The great tax analysis group Citizens for Tax Justice has an important new report out comparing our nation’s tax burden to that of other advanced economies, including all levels of taxation (fed, state, and local).
The paper points out that:
“In 2009, total federal, state and local taxes in the United States were 22.6 percent of our gross domestic product, ranking 26th among the 28 OECD countries for which data are available. Only Chile (18.2 percent) and Mexico (17.5 percent) had lower taxes.”
But since tax revenues were depressed by the recession that year, I’ve included the very useful time series on overall taxes/GDP and corporate taxes/GDP.
These data show that on overall taxation, we went from being around the middle of the pack to being among the lowest taxed nations—in other words, the 2009 results is not anomalous. On the corporate side, we used to collect a much larger share of GDP in business taxes, but that’s flipped and we’re now among the lowest by that metric as well.
There are different ways to cut this, I’m sure. Our statutory corporate tax rates are higher than most other countries, but there are so many loopholes that the rate on the books is no longer the relevant measure of the typical corporation’s tax liability.
I’ve got no doubt that our businesses waste a lot of time figuring out ways to take advantage of every break to which they’re entitled. I don’t blame them for that—their competitors are surely doing the same thing. That’s why closing loopholes is an essential part of any forthcoming tax reform.
But from the tenor of the tax debate, you’d think we were the most highly taxed nation on earth…that our corporate tax liabilities in particular hurt our ability to compete globally. But that’s far from the case.