There are nations on this earth that tax their citizens far more heavily than the U.S. does.
The top spots on the Organization for Economic Cooperation and Development’s rankings of tax revenue as a percentage of gross domestic product in 2017 were held by France (46.2%), Denmark (46%), Belgium (44.6%), Sweden (44%) and Finland (43.3%).
The U.S. tax burden was 27.1% of GDP, ranking it 31st among the 36 members of the OECD, the club of the world’s affluent democracies. That 27.1% includes state and local taxes; it doesn’t factor in the big tax cuts signed into law by President Donald Trump in December 2017.
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I have trotted out these OECD tax statistics several times over the past few years, mainly just because I like trotting out statistics but also to temper Trump’s repeated claims that U.S. taxes are inordinately high. Lately, though, a lot of the talk about taxes has been coming from Democratic politicians hoping to raise them to fund programs that they favor, with the increases in most cases targeted at the very wealthy. Which makes this an opportune time, I think, to review how the countries that raise lots more money from taxes than the U.S. go about raising it.
To start, here is how the U.S. stacks up against 15 other OECD nations — the biggest economies plus our neighbors plus some countries (the Nordic ones, mainly) with a reputation for combining high taxes with healthy growth — in personal income tax revenue as a share of GDP.
The U.S. gets much more revenue from personal income taxes than is the OECD norm. But yeah, Finland, Sweden and especially Denmark bring in even more as a share of GDP. How do they do it? With higher top income tax rates than the U.S., definitely. But also by assessing those top rates on a much wider swath of taxpayers than is the case in the U.S.
Smaller numbers in the right-hand column imply income tax systems that are less progressive — “progressive,” in this case, meaning that rates rise as incomes go higher. In Denmark, the top income tax bracket of 55.8% kicks in at an income of just $77,730 this year. In the U.S., the threshold for the top federal rate of 37% is $510,300. Interestingly, the countries with even more progressive income tax systems than the U.S. (France, Japan and Mexico) raise substantially less from personal income taxes than the U.S. does.