HOW DOES TAXATION IN THE USA COMPARE TO OTHER COUNTRIES?

 HOW DOES TAXATION IN THE USA COMPARE TO OTHER COUNTRIES?

In 2018, total US tax revenue represented 24% of GDP (gross domestic product), well below the weighted average of 34% for other OECD countries. It's interesting to look at US taxation and compare it to that of other countries. Invest US takes stock.

Taxation in the USA: Focus on overall revenue

Compared to other high-income countries, taxation in the United States is relatively low. In 2018, US taxes represented 24.3% of gross domestic product, compared to an average of 34.3% for the other 35 OECD member countries. Among the latter, the only countries to collect lower tax revenues than the United States, as a percentage of GDP, are Ireland, Chile, and Mexico.

In all seven European countries, taxes exceed 40% of GDP, with France leading the way with a 46.1% tax rate. It should be noted, however, that these countries generally provide more extensive public services than the United States.

What are tax revenues made up of in the USA?

Taxation in the USA

To understand where the money comes from, it is interesting to break down taxation in the USA according to the origin of the different revenues:

Income and profit taxes

Personal income taxes and corporate profits accounted for 45% of total U.S. tax revenue in 2018. This is proportionally higher than in most other OECD countries, where these taxes accounted for an average of 34% of total tax revenue.

In Australia, Denmark, and New Zealand, income and profit taxes are higher than in the US, generating more than half of their total revenue. Across the Atlantic, personal income and profit taxes alone generated 41% of total tax revenue, compared to an OECD average of 24%.

Social security contributions

In 2018, the United States collected slightly less revenue from retirement, disability, and other social security programs—a quarter of all tax revenue—compared to the OECD average (26%). The Czech Republic and Japan, for example, each collect 40% or more of their revenue from social security contributions.

Property taxes and taxation in the USA

In terms of property taxes, the US ranks well ahead of many OECD countries, with revenues twice as high (12% compared to the OECD average of 6%). Almost all property tax revenue in the US is collected by state and local governments.

Taxes on goods and services

When you look at the numbers, you see that the US relies less on taxes on goods and services than any other OECD country. This represents 18% of tax revenue, compared to 32% for the OECD.

VAT, for its part, remained the main source of consumption tax revenue within the OECD in 2018. Used worldwide, this value-added tax is widely used, with state and local governments levied in the United States.

Taxes on goods and services

The United States relies less on taxes on goods and services (including general consumption taxes and taxes on specific goods and services) than any other OECD country. It collects 18% of tax revenue, compared to 32% for the OECD. The value-added tax (VAT)—a type of general consumption tax levied in stages—is the largest source of consumption tax revenue in the OECD. VAT is used worldwide in 160 countries, including all 35 OECD member countries, excluding the United States. In the United States, most consumption tax revenue is collected by state and local governments.