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
In 2022, the United States had a tax-to-GDP ratio of 27.7% compared with the OECD average of 34.0%. In 2021, the United States was ranked 32nd out of the 38 OECD countries in terms of the tax-to-GDP ratio.
How does the estate tax in the United States compare to that of other countries? ›
The U.S. has the fourth highest estate or inheritance tax rate in the OECD at 40 percent; the world's highest rate, 55 percent, is in Japan, followed by South Korea (50 percent) and France (45 percent). Fifteen OECD countries levy no taxes on property passed to lineal heirs.
How are corporate taxes in the US compared to 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 is international income taxed in the US? ›
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.
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 are taxes in the US compared to the UK? ›
For instance, while the UK has a progressive tax system with rates ranging from 20% to 45%, the US federal tax rates vary from 10% to 37%. Additionally, the USA taxes its citizens and residents on their worldwide income, whereas the UK taxes are based on residence and domicile status.
What country pays the most taxes? ›
The long-troubled west African country Ivory Coast has the highest income tax rate in the world. It sure is a frontier market with a unique profile, but for such a low quality of life, we can't find a reason why someone would settle for paying their government most of their income.
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.
How are taxes in France compared to 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.
Does the US tax other countries? ›
The United States has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. taxes on certain items of income they receive from sources within the United States.
Instead, the U.S. has numerous tax brackets, with the goal of ensuring that higher earners pay higher rates of income tax. Although progressive rate structures like this are aimed at fairness, in that those who can afford to pay more do pay more, this type of tax system adds complexity.
Why is corporate tax so low in US? ›
Corporate Tax Rate and Receipts in the U.S.
The difference between the 21% statutory corporate income tax rate and the effective rate based on the cash taxes companies actually pay is the result of generous tax breaks doled out by U.S. Congress.
Do US citizens need to pay taxes when living abroad? ›
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. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.
Do foreigners pay more income tax in USA? ›
It is taxed for a nonresident at the same graduated rates as for a U.S. person. FDAP income is passive income such as interest, dividends, rents or royalties. FDAP income that is non-effectively connected income is taxed at a flat 30% rate on the gross income unless a tax treaty specifies a lower rate.
How many days can you be in the US without paying taxes? ›
The IRS considers you a U.S. resident if you were physically present in the U.S. on at least 31 days of the current year and 183 days during a three-year period. The three-year period consists of the current year and the prior two years.
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).
Where does the US rank compared to the rest of the world in tax rates? ›
Table 1. 2023 International Tax Competitiveness Index Rankings
| Country | Overall Rank | Individual Taxes Rank |
|---|
| United States | 21 | 22 |
| Costa Rica | 22 | 33 |
| Korea | 23 | 37 |
| Japan | 24 | 34 |
34 more rowsIn Denmark, with the highest income tax paid of any country in the world, they can be even more sure of this. Danes pay on average 36 per cent of their wages in income tax.
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.
