by Bill Sweet
My Chief Investment Officer, Barry Ritholtz, got me thinking about taxes in his post earlier today. A Very Famous Person® came up to him proclaiming that “The United States is the HIGHEST TAXED NATION IN THE WORLD.”
Of course - we all feel this way. Taxes are always too high, by definition, if you are paying them. I defend every American's right to complain about their tax bill.
But is there any truth to this?
Are income taxes high compared to what? Here are four ways to answer that question.
Compared to other developed countries, the US ranks in the lower third when both income and social taxes are calculated on $100,000 of income:
If you exclude social taxes (Social Security & Medicare, which are funded by taxes on income, so I'm not sure that they should be excluded), the US ranks around in the middle in tax revenues per capita (per person) at about $13,476 for each American in 2014:
However, you really have to adjust these figures for economic production, since the US is (by production standards) the global heavyweight champion of the world. Here are taxes as a percentage of GDP, which are quite low compared to other developed countries:
Finally, if comparing the US to other countries isn't convincing, let's compare current US tax rates (at the highest marginal bracket) to historic US taxes - for a true apples-to-apples comparison of current vs. past tax rates:
So anyone who is less than 85 years old is seeing historically low income tax rates at the highest bracket relative to any time period since the 1930s.
So depending on how you measure them, taxes on US income are either 1) in the lower 33% globally, 2) middle of the road, 3) low compared to other developed nations, and 4) low historically.
There's no evidence that they are the highest in the world.
But they are too high, of course.
- Bill
