How America's Tax Rates Compare With Other Countries

Author: David Yee
Created: 10 February, 2015
Updated: 15 October, 2022
4 min read

On December 16, 1773, a group of colonists dressed as Indians boarded three British cargo ships to destroy 342 cases of tea -- a "tea party" over a 90 percent tax cut.

Tea throughout the Empire had been taxed at 30-pence a pound, which had been reduced to 3-pence a pound in the colonies to combat sluggish sales and smuggling. But that wasn't good enough; we wanted tax-free tea.

From the very beginnings of the Republic, Americans have hated taxes. Looking at modern political discourse, one would think that we have a hefty burden in the United States, but how do we stack up against our neighbors worldwide?

Where Does the Federal Revenue Come From?

The revenue of the federal government is derived from 4 primary sources: personal income taxes (47.4%), corporate income taxes (34.1%), social insurance taxes (9.9%), and others taxes, including things like tariffs, gas taxes, sin taxes, and fees (8.5%).

This is an important distinction to make, mainly that personal income and social insurance taxes (both based on personal incomes) drives the federal revenues.

The total federal revenue in 2014 was $3.02 trillion, on a GDP of $17.7 trillion.

Personal Income Tax + Social Insurance Taxes

When the average person talks about taxes (at least federal taxes), they are usually talking about income and social security taxes -- the taxes that come out of their paychecks.

When comparing these types of taxes, probably the best source to turn to is the Organisation for Economic Co-operation and Development (OECD), which has recorded member data since 1960.

Of the

34-member nations, almost all are industrial nations with stable economies -- countries like France, Germany, Japan, the United Kingdom, and South Korea.

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In an attempt to compare realistic, proportional numbers, the OECD develops data comparing the taxes paid as a percentage of the country's total GDP.

By this measure, America has the fourth lowest tax rate of the 34 members.

Statistics can always be deceiving; a different report looked at the effective tax rates including income and social taxes of people making $100,000 and $300,000 a year.

Comparing 114 countries (leaving out most undeveloped nations), the United States had the fifty-fifth highest tax rate for $100,000/year and the fifty-third highest tax rate for $300,000/year.

The highest tax rate was Belgium, topping 47 percent, while the lowest was Macau at just under 5 percent. America's tax rate placed it beside Australia and Syria, with almost all of Europe higher than America's effective tax rate of about 25 percent at $100,000 of income.

Of course, Americans pay state, sales, and property taxes, but even compared worldwide, these taxes are fairly low.

The VAT tax in Europe, a sales/consumption tax, is over 20 percent throughout the EU, over twice as high as the highest state sales tax in America of 9.45 percent (Tennessee). With the exception of a few tourist destinations, the highest combined state and local taxes are surprisingly in some of the most "anti-tax" states, with Louisiana, Alabama, Colorado, New York, and Oklahoma rounding out the top 5.

Americans, compared to our worldwide neighbors, pay a pretty low tax rate. However, much of the political argument at home isn't about how we compare with our neighbors, but how we compare with each other.

A Nation of Makers and Takers?

In the 2012 election, Mitt Romney created a firestorm when he stated that 47 percent of Americans don't pay any federal income tax.

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Romney was effectively trying to exploit the common belief that we are a nation of makers and takers -- those who create for the system and those who only deplete it.


Romney was factually correct in his numbers, but the causes of this are from an interesting phenomenon highlighted in a short video by the Tax Policy Center. (see video)

While this debate will probably never be resolved--one essential fact remains. People of all income brackets make up the 47-percent of non-taxpayers.

It isn't just the poor leeching off of society or the rich skirting taxes; the 47 percent is made up of an incredibly economically-diverse group of Americans.

There is always room for improvement in our taxation system. From simplification to greater equity (however equity is defined), we can always build at better system, but with a catch.

Improving the taxation system can't be just a code word for advancing partisan policies.

Americans are always going to hate taxes; it's in our very nature. But at some point, we have to accept that we can actually have "taxation with representation" and come together to design a functional, equitable tax system that truly represents the values of our republic.