3. Comparing Our Taxes with Other Countries
As was discussed in the previous blog, between the federal, state and local governments, we pay a bewildering array of taxes. As a result, it is very difficult for us individually to calculate how much we owe in total taxes each year. It is much easier to calculate average taxes paid on a nationwide basis. This has averaged about 24% for the United States in recent years. Just how heavy is that burden? Most of us feel it is high–perhaps very high. But is it? What is high?
Average Tax Burdens Around the World
It is interesting to observe how heavily Americans are taxed compared with others. A very good measure of this can be found in the statistics of the Organization of Economic Cooperation and Development (OECD) whose 35 members include most of the largest economies in the world together with a number of rapidly growing developing countries. The OECD statistics measure “Total Tax Revenue as a percentage of Gross Domestic Product.” The following numbers are the latest averages for which the national statistics were available–2012 for most countries, 2011 for a few.
a) Three major European countries, including France, pay an average tax of more than 45.0%!
- Denmark 48.0%
- Belgium 45.3%
- France 45.3%
Residents of Denmark therefore pay twice as much in taxes as a share of their national income as do Americans.
b) Five other European countries, including most of Scandinavia and Italy, pay 40.0%-45.0%:
- Italy 44.4%
- Sweden 44.3%
- Finland 44.1%
- Austria 43.2%
- Norway 42.2%
c) Another eight European countries, including Germany and the United Kingdom, pay a national average tax rate between 35.0%-40.0%:
- Hungary 38.9%
- Netherlands 38.6%
- Luxembourg 37.8%
- Germany 37.6%
- Slovenia 37.4%
- Iceland 37.2%
- Czech Republic 35.5%
- United Kingdom 35.2%
d) Eight countries from around the world, including Canada, Spain and New Zealand, pay between 30.0%-35.0% in total taxes. The overall OECD average of all member countries is 34.1%:
- OECD-Total 34.1%
- Greece 33.8%
- Spain 32.9%
- New Zealand 32.9%
- Estonia 32.5%
- Portugal 32.5%
- Poland 32.3%
- Israel 31.6%
- Canada 30.7%
e) Residents of countries as diverse as Japan, Switzerland, Turkey and Australia pay 25.0%-30.0%:
- Japan 28.6%
- Slovak Republic 28.5%
- Ireland 28.3%
- Switzerland 28.2%
- Turkey 27.7%
- Korea 26.8%
- Australia 26.5%
f) The residents of only three OECD countries pay less than 25.0% of GDP in total taxes. Two of those are developing countries in Latin America. Only the United States of all of the industrialized countries pays less than 25%!
- United States 24.3%
- Chile 20.8%
- Mexico 19.7%
Thus, although we Americans may feel that our tax burden is high, it is actually one of the lowest in the world! It is almost 10% lower than the average for all OECD countries (34.1% versus 24.3%).
Why Do We Need Federal Tax Reform?
If our total tax burden is actually among the lowest in the world, the reader might reasonably ask why I have I gone to so much effort to design a sweeping fundamental change of our tax system. The problem is not that our total taxation is too high. The problem is our array of municipal and federal tax systems–especially the Internal Revenue Code, which is:
- Very long (more than 77,000 pages) and very poorly designed;
- Very complicated and contradictory;
- Very unfair to most groups of taxpayers; and
- Perhaps most importantly, harmful to the American economy and society.
Ours is a bad federal tax system!
A Solution Is at Hand
Sensible Tax Reform–Simple, Just and Effective is a proposal to bring our tax system into the 21st Century. It will be:
- Simple,
- Consistent,
- Easy to understand,
- Easy to comply with,
- Just to businesses and individuals alike,
- A dynamic boost to the overall American economy and
- The vehicle for making American companies much more competitive on the world stage.
STR will:
- Create millions of jobs;
- Help diversify our economy;
- Greatly strengthen American companies;
- Substantially reduce our international balance of trade deficit; and
- Substantially reduce the American government’s need to borrow abroad.
Some observers, especially some misinformed politicians, constantly denounce our “high” taxes. They demand even more tax cuts. We do indeed need tax reform, but not because our taxes are too high. [As can be seen in the above data, Americans are among the lowest taxed citizens in the world.] Rather, it is that our Internal Revenue Code is simply a terrible mess.
I hate taxes. My wife and children all hate taxes as well. However, it is not the total of taxes that we detest but the senseless mess that is our Internal Revenue Code and the sense that the system is basically very unjust. It needs to be replaced. We need a much better tax system. We need Sensible Tax Reform–Simple, Just and Effective. We need it now!
People often say when they recognize a serious problem: “Someone should do something!” Well, each of us is someone. Each of us can make a contribution. Get involved. Join the tax revolution. It begins–here and now!
2 Comments to 3. Comparing Our Taxes with Other Countries
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www.SensibleTaxReform.org
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You make many excellent points, Prof. Korth.
I would add that the citizens of many of those countries that pay more in taxes also receive a lot of benefits and services from their governments.
A huge problem with our federal tax system is the influence of special interests, and receiving of special favors by certain sectors and companies. Too many tax lobbyists and the potential for corruption in the way Congress works now.
Thanks for the opportunity to respond and comment.
As you quote in your excellent recent book,
“People want just taxes more than they want lower taxes.”
– Will Rogers (1879-1935), American humorist
In full support of your reform proposal,
David
Western NY
Thanks, David! I’ve formally launched my blog late last week. Still looking for any problems–so far ok. New posts will be forthcoming every Monday & Thursday afternoons.
Your points are well taken. Re. “a lot of benefits and services from their governments,” I was interviewed on the weekly interview show, Monday Night Live (link attached below):
https://archive.org/search.php?query=Keith%20Roe%2B%20korth
The interviewer, Keith Roe (who is British) also made that comment. Here in the States we have a much more cautious approach to government services (entitlements). Our taxes, as well as the services that they provide, will undoubtedly remain well below international standards. Sensible Tax Reform deliberately avoids the debate of increasing or lowering taxes. It will be difficult enough to get a broad coalition to support sweeping tax reform. Sensible Tax reform attempts to maintain tax neutrality.
Best regards,
Chris