TOTAL TAX REVENUE
US taxes are low relative to those in other high-income countries (figure 1). In 2021, taxes at all levels of US government represented 27 percent of gross domestic product (GDP), compared with a weighted average of 34 percent for the other 37 member countries of the Organisation for Economic Co-operation and Development (OECD).
Six OECD countries (Chile, Colombia, Costa Rica, Ireland, Mexico, and Türkiye) collected less tax revenue than the United States as a percentage of GDP. Taxes exceeded 40 percent of GDP in eight European countries, including Denmark, where taxes were 47 percent of GDP. Those countries generally provide more extensive government services than the United States does.
COMPOSITION OF TAX REVENUE
Income and Profits Taxes: Taxes on personal income and business profits made up 48 percent of total US tax revenue in 2021, 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 were the only OECD countries where over half of total revenue was generated from such taxes.
In the United States, taxes on just the income and profits of individuals (not businesses) generated 42 percent of total tax revenue, compared with 27 percent for all other OECD countries combined.
Social Security Contributions: The United States collected less revenue from retirement, disability, and other social security programs—24 percent of total tax revenue—than the 29 percent average across the 37 other OECD countries. Some countries were well above that average: the Czech Republic, Japan, Slovak Republic, and Slovenia each collected over 40 percent of their revenue from Social Security contributions.
Property Taxes: Taxes on property, estates, and gifts provided 11 percent of US tax revenue, compared with 7 percent for all other OECD countries. Almost all revenue from taxes on property in the US 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 selective sales taxes on specific goods and services) than any other OECD country, collecting 17 percent of tax revenue this way compared with 28 percent for the rest of the OECD. Chile collected the highest share of its total tax revenue from taxes on goods and services (53 percent).
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 37 OECD member countries except the United States. Most consumption tax revenue in the United States is collected by state and local governments.
FAQs
TOTAL TAX REVENUE
In 2021, taxes at all levels of US government represented 27 percent of gross domestic product (GDP), compared with a weighted average of 34 percent for the other 37 member countries of the Organisation for Economic Co-operation and Development (OECD).
How does the US compare in corporate income tax to the other countries? ›
The 10 nations with the highest corporate income taxes currently impose rates ranging from 35% to 50%. Countries with relatively low corporate taxes have rates of 10% or less. More than a dozen nations have no corporate taxes at all. The United States has a flat 21% corporate income tax rate.
How does taxes work for international? ›
In general, yes — Americans must pay U.S. taxes on foreign income. The U.S. is one of only two countries in the world where taxes are based on citizenship, not place of residency. If you're considered a U.S. citizen or U.S. permanent resident, you pay income tax regardless where the income was earned.
Why do you think that taxes vary so much between countries? ›
Differences between the two country groups in wage income, in the sophistication of the tax administration, and in the political power of the richest segment of the population are the primary contributors to this disparity.
How are taxes in the US compared to Europe? ›
In general, taxes in Europe vs US tend to be higher. When considering Denmark taxes vs US, the income tax can vary from 8 to 56.5 percent. In the case of German tax rates vs US, it can be anything from 9 to 45 percent plus a 5.5 percent solidarity surcharge if applicable.
How does US government spending compare to other countries? ›
Governments in the United States—federal, state, and local—spend 38.0 percent of national GDP, placing the country twenty-fourth of the twenty-nine countries.
Which country takes the most taxes? ›
1. Ivory Coast. The country with beach resorts, rainforests, and a French-colonial legacy levies a massive 60% personal income tax – the highest in the world.
Does US tax worldwide income? ›
Do I still need to file a U.S. tax return? Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live.
Which country has the best tax system? ›
2023 Rankings
For the tenth year in a row, Estonia has the best tax code in the OECD. Its top score is driven by four positive features of its tax system. First, it has a 20 percent tax rate on corporate income that is only applied to distributed profits.
Why do US citizens pay taxes abroad? ›
The U.S. is one of only 3 countries in the world that tax based on citizenship and not residency. Therefore you are required to file complicated tax forms with the IRS every year even if you are resident in another country and have been for many years and even if you have no income.
If you are a U.S. citizen or resident living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.
Do US citizens have to pay taxes on foreign property? ›
Wherever you live, buying and selling real estate can have tax implications. If you are an American, you will owe the same taxes on foreign real estate transactions as on domestic real estate. You will also need to correctly convert foreign currency transactions to U.S. dollars.
Do Europeans pay more taxes than Americans? ›
Overall, Europe has a lower cost of living due to lower healthcare expenses, a weakening euro currency, and low inflation. Europeans, however, tend to pay more of their income to taxes, and average wages tend to be lower than in America.
Are taxes higher in France or the US? ›
France has much higher taxes than in the US. Total taxes plus fees charged by the state account for more than 50% of France's GDP (it used to be only 35% in the early 70s). In contrast, Federal taxes (income tax plus social security taxes plus Medicare tax plus other miscellaneous taxes) are about 28% of the US GDP.
Are taxes higher in Canada or the USA? ›
The IRS taxes the richest Americans at 37%, whereas the top federal tax rate in Canada is 33%. Wealthy Americans have access to many tax deductions that Canada's Alternative Minimum Tax does not allow.
Is the US tax burden high compared to many European countries? ›
Are US taxes higher than in Europe? As for who pays more in taxes, it depends on a particular country. The US has higher rates compared to Eastern European countries (Poland, Bulgaria, Romania, Hungary), but lower rates in contrast with Western European states (France, Germany, Denmark, and the UK).
Who is the highest taxed country in the world? ›
1. Ivory Coast. The country with beach resorts, rainforests, and a French-colonial legacy levies a massive 60% personal income tax – the highest in the world.
Do US citizens abroad get taxed twice? ›
The US is one of the few countries that taxes its citizens on their worldwide income, regardless of where they live or earn their income. This means that American expats are potentially subject to double taxation – once by the country where they earn their income, and again by the United States.
Is the US tax code more complicated than other countries? ›
That said, filing can be tricky. As accounting professors and hosts of the podcast “Taxes for the Masses,” we know the U.S. tax system is more complex than many other countries. That complexity, however, has benefits as well as drawbacks.
