America The Undertaxed

Political scientist Andrea Campbell in Foreign Affairs (ungated):

In proposing all these options, from reducing spending to raising revenue, policymakers are confronting the reality of U.S. fiscal policy: compared with its counterparts among the advanced nations, the United States’ tax system collects little revenue, poorly redistributes that money across the population, and is mind-bogglingly complex. The decision of whether to change that system is a political one; whether and how to undertake tax reform is ultimately a referendum on the direction in which Americans would like to take their country.

11 Responses to America The Undertaxed

  1. Joe Bruns August 24, 2012 at 10:39 am #

    It would be interesting to superimpose the percent of GDP spent on defense.

  2. Mike Colucci August 24, 2012 at 10:45 am #

    Interesting to note that free market economies (e.g., Hong Kong, Singapore, Bahamas) are not included on this list. I wonder where they would rank?

    • Craig Burley August 24, 2012 at 11:32 am #

      The data is easily available, Mike. Singapore is around 8%, Hong Kong a touch over 11%, and Bahamas about 12%. Each, of course, is a small country with a non-scalable economy deriving significant free-rider benefits from the countries that are listed; they are not really comparable.

    • Mike McC August 27, 2012 at 11:30 am #

      I had wondered the same thing. The countries you list are not in the OECD, which is why they weren’t in the graphic. The same would be true of Taiwan, which is (like Singapore) an industrialized country with a distinct low-tax policy; its rate is 12.4%.
      Contrary to Mr. Burley’s comment, I don’t think it appropriate simply to disregard these countries as “free-riders”. Taiwan is quite similar in its economic and demographic characteristics to Korea, which is in the OECD but shows up as a relatively higher tax regime (ca. 26%).
      If the list were truly industrialized countries (and not just OECD), then the US would still appear on the low end, but not so alone and not compared just to Mexico and Chile.

  3. David Karger August 24, 2012 at 11:22 am #

    Your broke the reference url. It is

    • Erik Voeten August 24, 2012 at 11:51 am #

      Thanks, fixed!

    • Jay Livingston August 24, 2012 at 12:06 pm #

      Yeah, but the 404 page itself is worth it.

  4. David Karger August 24, 2012 at 11:29 am #

    This is an interesting article but it does seem to leave one question unaddressed. A good portion of taxes are paid to states, which may have no analogue in other countries that only have federal and municipal taxes. If you add state taxes to the total tax revenue, does the total US tax revenue become more similar to other countries’?

  5. Craig Burley August 24, 2012 at 11:35 am #

    The OECD is using the combined figures, David.

  6. MTNance August 24, 2012 at 12:14 pm #

    A quick look at unemployment data from the same source and year makes the “job-killing taxes” argument a little difficult to sustain, too. The US in overall unemployment is about the middle of the pack; there’s no immediately obvious pattern that suggests those at the top of the taxation scale are also at the top of the unemployment. There might be a positive relationship between the the % of the unemployed who are long-term (> 12 months) and taxation, but it’s not as direct as one side of the ideological spectrum likes to suggest. Caveat: all of this is based on a quick glance, not on a rigorous comparison.

  7. TaylorL August 25, 2012 at 11:37 am #

    Totally bogus & contrived analysis 0n taxation.

    GDP is an extremely poor measurement standard. It is a vague and quite arbitrary number, especially for international comparison. Also, U.S. GDP includes government spending– the spending of taxes-collected… thus, greatly reducing the ‘calculated percentage’ tax rate.

    Very unclear how payroll and non-direct taxes are treated, but they appear to be ignored that amateurish “analysis”.

    Direct taxes consume at least 38% of the gross income of the typical American family.

    Indirect (hidden) taxes consume even more worker income. Every provider of g00ds & services … pays many taxes you don’t see but are ultimately included in the price you pay. Beyond mere sales tax, you also pay a major chunk of what government charges the pizza-shop owner for property taxes, unemployment insurance taxes, federal payroll taxes, federal, state, and local income taxes, and worker’s compensation taxes. Typically, the U.S. taxman gets $4.00 on that $10 pizza you just bought {with your ‘after-tax’ Dollars}… $40 on every $100 spent on an airline ticket; $43 on every $100 of a hotel bill; $28 of every $100 of a restaurant tab.

    Anyone here who thinks they are under-taxed … is free to send generous personal checks to the U.S. Treasury — which eagerly accepts such donations, as do most state governments.