Memo to Mitt: American taxes already low

The tax burden on American workers is one of the lowest on Earth.

By MSN Money Partner Oct 12, 2012 12:42PM

By Rick Newman, US News & World Report


With all the talk among the presidential candidates about cutting taxes and giving the middle class a break, you'd think American taxpayers were the most overburdened in the world.


Far from it. In fact, the tax burden on American workers is one of the lowest on Earth.


Still, Republican presidential candidate Mitt Romney wants to cut tax rates by 20 percent for workers in every income bracket, and kill or reduce a bunch of other taxes. President Obama wants to raise taxes on the wealthy to help pay down the $16 trillion national debt, while keeping middle-class taxes where they are and lowering the corporate tax rate. While their proposals differ, both candidates emphasize the need to give more help to the middle class, rather than calling on ordinary families to help reduce Uncle Sam's mountain of debt.


But the bulk of American taxpayers are already getting a break compared to other advanced nations.


Overall, Washington's tax revenues are just 24.8 percent of GDP, according to data gathered by the Organization for Economic Cooperation and Development. That's the lowest level of taxation for any developed nation, and the third lowest among 34 nations tracked by the OECD, with only Mexico and Chile having lower levels. In most of Europe, taxes are at least 35 percent of GDP. In Canada, they're 31 percent; in Australia, 26 percent.


Here's how the tax burden breaks down by different categories, as a percentage of GDP:


Income tax payments: U.S.: 9.8 percent; OECD average: 11.4 percent


Taxes on goods and services: U.S.: 4.5 percent; OECD average: 10.7 percent (The higher OECD number is due to a value-added tax, or national sales tax, in many countries.)


Social Security taxes: U.S.: 6.6 percent; OECD average: 9.2 percent


Taxes on property: U.S.: 3.3 percent; OECD average: 1.8 percent


So in only one category—property—are Americans taxed higher than citizens elsewhere. And since those are mostly levied at the local level, Washington has little to do with them.


In most of the other OECD nations, higher taxes help pay for one important thing many Americans must pay for separately: health care. On the other hand, taxes in America finance the world's most expensive military, which in turn helps protect many other nations.


The real reason the burden on U.S. taxpayers is so low is that Washington has had the unique ability to borrow money, to help pay for as much as half of the government's annual spending. That's why the effective federal income tax rate has fallen from an average of about 22 percent in 1979 to 17.4 percent today, according to the Congressional Budget Office. It also helps explain why nearly half of all taxpayers end up with no income-tax payments at all, as Romney notoriously pointed out to a group of donors earlier this year.


But that can't go on forever, which is why Washington now faces the prospect of sharp tax hikes—part of the so-called fiscal cliff—if Congress doesn't come up with other ways of starting to pay down the debt by the end of the year.


Instead of addressing that, however, Romney and Obama are dickering over tax cuts for a nation that already has one of the lowest tax burdens in the world—and by some measures, the most unmanageable debt. The United States shouldn't try to out-tax other nations, but it could certainly look around and see how it measures up in terms of what taxpayers give, and what they get.


The most likely answer is too little, on either end.


More from U.S.News & World Report

Oct 12, 2012 2:11PM

What is the overall tax burden on the American citizen when all the State and Local level taxes are added?  Income tax, sales and use tax, fees for everything that requires a license or registration of one kind or another - which are most certainly taxes.  Many taxes are well hidden and are not thought of much such as the taxes on gasoline, utilities and phone bills.  There is practically nothing for which you can spend money that government at some level does not get their grubby hands on.  It boggles my mind to think that the federal goverment alone cannot manage to do the things it thinks it needs to do for less than 5 trillion dollars a year.  A person cannot even conceive of how much money that is.  Why compare America with the failed economies of countries around the world?  If you want all of your decisions to be made for you by your government and everything it thinks you need provided to you (by taking it from others of course) just pick up your belongings and move to any other country in the world and take advantage of that wonderful system.  Why do you bother with the hassle of trying to transform this once great and free republic into the same miserable state as every other country in the world who has already taken the path of socialism? Would it not be much easier to simply go where that type of system already exists?  I, for one, do not want everything handed to me.  I want freedom above all else.  Nothing more, nothing less.

Oct 12, 2012 1:32PM

Obama and Romey are not dickering over tax cuts.  They are dickering over ways to stimulate the economy and increase tax revenue.   And the author is right, we need to stop printing money and pay as we go.  Once the taxpayer sees the real bill, the size of government will quickly decrease

Oct 12, 2012 2:01PM
That's great, except I can't spend Gross Domestic Product (GDP), I can only spend my income.  Plus, they only show 4.5% on goods and services?  Sales tax in Illinois is over 9%.  That's not counting all the taxes before it ever gets to the store.  My property taxes have risen to over 12% of my income.

The real issue is that politicians can not say no to anyone and we have been deficit spending since trying to justify the Vietnam War.  Clinton was the only one that came close to balancing the budget because he inherited what Bush Sr put in place.  Then he stared dismantling it and NAFTA was passed.  Jobs start going overseas and the tax base erodes, but our politicians keep spending.
Oct 12, 2012 2:53PM

As usual, an equally important component of the tax issue is absent. WHAT DO THEY DO WITH THE MONEY? I know very few people that resent paying their taxes but when they see their money wasted and squandered on worthless programs, given to foreign governments, some of which are openly hostile to the U. S. and often used as reeletion slush funds by politicians through give aways to their friends, resisting ANY tax increases locally, state, or federal level is a noble pursuit.

to know that 40%+ of what the feds spend is borrowed is disgusting.

No additional tax/fees should be able to be collected until a $2-$3 reduction on the spending side is in effect. 

Oct 12, 2012 2:12PM
This doesn't apply to New Jersey - land of taxes.  As if my property taxes were not bad enough, I also pay TWO sewer bills - one to the township and one to the county.  Just yesterday my two sewer bills arrived in the mail together totaling $162.94!  On top of this, I get the sounds of the train roaring by a few blocks away and the stench from the sh*t plant nearby, which is a constant disgusting odor.  Although my house value keeps going down, even with massive improvements since I got it in 2010, my property taxes went up $566.00 in a year and a half!  Wanna go to the beach in NJ?  That'll cost you too.  The beaches aren't free here.  I can't even afford McDonald's anymore.
Oct 12, 2012 1:20PM
Yes France has a 75% tax rate on the rich they just enacted. As you pay taxes in western Europe on where you live and not to which country you are a citizen, many predict the rich will move.
Oct 12, 2012 1:26PM
people have become so stupid...all they want to do is reshape the world in their prejudiced image of what it should be, everyone thinks they are leaders, everyone thinks they run the country, everyone wants what everyone else much for the good old days of being able to work, be happy, and be left alone...
Oct 12, 2012 2:09PM

The fact that other people/countries are overtaxed more, does not mean we are not overtaxed.  We are just overtaxed less.


We had a revolution and threw off the yoke of King George III because he was taking 25%, and our forefathers thought that was too much, and choking the economy.  So now Uncle Sam is taking 25%?  Where is the new revolution?  We need a new George Washington.  We need to replace Uncle Sam, the same as we replaced King George III, for the same reasons.  As The Who wrote, "Meet the new boss, same as the old boss."

Oct 12, 2012 2:05PM
Look how great Europe is doing with the high taxes.  Last time I checked Greece, Spain, Portugal, and Italy are all on the verge of economic collapse.  Why because of entiltement programs and promises made that can't be meet with printing more money.  I hope the dollar does collapse and all the "experts" who think we can keep taking my hard earned money can run for the hills.  What about all the "other" taxes we as a society pay, gas tax, property tax, sales tax, etc, etc, etc.  I wonder if that figure was included in the study? 
Oct 12, 2012 2:07PM

The article talks about state property taxes but no other local taxes. 

Also please explain the difference in paying higher taxes for health care and paying for it yourself?  It seems one way or another you are paying for it.  The problem we have is not all people are paying for things either directly or in taxes.  I am all for helping people get back on their feet when they are down.  I do have a problem when we have second and third generations living on the doal without any thoughts of getting off.  Yes I also agree that their are rich people who are taking advantage of our current tax laws. 

Raising taxes is not going to end our budget problems.  We need more people working and making enough to pay taxes.  There is no easy way to do that.  We as individuals need to do more as well. 

Un skilled workers here in the US are competing against un skilled workers from around the world.  Of course they are going to be paid less. 

Oct 12, 2012 8:15PM
Newsflash! State and local taxes are still taxes.

And Social Security taxes are not 6.6%. They have been 12.4% since 1990. Add in 2.9% for Medicare, and it's 15.3% (13.3% the last couple of years, which is temporary). The employer portion of Social Security and Medicare taxes are part of the cost of hiring employees. It's coming right out of our paychecks, but we don't see it. Nice trick, Uncle Sam!

Maybe Social Security taxes are 6.6% when you add in the Warren Buffets and Mitt Romneys. Since they pay virtually no Social Security taxes (as a percentage of income), they may be skewing the numbers. But that is not a typical tax rate for the Average Joe.

Oct 12, 2012 2:54PM
Rick,  You need to check your facts.... Socia lsecurity tax employee 6.6% employer 6.6% for a total of 13.2%.... much higher than the average
Oct 12, 2012 2:28PM
So does that mean that there is a correlation between low taxes and higher prosperity?  Couldn't this be an arguement for even lower taxes?  Put the money back in the private sector to spur job growth and increase prosperity.  So what if the rest of the world taxes more ... look at where they are compared to us.  Do we really want to tax and spend like Greece and Spain?  I think not...
Oct 12, 2012 1:38PM

Right - so nothing in this articles talks about the unbelievable unemployment and social programs in most of these countries that are in the article - So I think the take-home message is that we should be paying as much taxes as they do WITHOUT the added social programs????  Pretty sloppy financial journalism if you ask me.  People don't live in fear of paying their way if they lose their jobs, and their retirement programs are amazingly rich.  Are ours?  I don't think so.


Remember you get what you pay for.....

Oct 12, 2012 3:02PM
As already stated, MSN Money Partner did not add in all the other taxes we pay to make it a comparison.  The really big miss was what the other country citizens get for their taxes - a great deal more that what US citizen receive.
Oct 12, 2012 3:16PM

I am sorry, but this story has nothing to do with facts, I and all my friends  50 miles north of NYC have never paid less than 10-15 % in property taxes right here in NY State (8-12 K a year) , and the total SS/Medicare is 16,4 % gross first before that (no deductions at all, now up to 110 K Dollars (17K), I know severeal EU countries, that you pay 0 tax for the first 10-12 K they make individually, that is and means "nothing". Property tax including all types for that is in my old country 400-1000 Dollars a year, and that includes the septic tank cleaned twice every year, and garbage collection (far more advanced with polution)---AND Please remember that MIN WAGE is 2-3 times more than USA so those taxes relatively are very cheap compared to here.!

AND NO ONE in my old country pays for any college, including living exp, IF YOU HAVE ACTUAL BRAINS. ( so indirectly that is a lifetime of at least 100 K savings if you can go to college.

Yes, there is sales tax (or VAT) and it is high, you see they want to make sure that Mitt and others when they buy the 150,000,000 boat actually pay tax, can not get away without it, so that is the way it is, but until you spend your money, you actually have it yourself!

Also here we have something called State income tax in most states, so please add it all up, compared to what you get, and we are without a doubt the highest "tax/personal expense" country, and regular people still have to pay up to 20 K a year for medical every year unless you like old Soviet Union work for the government, and a few companies--THAT IS ALSO INCLUDED IN NORTHERN EU< NO EXTRA CHARGE----and all are covered, no matter what--except for cosmetic surgery for extra boobs or removal of belly fat--Please stop listening to the polilitical ranters will you?!


Oct 12, 2012 2:05PM
Oct 12, 2012 4:04PM

Below is a list of the 47% (actually, the number is exactly 46.6% according to the IRS. Most of them have paid taxes for 50 years and/or pay taxes now. You, or someone you love, are an American in the "47%." They are true American patriots, heroes, working people and our elders. They are Us. WE are the UNITED States of America.. I am proud to pay my taxes and so are THEY.

70.2% are people 65 or older who paid into Social Security and the Medicare tax and are now retired. They receive an average of 1100.00 per month making them poor, but able to live within a tight budget. THEY are My Fellow Americans.

Two thirds of these people, including the retirees listed above as well as working people, are people who earn under 20,000.00 per year. This would include every single person earning minimum wage. Now, these working people DO pay payday taxes out of their checks. They just get some deductions depending upon the size of their family when they fill out their income taxes. They sometimes get Earned Income Credit or Daycare Rebates. President Obama lowered these payday taxes and we now know that his plan is to raise taxes for people making 250,000 or more per year. They are My Fellow Americans.

Among the 47% are people paying sales taxes, car purchase and tag taxes, property taxes, and on and on. They are just too poor to pay any more on April 15th. But, Mitt Romney isn't. And by April 15th, 2014, he will be paying his fair share and that will be the very least he can do because he made a ton off war investments.

The stories about "freeloaders" and "lazy" people.....these are just that. Stories people have tossed out there. They are not true. Sure, there are a few people getting a little something for nothing. But, the states are poor and restrictions are tight. There just isn't as much as some politicians want you to believe. A lot of those people who never paid in and are getting something for nothing are sick and disabled children. Their parents get around 700.00 per month to help pay for their care. I doubt it's enough. I did not have a dying or disabled child. I will gladly pay my taxes for a tormented parent to help care for his and/or her disabled child. They are My Fellow Americans.

We have also seen the 47% and it is US, our parents, our grandparents, our neighbors, the disabled child in our child's school, the couple who both work for minimum wage......The people Mitt Romney is disgusted with? They are Us, our parents, our grandparents, disabled people, disabled children and sick babies receiving SSI, working poor, Active Military, Veterans, His own WIFE.   Watch the motherjones speech.

We have seen Mitt Romney and his millionaires and we finally know a little about his/their policy plans. They are greedy and horrific plotters who would step on a baby to get to a dollar.  And now they are planning another war for their investment portfolios to get fatter while more of our poor people die.

Some millionaires have announced that they want to pay their fair share. This is called gratitude and patriotism. It is also listed in the Bible as a requirement to be a good Christian. It is also required to be a good Humanist and important to every ethical and moral philosophy throughout the history of human kind. And THEY are My Fellow Americans.


Our taxes are nothing.  Other countries support all of the above people and their millionaires and billionaires pay their fair share.

Oct 12, 2012 3:42PM
Yep.  That is why our deficit is so high.  If we would just go back to the Clinton taxes for people making 250000.00 and more and stop invading countries, we could be back in business.
Oct 12, 2012 2:42PM
I seem to pay a lot of taxes to the state I reside in, not just to Washington.  Take a look at ALL the taxes we pay and we are pretty equal to other nation states.  Seems like we were in better shape to the European nations when our governments were smaller.  Just saying.
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