How Do U.S. Taxes Compare to Other Countries?

Living in the U.S. might not be as bad tax-wise as you think

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It might come as a surprise to some, but the United States is actually on the bottom end of the tax scale when compared to other developed nations. The Tax Foundation performed an analysis of income tax rates in 2019 and found that the U.S. ranked 32 on a list of 41 countries. 

The Organisation for Economic Co-operation and Development (OECD) found that U.S. taxes represented about 25.5% of the country’s gross domestic product (GDP) in 2020. The average for other member countries was 33.5%.

Several European countries tax in excess of 40% of GDP, including Denmark, France, Belgium, and Italy. Five OECD countries had a lesser overall tax burden than the U.S.: Turkey, Costa Rica, Ireland, Chile, Colombia, and Mexico.

Income Taxes

Percentages of GDP are only one way to compare tax burdens. The issue changes a bit if you narrow the focus down to just income taxes.

The United States' top individual tax rate was 37% in tax year 2021. The North American average was 31.27%, according to accounting firm KPMG. Countries that had higher top tax rates in 2021 included Australia (45%), Austria (55%), and Norway (38.2%). Countries with lower top tax rates included Sudan (15%), Syria (22%), and Canada (33%).

Note

The average American household got to keep approximately $1,300 more of their earnings when the TCJA went into effect.

The top tax rate in the U.S. dropped to 37% for 2018 through 2025 under the provisions of the TCJA, and only significantly wealthy individuals pay this much. The top rates are lower in 20 European countries.

The TCJA additionally doubled standard deductions and upped the value of a few tax credits, although it imposed stricter limitations on some itemized deductions. But overall, 2018 tax reform treated many Americans kindly.

Excise and Value-Added Taxes

Excise taxes are those imposed on specific goods and services—think gasoline and cigarettes and the like. For the most part, these are imposed at the state and local levels and they're buried in the purchase price.

The U.S. imposes far less in taxes on goods and services than any other OECD nation—18% of its revenue comes from this source compared to an average of 32%. This is largely attributable to the fact that it doesn’t have a national-level VAT.

Note

These "value-added taxes" (VATs) are imposed by every OECD member country except the U.S., according to the Tax Policy Center, and whether the U.S. should be imposing this tax is a matter of some debate.

Interestingly, France—which ranked highest on the Tax Policy Center’s list of highest taxes as a share of GDP—is largely credited with creating the VAT back in the 1950s.  

The Added Cost of Tax Preparation

It’s said that time is money, so it bears mentioning that the U.S. has one of the most complicated tax filing systems among developed nations. According to T.R. Reid, author of A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax SystemU.S. taxpayers collectively spend about six billion hours preparing and filing their returns every year. 

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Tax Foundation. "Top Personal Income Tax Rates in Europe."

  2. PwC. "Worldwide Tax Summaries."

  3. Organisation for Economic Co-operation and Development. "Revenue Statistics 2021 - the United States," Page 1.

  4. KPMG. "Individual Tax Rates for 2011-2021."

  5. Tax Policy Center. "The Three Numbers To Know About The TCJA In 2018."

  6. IRS. “Tax Reform Basics for Individuals and Families,” Page 1.

  7. IRS. “Be Tax Ready – Understanding Tax Reform Changes Affecting Individuals and Families.”

  8. Tax Policy Center. "How Do U.S. Taxes Compare Internationally?"

  9. Britannica. “Value-Added Tax.”

  10. T.R. Reid. “Google Books,” Page 5. A Fine Mess. Penguin Random House, 2018.

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