This is a tale told in three tables, based on data provided by the Organisation for Economic Co-operation and Development (OECD), a club of mostly rich countries. I’ll start with tax rates:
My take-away: compared to the other countries and ignoring Switzerland, the top US personal income tax rate is a bit on the low side. However, the US figure is misleading because it combines our top federal rate and the “representative” top rate for the states, which the OECD says is 4%. But we know that many highly populated states have much higher top tax rates - like the 13% top rate in California and almost 9% for New York. In these states, the combined top income tax rate is more like Denmark’s. As for corporate tax rates, the US is pretty much in the middle of the pack.
The top personal income tax rate doesn’t tell us if a country’s tax system is progressive - you have to look at what other income groups are paying as well. Consider the following:
My take-away: countries with higher top income tax rates than the US have higher tax rates in general. That makes their taxes less progressive the the US system - even when you factor in cash transfers (like Social Security and Unemployment benefits). Not counting Switzerland, the average US household is less tax-burdened than the average household in the other countries.
But tax rates give an incomplete picture of a country’s tax system. We also have to look at tax revenue as a portion of the whole economy:
My take-away: As a portion of the overall economy, the US collects less tax revenue than the others - even Switzerland! Ditto tax revenue from US corporations. Mmmm.
I’m thinking the US could generate more tax revenue without harming the economy. Not Denmark levels, but maybe Aussie and Swiss levels. Note that Australia and Switzerland grew their economies at roughly the US rate in 2018.
Next: Ideas on how to generate more tax revenue without harming GDP growth and what I would do with all that money.