Committee for a Responsible Federal Budget
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Is the U.S. the Highest Taxed Nation in the World?

Jul 22, 2016 | Taxes

As he accepted the Republican nomination for president, Donald Trump stated that “America is one of the highest-taxed countries in the world,” while promoting his tax cut proposal.

There are multiple ways to measure levels of taxation, including government revenue as a share of the economy and the tax rates that individuals and businesses pay. As a share of the economy, the United States is nowhere close to the “highest-taxed country in the world” and does not raise nearly as much tax revenue as other developed countries, many of which are in Europe.  

According to the Organisation for Economic Co-operation and Development (OECD), total U.S. tax revenue amounted to 26 percent of GDP in 2014, with about one-third of that coming from state and local government taxes. In contrast, the OECD average was 34.4 percent of GDP and the highest rate was 50.9 percent in Denmark.

US is the fourth lowest country in the OECD by tax revenue as a share of GDP

If Trump was talking about the federal income tax rate that individuals pay, Americans still do not face the highest tax rate in the world. Again according to the OECD, the country with the highest national income tax rate is the Netherlands at 52 percent, more than 12 percentage points higher than the U.S. top federal individual income rate of 39.6 percent.

However, if Trump was talking about marginal corporate tax rates, he would be closer to correct if he said that the U.S. has the highest top marginal corporate tax rate in the OECD countries, though in the entire world the United Arab Emirates and Chad still have higher tax rates.

According to the OECD, the U.S. corporate rate is 39 percent (including an average of state and local taxes), while the OECD's unweighted average is 25 percent. Those figures account for stated tax rates, before deductions and credits. Estimates of the effective rate after deductions and credits vary, but a report by the Congressional Research Service found the U.S. effective rate was lower than the OECD weighted average and a survey of estimates by the Tax Foundation did not identify any study that found the U.S. effective corporate rate to be the world's highest.

Notwithstanding our high corporate tax rate, the U.S. is not close to being the highest-taxed country in the world.

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