The top 10 percent of US households earn about 33.5 percent of all income, but they pay 45.1 percent of income-related taxes, including Social Security and Medicare taxes. In other words, 1.35 times their share of all income-related taxes
bigger thanAs a large share of their income. The most progressive income tax share of any OECD country. In Germany, the top 10 percent earn 29.2 percent of income and pay 31.2 percent in income-related taxes, which is 1.07 times their income. The French top 10 percent earn 25.5 percent of income and pay 28.0 percent of income tax, 1.10 times their income.
If top earners pay a smaller share of income tax in other countries, that means everyone else pays a larger share. In the United States, the top 10 percent of earners pay 7.6 percent of GDP in income-related taxes, and the bottom 90 percent pay 9.2 percent. In Germany, the top 10 percent of earners pay 7.4 percent of GDP in income-based taxes, but the remaining 90 percent in Germany pay 16.4 percent of GDP, 77 percent more than in the United States. In France, the top 10 percent contribute 7.1 percent of GDP; The remaining 90 percent of taxpayers pay 18.2 percent of GDP, which is 97 percent higher than in the United States. Even in Sweden, the top 10 percent of earners pay only 5.9 percent of GDP in income-related taxes, 22 percent less than in the United States; The remaining 90 percent earn 16.3 percent, 77 percent higher than in the United States.
This is from page 54 of Phil Gramm, Robert Ekelund and John Earley, The Myth of American Inequality: How Governments Bias the Policy Debate. It was published in September.
The book is first rate and their deep dive into the information is very careful. I learned a lot. My review of the book will be published at the Hoover Institution Defined concepts Site tomorrow. This is a long review and so I don’t have the space to compare US taxes and taxes in OECD countries, most of which are in Europe.
When I first read the above paragraphs, I said to myself, “Well, of course; Because most European countries have a strict value added tax (VAT.)” Then I read the paragraphs more carefully and saw that it is only about tax on income and therefore, does not include VAT.
They drive that point home in the next paragraph, on page 55, writing:
Even these numbers show how progressive the total tax burden is in America. The United States collects only 35.8 percent of all tax revenue from sources other than income, such as sales and excise taxes, the smallest share of any country in the OECD. Most OECD members have large value added taxes (VAT). This tax is paid on most purchases by all customers. VAT is one of the most regressive forms of taxation, which means that the tax systems of the rest of the developed world are even less progressive than income tax comparisons indicate.
How great! Note that two-thirds of OECD countries have a VAT of 20 percent or more.