all government transfer payments go to the bottom two quintiles.

America’s system of data collection is among the most sophisticated in the world, but the Census Bureau’s decision not to count taxes as lost income and transfers as gained income grossly distorts its measure of the income distribution. As a result, the raging national debate over income inequality, the outcome of which could alter the foundations of our economic and political system, is based on faulty information.

The average bottom-quintile household earns only $4,908, while the average top-quintile one earns $295,904, or 60 times as much. But using official government data sources on taxes and all transfer payments to compute net income produces the more complete comparison displayed in the nearby chart.

PHOTO: GETTY IMAGES/ISTOCKPHOTO

The average bottom-quintile household receives $45,389 in government transfers. Private transfers from charitable and family sources provide another $3,313. The average household in the bottom quintile pays $2,709 in taxes, mostly sales, property and excise taxes. The net result is that the average household in the bottom quintile has $50,901 of available resources.

Government transfers go mostly to low-income households. The average bottom-quintile household and the average second-quintile household receive government transfers of some $17 and $4 respectively for every dollar of taxes they pay. The average middle-income household receives $17,850 in government transfers and pays an almost identical $17,737 in taxes, while the fourth and top quintiles of households receive government transfers of only 29 cents and 6 cents respectively for every dollar paid in taxes. (In the chart, transfers received minus taxes paid are shown as net government transfers for low-income households and net taxes for high income households.)

The average top-quintile household pays on average $109,125 in taxes and is left, after taxes and transfer payments, with only 3.8 times as much as the bottom quintile: $194,906 compared with $50,901. No matter how much income you think government in a free society should redistribute, it is much harder to argue that the bottom quintile is getting too little or the top quintile is getting too much when the ratio of net resources available to them is 3.8 to 1 rather than 60 to 1 (the ratio of what they earn) or the Census number of 17 to 1 (which excludes taxes and most transfers).

Today government redistributes sufficient resources to elevate the average household in the bottom quintile to a net income, after transfers and taxes, of $50,901—well within the range of American middle-class earnings. The average household in the second quintile is only slightly better off than the average bottom-quintile household. The average second-quintile household receives only 9.4% more, even though it earns more than six times as much income, it has more than twice the proportion of its prime working-age individuals employed, and they work twice as many hours a week on average. The average middle-income household is only 32% better off than the average bottom-quintile households despite earning more than 13 times as much, having 2.5 times as many of prime working-age individuals employed and working more than twice as many hours a week.

Antipoverty spending in the past 50 years has not only raised most of the households in the bottom quintile of earners into the middle class, but has also induced many low-income earners to stop working. In 1967, when funding for the War on Poverty started to flow, almost 70% of prime working-age adults in bottom-quintile households were employed. Over the next 50 years, that share fell to 36%. The second quintile, which historically had the highest labor-force participation rate among prime work-age adults, saw its labor-force participation rate fall from 90% to 85%, while the top three income quintiles all increased their work effort.

Any debate about further redistribution of income needs to be tethered to these facts. America already redistributes enough income to compress the income difference between the top and bottom quintiles from 60 to 1 in earned income down to 3.8 to 1 in income received. If 3.8 to 1 is too large an income differential, those who favor more redistribution need to explain to the bottom 60% of income-earning households why they should keep working when they could get almost as much from riding in the wagon as they get now from pulling it.

Sen. David Perdue: Mitt Romney makes the same mistake that cost him the White House

With his attempted character assassination of the president, a fellow Republican, Romney put self-interest ahead of the larger national interest: conservative Republican governance. The op-ed brought to mind 2012, when many Republicans chose to divide the party by continually bashing each other. Romney eventually discovered that many discouraged GOP voters decided to stay home on Election Day.

Like others who have run for president and failed, Romney has taken a stance that smacks of jealousy and resentment. It does nothing but serve the radical liberal left and further divides conservatives.

As the only former chief executive of a Fortune 500 company in Congress, I was initially thrilled by the prospect of welcoming another business guy to the Senate. But Romney’s behavior — before he was sworn in or cast his first vote as the new senator from Utah — was deeply disappointing.

He ran to the media instead of picking up the phone. That is exactly what is wrong with Washington. Too many career politicians focus on finger-pointing for their own self-interest rather than on getting results.

We have seen what a divided party means for Republicans. It means we help put Democrats in charge. It means we help them advance their radical liberal agenda, which has proven to fail the very people they claim to champion: the working women and men of America.

Conservatives know that bigger government, higher taxes and single-payer health care should not be the way forward. It’s fiscally and socially irresponsible.

The mainstream media and Democrats want to further divide Republicans, and now Romney has played right into their hands. Jeff Flake (Ariz.) filled that role before his retirement; the last thing we need now in the Senate is a Jeff Flake on steroids. We certainly don’t need more distractions. We need constructive leaders who want to get things done.

Like many other leaders in history, Trump is certainly an unusual president. He does not fit the typical mold of a Washington politician. That is exactly why the American people, fed up with business as usual, elected him.

The presidency is bigger than any one individual. It is about providing a vision and executing an agenda to advance all Americans. Criticism of the president or his policy decisions is, of course, not off-limits. But I believe it is much more productive to have candid conversations behind the scenes.

The Republican agenda is working. Just look at the results. As the news about employment and wages on Friday confirmed, over the past two years, the United States has undergone an astonishing economic turnaround. The economy is growing at twice the rate it did under President Barack Obama. More than 4.4 million new jobs were created in 2017 and 2018 . Middle-class income is at an all-time high. Overall unemployment is the lowest in 50 years, and African American, Hispanic and Asian American unemployment is at historically low levels.

Clearly, this president understands that his primary role is to protect Americans. He is strengthening the military and reasserting U.S. leadership around the world. These results would be absolutely celebrated if anyone else were president. Instead, “the resistance” has spread from the political extremes to the media and now to the Republican Party itself.

Imagine if Romney had been elected president and removed hundreds of regulations, passed a historic tax bill, made the United States’ NATO allies pay their fair share, negotiated a new trade deal with Mexico and Canada, and stood up to China. Would he have been met with this type of resistance? Of course not.

We are on track to change the nation’s direction for the better. We are on track to restore economic opportunity, fiscal responsibility, limited government and individual liberty. I hope Romney, who plans to caucus with Republicans, will reconsider continuing his harmful behavior as he begins his Senate career.

Instead, I hope he will join me as one of the few business-minded leaders who can stay focused on getting the job done.