No Country Leans on Upper-Income Households as Much as U.S.

Tax Foundation: No Country Leans on Upper-Income Households as Much as U.S.

During my recent testimony before the Senate Budget Committee (found here), I cited an OECD statistic that the U.S. has the most progressive income tax system among industrialized nations.[1]  This prompted one Senator to point out that if the richest 10% of taxpayers earn the most of any OECD country, shouldn't it make sense that they bear the largest tax burden of any country?  

The answer can be found in the OECD table below. This table shows the share of taxes paid by the richest 10 percent of households, the share of all market income earned by that group, and the ratio of what that 10 percent of households pays in taxes versus what they earn as a share of the nation's income.

The first column shows that the top 10 percent of households in the U.S. pays 45.1 percent of all income taxes (both personal income and payroll taxes combined) in the country. …

By contrast, column #2 shows that the richest decile in America earned 33.5 percent of the market income …

Interestingly, countries with top personal income tax rates that are higher than in the U.S., such as Germany, France, or Sweden, have ratios that are closer to 1 to 1. Meaning, the share of the tax burden paid by the richest decile in those countries is roughly equal to their share of the nation's income. By contrast, we prefer to have the wealthiest households in this country pay a share of the tax burden that is one-third greater than their share of the nation's income.