OECD: U.S. Has the Highest Deficit
The United States had the highest deficit in 2018 among Organisation for Economic Co-operation and Development (OECD) countries according to the Organisation's most recent data. And another recent OECD report shows the U.S. also experienced the largest one-year drop in tax revenue.
According to the OECD, the U.S. leads member countries in general government deficit as a percentage of Gross Domestic Product (GDP) at 6.6 percent in 2018, with the next five countries – Israel, Japan, Spain, France, and the U.K. – all having deficits below 4 percent of GDP. (Data on Japan was not available for 2018 and is drawn from 2017.)
Estimates from the International Monetary Fund (IMF) earlier this year showed that the U.S. ranks number one among advanced economies in expected increase of debt as a percentage of GDP. IMF data has also shown that the U.S. has the highest deficits among advanced economies.
The latest OECD data found that between 2017 and 2018, U.S. tax revenues as a percent of GDP at all levels of government fell from 26.8 percent to 24.3 percent, the largest drop of any member country. The OECD report attributes the drop to the 2017 Tax Cuts and Jobs Act, with corporate income tax revenues falling by 0.7 percentage points and personal income tax revenues falling by 0.5 percentage points.
Tax revenue as a percentage of GDP was flat in most countries, with the overall OECD average increasing just slightly to 34.3 percent in 2018. Average tax revenues-to-GDP had increased each year since 2009 following the financial crisis. The U.S. now has the fourth-lowest revenue-to-GDP ratio in the OECD after Ireland, Chile, and Mexico.
This new data only reinforces the idea that the U.S. stands apart from other high-income countries on fiscal matters, with deficits larger than they've ever been when the economy was this strong. High and rising debt can slow growth, crowd out other policy priorities, and make it harder to respond to the next economic downturn. The U.S. could learn from other countries that have managed their obligations.