Taxes: One of the talking points Democrats and the left often drag out to justify reversing the Trump tax cuts is that the U.S. is “undertaxed” compared with other nations. A new study shows that’s false.
Everyone from House Minority Leader Nancy Pelosi to Senate Democratic Leader Chuck Schumer to socialist independent Bernie Sanders says they would reverse the tax cuts. It’s premised not on the idea that we spend too much, but that working Americans keep just too dang much of their own money.
The problem is, as a new OECD study shows, that’s not true.
The OECD, the think tank for the world’s wealthiest nations, looked at 12 major countries in Europe, the Americas and Asia. The U.S. finished third in terms of taxes at 18.4% of income. Only Germany — at 19.7% — and deeply financially troubled Italy — at 21.7% — are higher than the U.S. So at the time of Trump’s tax cuts last year, the U.S. wasn’t “undertaxed” by any real measure.
Aha, taxoholics say, but what about Social Security taxes? Surely the U.S. is low on that list.
That happens to be true, at least based on the OECD numbers. The average worker in the U.S. pays “just” 7.7% in Social Security tax. That’s the fourth lowest of all. Only Spain, Canada, and Mexico are lower.
Fair enough. But two points need to be made.
One, overall taxes paid by each worker are still higher than average in the U.S., where the average worker pays 26.1% of his or her total income for both income tax and Social Security. That’s fifth among the nations with Germany (39.9%), Italy (31.2%), France (29.2%) and Turkey (27.9%) ahead of the U.S. The average is 25.5%. But workers also pay by having lower wages than they would otherwise. And they pay lots of “hidden taxes.”
Second, the left is on far more solid ground when it says that overall taxes in the U.S. are lower than in other nations. When it comes to overall tax burden — as measured by taxes as a share of GDP — the U.S. comes in 12th, at 25.5%, compared to No. 1 Denmark at 45.5% of GDP, No. 2 France at 45.3% and Sweden at 44.1%. The EU’s value-added tax, for instance, adds a huge amount to every purchase made by workers.
Not by coincidence, we’ve also had better economic growth, more jobs and far more private wealth created — both from real estate holdings and financial investments — than any other country. America’s overall low-tax, low-regulation society is growing faster than the others. This is a function of having a more robust, less-restricted private sector, not from copying tax systems in Europe.
To rehash, American workers are not “undertaxed.” If Democrats push the issue, they might find out how wrong they are in the 2018 election.