Taxes are going up around the world, but the U.S. is already bucking that trend.
The Organization for Economic Cooperation and Development on Thursday said the share of economic output taken by governments in developed economies as taxes has risen to its highest level since records began 50 years ago.
But in the U.S., taxes as a share of gross domestic product fell in 2016 to below the level recorded in 2007, the year before the financial crisis hit and briefly reduced tax revenues for governments around the world.
According to the OECD, the U.S. government–at national, state and local levels–raised the equivalent of 26.2% of GDP in taxes last year, placing it 31st out of the research body’s 35 members. Only Turkey, Ireland, Chile and Mexico taxed less.
The report comes as senators prepare to vote on a Republican tax bill that would further reduce the revenues raised by the U.S. government. According to the Congressional Budget Office, the proposed changes will amount to 0.6% of GDP over the coming decade.
The GOP controls 52 votes in the Senate and can afford to lose only two for the legislation to pass. The bill is slated for a vote after Thanksgiving.
President Donald Trump often says the U.S. is the highest-taxed country in the world, a claim contradicted by the OECD data. Other Republicans sometimes accurately say that the U.S. has the developed world’s highest statutory corporate tax rate. The proposed tax bills would lower that rate to 20% from 35%.
The Paris-based think tank said its member governments raised their tax take to 34.3% of GDP in 2016 from 34% in 2015, the seventh straight year of increase. The increase is partly driven by a need to narrow budget deficits and reverse the rise in government debts that followed the financial crisis.
Denmark’s government was the biggest taxer, taking 45.9% of GDP, followed by the French government with 45.3% and the Belgian government with 44.2%.
While taxation is on the rise across the developed world, the burden has shifted toward households and away from businesses. The OECD said that in 2015–the most recent year for which comparable figures are available–the share of total taxes paid by individuals out of their incomes rose to 24.4% from 24.1%. That is well above the 23.7% share recorded in 2007.
By contrast, taxes on company profits were just 8.9% of the total, having fallen from 11.2% in 2007 in the aftermath of the crisis and never rebounded.
The U.S. government relies more heavily on taxes on individual incomes than most of its counterparts, and is roughly in line with the OECD average in terms of the proportion of revenues that come from businesses. That reliance on income taxes is partly explained by the absence of a national sales tax, which provides one fifth of revenues on average for OECD governments.
Source: Dow Jones