All data referenced in this discussion are compiled from the Organisation for Economic Co-operation and Development.
I. Taxes as a Percentage of GDP
Taxes in the US, as measured as a percentage of Gross Domestic Product, were 25th lowest out of the 30 participating countries. As of 2006, the latest year for which complete data are available, Denmark paid the highest at 49.1% of its GDP, the US paid 28%, and the lowest taxes were paid by Mexico, at 20.6% of GDP.
II. Top Marginal Taxes
As you know, the US has a “progressive tax.” In this method of taxation, lower levels of income are taxed at lower levels, and higher levels of income are taxed at a progressively higher rate. Most people pay Federal income tax as follows
- 10% on income up to $8,350
- 15% on income from $8,350 to $33,950
- 25% on income from $33,950 to $82,250
- 28% on income from $82,250 to $171,550
- 33% on income from $171,550 to $372,950
- 35% on income over $372,950
The average tax paid by a person earning $373,000 is 27%, as only $50 is taxed at 35%.
The USA ranks right in the middle (15th of 30 countries) for top marginal tax rates for employees, with Denmark again at the top (59.7%) and the Czech Republic with the lowest rate (15%).
III. Corporate Tax Rates
As of 2009, the average corporate tax rate for the thirty countries in the OECD is 26.3%. Two countries, Ireland and Iceland, have rates significantly lower than the average, 12.5% and 15%, respectively. The remainder are between the Slovak Republic and Poland at 19% and Japan at 39.54%. The US is second highest at 39.10%.
We rank 20th as a debtor nation. We rank 25th in total taxes as a percentage of GDP. We rank 15th in personal income taxes. It is only in corporate taxes that the US ranks very high: We are second in the world, after Japan.
It is a laudable goal to decrease deficit spending and lower the National Debt. It is, however, important that we put the issue into perspective, and not overstate our current circumstances.
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A copy of the article about Public Debt published last December can be found here http://womensfinancialplanning.blogspot.com/2009/12/what-can-we-afford.html
Thanks for the info Kitty. It’s does shed light on the “whole” picture….of course, I still wish my taxes were lower
……K
Thank you for the information. Very enlightening. Keep on posting, we appreciate your knowledge.
Thanks for the post Kitty, very enlightening. Since everyone who has an income over $372,950 is in the same bracket of 35%, it seems that the “progressive tax” system ends for the wealthiest of Americans. Since these Americans don’t have to pay more as they earn more, how about adding something onto those who earn over 1 or even 2 million and apply that to the lower brackets to give these people some relief. It is unconscionable that anyone living beneath the US 2009 poverty line has to pay any taxes, IMHO. Why are the poorest of Americans subject to the progressive tax system, but not the wealthiest?
Hi Jeanniep, and thanks for your opinion. Actually, the Obama Administration is considering reinstatement of the tax brackets that were in place prior to the so-called “Bush tax cuts,” which add another higher tax bracket at 39.6%. As to those who live beneath poverty level, such taxpayers pay little, if any, taxes. Why? Because income is adjusted before it is taxable, subtracting an exemption amount for the taxpayer, spouse, and children, if applicable, then reducing the tax on that amount by standard (or itemized) deductions. Generally that amount is close to, if not zero for those at poverty level. I hope this addresses your issues, and thank you again for participating in this discussion.
Thanks for the information Kitty. I’m a retired realtor and just got my tax preparer license in California last year. My husband is a retired airline pilot and we decided to try to help people in the lower income brackets, mostly Spanish speakers, who don’t file their tax returns and therefore are not receiving their refunds. My husband is Mexican American and grew up in a neighborhood where many people were too intimidated by the system or their lack of English to bother filing. Many are not aware of exemptions, child credits, itemized deductions, etc. I’m referring to the working poor, who have $ withheld from their paychecks.
Hi Kitty,
Thanks for another informative piece. I have a question, though. Please bear with me. I only have a layman’s understanding of GDP.
My question is, does this determine the value I get for those tax dollars? You know, bang for the buck. I mean, ranking is ok, but does it really say anything given the countries are so different (e.g., some countries provide more public services than others)? I would appreciate any information, because right now I’m thinking some folks are saying: Don’t complain ’cause it could be worse? (Hope I’m making sense here.) lol. That is, I’m not quite sure how this information relates to the Tea Party allegation you stated in your heading.
Hi Olga,
I use the ratio of deficit spending to GDP, because that relationship more accurately compares the degree to which each country is engaging in deficit spending, than stating the dollar amount of deficit spending alone. Whether the country is getting more “bang for the buck” depends on how the country’s spending is allocated, and whether the citizen agrees with those priorities. To see how the US spends its money, the pie chart on this site is informative.http://en.wikipedia.org/wiki/United_States_federal_budget
Thanks, as always, for your question.
Thanks Kitty,
Now I see the reality that social programs account for 39%, vs 23% for military (since that always seems to pop up in discussions here). I’ll see if I can google budgetary info on other countries.
Your comment about the “so called Bush tax cuts” are completely counter to the following article from the National Review Online: Click the blue link for the actual article.
Key points from the article include……..
Kitty–Do you disagree or refute the article? Can you help us better understand then why the term the “so called Bush tax cuts”??
Hi Dallas Lady, and thank you for your question.
I use the term “so called Bush tax cuts,” as that is what the “Jobs and Growth Tax Relief Act of 2003″ is more commonly called. Perhaps you thought I used the term perjoratively, when actually I was using common vernacular instead of the proper name for the bill.
I generally try to keep economic discussion politically neutral, but I find no inaccuracies in the points you outlined in the article you referenced, and further acknowledge that the majority of small business job creation comes from taxpayers in the highest tax bracket.
Thanks again for your participation in this discussion.
Thanks for clarifying…and I appreciate your explanation that the intent was neutrality and referential in placement, not perjorative in assessment~!!
I have many times seen and heard misinformation such as “the so called Bush tax cuts that only cut taxes for his wealthy friends” etc. and so I wanted to verify that our respective understanding was aligned!
So, does this mean that, if these tax cuts are allowed to expire, those of us that are ‘not rich’ will see our taxes go up?
Most people will see no change. The primary difference, with respect to personal income, is the addition of a 39.6% tax bracket.
OK, I’m still not sure here. What about the information from the National Review articcle cited above, which states that those earning under $75K got a 1-2% cut. Does that mean that those in this bracket will see their taxes go back up if the cuts are allowed to expire?
Comparisons of prior years’ tax cust are tricky. First, estimates must be converted to “constant dollar” value, which means that they must be adjusted for inflation. Secondly, the same number of years must be compared. Finally, estimates must be revised if predictions prove inaccurate.
A combination of the effects of inflation and the recession preventing people from taking advantage of lower rates on higher income largely negate the tax cut for those earning $75k and under, which is the basis for my statement that most people will see no change. The bottom 80% of taxpayers (those with adjusted gross income of less than $68,296) will pay a lesser percentage of total taxes, and those above that level will pay an increased share of taxes. Table 4 at this link http://www.taxfoundation.org/news/show/323.html will explain further.
Thanks for the link, Kitty. I read it over quickly and found it easy to understand. I plan to go back and read it more carefully. I like reading articles that puts information in perspective. Thanks again.