I tweeted this during the week, and I was surprised how many times it got retweeted:

 


Source: Economist

Category: Digital Media, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

29 Responses to “Effective Tax Rates Around the World”

  1. andrew755 says:

    Where is Canada? I’m guessing they would be somewhere in the middle of the chart.

  2. Bob A says:

    To be accurate the chart should break down healthcare insurance portion of taxes, since for most if not all of the higher rate countries it’s included.

    The US chart should also show include how much is privately paid for healthcare costs that is included in these other countries tax rates. And this should include the amount that could be paid in wages if it wasn’t paid by employers.

  3. dukeb says:

    For a more comprehensive comparison, the US needs an extra color added on to its bar to represent health care costs that are covered in other countries as part of government benefits. Maybe something for education costs too.

  4. super_trooper says:

    What are “effective” tax rates.My litmus test for these kind of graphs are the Nordic countries. How can Sweden be so far down? 36% if you make 650k skr, sounds like heaven.

  5. howardoark says:

    Charts like that are meaningless because they cherry pick how taxes are defined. In 2002 US governments (federal, state and local) spent $12,000 per capita on a per capita income of $31,000 or 38% ( http://research.stlouisfed.org/publications/review/06/01/GarrettRhine.pdf ). Of course the effective tax rate for people in the upper middle class (making $100k) would be much higher. So, rather than being at the tail end of that chart, we would be above Belgium if you included all taxes. On the other hand, we don’t have a 17% VAT so the fat Belgian Bastards (Monty Python reference) probably win after all.

  6. howardoark

    Using “National tax rates” of the federal government is hardly cherry picking — the economist magazine knows how to select a data set.

    But if you want to make this chart more complex, you can a) include VAT taxes, but then you have to offset that versus what they PAY for. For example, in the US, we have lower taxes than the Belgium or Swiss or Danish — but you also pay healthcare insurance, student loans, Unemployment insurance, social security, etc. Thats what their higher taxes pay for.

  7. doug says:

    I don’t tweet, but I did send the link to several friends who are always talking about how ‘taxes are too damn high’. Thanks for posting it.

  8. mpappa says:

    Who wins effective spending?

  9. VennData says:

    ‘I Feel Your Pain,’ Romney Tells Campaign Rally Attendees Who Make $20 Million A Year

    http://www.theonion.com/articles/i-feel-your-pain-romney-tells-campaign-rally-atten,29929/

  10. gremlin says:

    That tax rate for italy listed does not include the health care tax, which was an additional 8%. (my income was 30% higher than the chart income) What’s really different working in other countries is the tax form is done by the government and sent to you, there’s no tax return. 54% is 54%, and that is a pretty painful tax rate. That tax rate explains my first landlord asking to be paid in cash even though he was an attorney.

    On the other hand, here in mexico the tax rate is around 27% and almost all transactions are in cash, so I guess the tax rate that will cause evasion depends on what people are used to.

  11. Jim67545 says:

    If you think your taxes are too high and want them lowered, vote for Willard. Trust him, he knows how to do that. Just like W did, and we can then bitch about the deficit.

  12. Frilton Miedman says:

    Bob A points out an EXTREMELY important variable not factored into global tax comparisons.

    While almost every other country in the world incorporates healthcare, and often college, into taxation – it’s imperative that we incorporate those expenses into the equation for an accurate comparison, specifically where we have the most expensive H-care in the world.

    Skew of taxation to income is also a huge factor, Josh Brown posted this today, regarding who’s spending and who’s cutting back this year –

    http://www.thereformedbroker.com/2012/10/20/how-affluent-americans-are-feeling-at-year-end/

    Taxation vs costs of living should be factored, for example – where our healthcare costs $21,250 per household ($8.500/person) – How much of a differential does private expenditure in healthcare account for here in the U.S.?

    We should be comparing incomes after taxes, healthcare and costs of living/staples that other countries incorporate into their taxation.

  13. dsawy says:

    Anyone who would like to emulate Belgium’s system of government needs their head examined.

  14. ook_boo says:

    Milton Friedman used to say the best way to measure total tax burden is simply to look at public expenditures a percent of GDP, on the basis that you will pay for it through one form of tax or another,whether that be income tax, VAT, through inflation, or whatever. By that measure, the differences between the Nordic countries and the US get much smaller.

  15. johnl says:

    Andrew, Canadian tax rates can be found here.
    http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html
    Remember to add the Provincial rate to the Federal rate, also there is a VAT up here.

  16. b_thunder says:

    what happened to the employer’s half of SocSec tax?

  17. socaljoe says:

    “Effective” tax rates?

    How effective can Greek taxes be if, having the second highest “effective tax rates”, is insufficient to avoid national bankruptcy?

    Maybe “theoretical” or “fictitious” would be a better description.

  18. FarmerLance says:

    Does that include State Taxes, property taxes, sales taxes etc.? I live in California and I can tell you my effective tax rate is quite a bit higher. We, as a nation, are not undertaxed relative to the rest of the world, as that graph seems to imply.

  19. Swedish Austerity says:

    The number for Sweden is incorrect, you have to include our “Arbetsgivaravgift” of 31.4% that is charged from your salary before you start paying income taxes.

    Sweden has a austere government, school vouchers and right to work laws in our whole country. Also our effective income tax for ordinary working people has been continually lowered since 2006.

    Anyone who see Swedish society as a model should be aware that those factors are just as important as our tax rates.

  20. Swedish Austerity says:

    Sorry, I forgot the link. Here you can see the real effective tax rates for Sweden: http://www.ekonomifakta.se/sv/Fakta/Skatter/Skatt-pa-arbete/Genomsnittsskatt/

    Please look at the green curve, the effective tax rate for $100k of income (approx 625k SEK) is 50.3%

  21. DeDude says:

    These numbers to a great extend reflects how many things are left to the inefficient private sector. As pointed out most countries use taxes to cover a effective health care system at less than half the price we waste on an exploitive for-profit health care system. No matter what the “function” is, it is fulfilled at some level of efficiency and someone pay for it (either directly out of pocket or via taxes out of pocket). I think the more constructive debate would be to take each function (health care, infrastructure, education, social support, military), then look at how much is spend on each. The debate should be about how good that function is, how much it cost total (both in $ and as % of GDP), and whether the public or private sector is delivering things more cost-effectively. For a country as rich as US the goal should be to be in the top 10% of the world in every single function, but to get there as cost-effectively as possible. Unfortunately these types of simple debates always get derailed at the beginning by morons who, in spite of evidence to the contrary, are convinced that no matter what the function, gobinment is more wasteful than the blood-sucking private for-profit sector. But you can always dream that one day this country will grow up.

  22. Joe Friday says:

    The 15% rate listed for Hong Kong does not include the MANDATORY retirement tax.

  23. Joe Friday says:

    armerLance,

    We, as a nation, are not undertaxed relative to the rest of the world, as that graph seems to imply.

    Of course we are.

    Where do you think are massive federal deficits & debt arise from ?

  24. Joe Friday says:

    mpappa,

    Who wins effective spending?

    The U.S. has the smallest federal government of all of the 20 industrialized nations on the planet.

    That, of course, is as a percentage of their respective populations, and refers to the governing government, and does not include the Military Industrial Complex, which is a global military presence, which means other nations are covered by our military umbrella so they don’t find it necessary to spend on a military.

  25. constantnormal says:

    … kind of borderline meaningless, at least for the US, which has a mean taxable income of about $50K, and in almost all of the other nations shown, it is far lower …

    And when one looks at the poverty levels in the US, which hits a family of four at $23,050 and a two-person household (most retirees) at $15,130, and considers the fact that an annual health care policy for that hypothetical two-person senior household is right around $14K, when Medicare implodes (or Mitt’s vouchers kick in) and seniors end up having to pay health coverage out-of-pocket, the 47% will likely rise in open revolt.

    Then our Bananamerican Spring might finally begin at last …

  26. victor says:

    @FarmerLance: yes, California is at the top of the list reg. taxation except property taxes which are about average for the nation due to Proposition 13 which of course our politicians here are working hard to repeal.

    The Federal take as a % of GDP here has been remarkably constant, over the past several decades at some 18%, see:

    http://www.heritage.org/federalbudget/current-tax-receipts

    Sources: Office of Management and Budget and Congressional Budget Office

    Some people here insist that the private system is more wasteful than the Government, forgetting that BY FAR the biggest corporation IS the Government that often operates as a cruel monopolistic master and a poor public servant, just look at the entrenched new class of the “politicos” with their “administrators” accolades and how wasteful they are via their policies and mismanagement of the public affairs.

    Everybody knows wealth can only be either created (like in the private sector) or captured (again from the private sector) and transferred into the public sector via all forms of taxation visible or opaque.

    Here’s a link on how much tax we really pay: http://www.nowandfutures.com/taxes.html

    From biblical times to the Beatles (http://www.youtube.com/watch?v=Oyu5sFzWLk8), oppressive taxation has been decried. Here, the lower income masses are OVERTAXED and the few, very few uber rich have their accountants to shield them from over-taxation. So, look admiringly at the city state of Singapore’s taxation policies and re-read Plato’s Republic and then cry over the sorry state of the world’s effective tax rates.

  27. James Cameron says:

    You can’t begin to understand that chart without understanding how the underlying analysis was done. You would also have to have a much better understanding of what is meant by “effective tax rate.” According to the KPMG report (which the Economist graphic is based on):

    “Effective rates were derived by taking total taxes over gross income prior to any deductions (which may include social security) to allow for better comparison as deductions can vary greatly across countries.”

    Cryptic at best.

    The KPMG report, which makes for an interesting read nonetheless, is here: http://goo.gl/KlNyl

  28. Joe Friday says:

    constantnormal,

    … kind of borderline meaningless, at least for the US, which has a mean taxable income of about $50K

    As I’ve previously documented here, “Household Income” (of any sort) is not a measure of ANYTHING, not to mention Wikipedia is OPINION.

    and in almost all of the other nations shown, it is far lower …

    The other nations one would contrast us with all have MUCH larger Middle-classes, and many of our metrics are skewed by the top 1%.

  29. jeffers5 says:

    This is interesting, as a conversation starter, but ultimately this is a case of different horses for different courses. Unless you know what’s happening on the expenditure side within each of the countries – that is to say, what services are provided for a given tax regime – then it’s difficult to draw intelligent conclusions from this chart.