How Do U.S. Tax Rates Compare To Other Countries?

MINNEAPOLIS (WCCO) — On Twitter Wednesday morning, President Donald Trump repeated a common refrain from his campaign: “We are the highest-taxed nation in the world.”

So, what do we pay compared to everyone else? Good Question.

“When you look at the all of the taxes, we’re actually one of the lower-taxed countries among the major countries in the world,” says John Spry, professor of finance at the University of St. Thomas Opus School of Business.

According to data from the Organisation for Economic Co-Operation and Development, the U.S. ranked 29th in 2015 at a rate of 26.4 percent. This tax revenue as a percentage of gross domestic product includes all types of taxes – local, income, payroll, corporate, property and sales. The U.S. is below the average for developed countries of 34.3 percent and far less than the more than 40-percent in some European countries like Denmark, France and Belgium.

According to Spry, the big difference in the overall tax rates between the U.S. and many countries in Europe is due to the Value-Added Tax (VAT). Several European countries impose the VAT, which is similar to an average of 20 percent sales tax on everything.

But, when it comes to the statutory corporate tax rate, the U.S. does top the list of industrialized countries with an average rate of 39 percent. According to the OECD, the U.S. is No. 1 for its corporate tax rate followed by France (35 percent) and Belgium (33 percent).

But, most corporations in the U.S. don’t pay that rate. Instead, researchers believe the effective tax rate for U.S. corporations is between 20 and 28 percent, which still puts the U.S. as among the highest in the world for effective corporate tax rates.

Spry says it’s hard to know how much the “average” corporation pays in taxes because it changes from business to business and year to year.

“Two different businesses can be taxed very differently because of the nature of their business or how they run their business,” he says.

According to the Center for Budget and Policy Priorities, the vast majority of U.S. tax revenue comes from payroll and income taxes. Corporate income tax only makes up 9 percent of federal tax revenue.

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