PROGRESSIVE ECONOMY
TRADE FACT OF THE WEEK | September 14, 2011
U.S. government revenue is less than world average, and far below rich-country average.
THE NUMBERS: Government revenue, as share of 2010 GDP –
Denmark 53.9%
Rich country average 43.3%
Brazil 37.4%
WORLD 32.3%
U.S. 30.5%
Japan 30.8%
China 20.3%
Developing-country average 27.1%
India 17.8%
Madagascar 11.7%
WHAT THEY MEAN:
By world standards, Americans are taxed a bit less than average, while American governments spend a bit more. By rich-country standards, American government revenues and spending are both below average. Some points of comparison:
Revenue: As of 2010, the IMF’s data find American federal state, and local governments collecting 30.5 percent of GDP in revenue. This is down from 34.3 percent in 2001; the decline mainly reflects the federal-revenue drop from 19.3 to 14.9 percent of GDP. In world context, the IMF figures show American government revenue – mainly taxes, but also some user fees, military and other public-sector sales of services, &c. – to be about the same as that for Japan, less than the world’s 32.3 average and well below the 43.3 percent average for rich countries. Denmark’s 54 percent was the rich world’s peak, with Finland and Sweden close behind. Among big developing countries, Chinese federal and provincial governments collected 20.3 percent of GDP in revenue, and their Indian counterparts 17.8 percent; Brazil’s 37.4 percent fits easily in the rich-country range. Madagascar’s 11.7 percent figure is the lowest on the IMF charts, with the Philippines’ 14.2 percent and Pakistan’s 14.5 percent next. The highest developing-world revenue figures are anomalies, with oil-exporters Kuwait and Libya near 60 percent and some aid-dependent small islands states even higher.
Spending: U.S. government expenditures (again counting all levels) were 41.1 percent of GDP, up from 39 percent in 2008 and 34.6 percent in 2001. This is above the world average, but well below the rich-world’s 47.7 percent average. (Excluding military spending the gap is wider: 36.4 percent for the US, 42.9 for the rich world as a whole.) Discounting anomalies in small island states – the Fund somehow counts East Timor’s government spending at 103 percent of GDP – the highest rich-country rates are Denmark’s 58 percent, France’s 56 percent, and crisis-stricken Ireland’s temporary 67 percent. The lowest rate of spending is Burma’s 11.1 percent of GDP. Madagascar is next at 12.9 percent, followed by Guatemala at 14.5 percent and the Dominican Republic at 15.1 percent. China’s 22.9 percent expenditure figure is a bit above its revenue; India’s 26.5 percent is far above.
FURTHER READING:
The IMF’s Economic Outlook data, compiled in April 2011. Includes GDP, growth, currency, budget-balance, and more:
http://www.imf.org/external/pubs/ft/weo/2011/01/weodata/index.aspx
The same table as above, with expenditures instead of revenue:
Expenditure
Denmark 57.7%
Rich country average 47.7%
Brazil 40.3%
WORLD 36.9%
U.S. 41.1%
Japan 40.3%
China 22.9%
Developing-country average 30.0%
India 26.5%
Madagascar 12.9%
And a U.S. perspective – At 30.5 percent of GDP, U.S. revenue is the lowest in many years. The IMF figures report a drop from 34 percent in 2000, largely reflecting a collapse in federal government revenue from the 20.6 percent peak measured in 2000 to last year’s 14.9 percent, which (what with tax cuts and high unemployment) was the lowest federal-revenue figure since 1950. The highest peacetime rate ever measured came in 2000 at 20.6 percent, slightly below the 20.9 percent of 1945. The highest levels of peacetime spending were the 25.0 percent and 23.8 percent rates of 2009 and 2010, with the 22 percent spending rates of the mid-1980s not far behind. American revenue and spending figures from the Office of Management and Budget: http://www.whitehouse.gov/omb/budget/Historicals/
More tax comparisons, for individuals and businesses –
Tax rates for individuals – The OECD’s detailed figures on taxation (using a definition of ‘income tax’ that includes social-security contributions, state and local income taxes, and federal income taxes but not capital gains taxes or sales taxes) allow for some comparisons on tax policy across its 34 middle-to-high-income members. Among these countries – basically Europe, the U.S., Canada, Australia, New Zealand, Japan, Korea, Israel, Mexico, Chile, and Turkey – tax rates for average earners are lowest in the Latin America states, at 15 percent for Mexico and 12 percent for Chile. Slovakia, the Czech Republic, and Turkey, come next, with at about 30 percent for the Czechs and Slovaks and 36 percent for Turks. The U.S. is on the lower-middle section of the wage-tax scale with a 32.7 percent average rate, and near the low end for upper-income taxpayers. Some sample comparisons:
Average income Upper-middle and above*
France 49.3% 53.2%
Sweden 40.6% 50.8%
UK 32.7% 37.5%
United States: 29.7% 35.2%
Japan 30.5% 33.5%
Mexico 15.5% 21.3%
* 167 percent of median income and higher.
OECD’s tax database has 34-country comparisons of income, corporate, payroll, and other tax rates: http://www.oecd.org/document/60/0,3343,en_2649_34533_1942460_1_1_1_1,00.html
The OECD figures, however, are published rates. Deductions, credits, and exclusions leave actual American tax payments far from published rates, particularly for lower-income taxpayers and upper-income taxpayers. The Tax Policy Center (a joint project of the Brookings Institution and the Urban Institute), tells you how much American families of different types and incomes typically really pay in income, payroll, excise, and other taxes: http://calculator.taxpolicycenter.org/
Tax Rates for Businesses: For business taxation, the World Bank’s Doing Business surveys offer an up-to-date and universal source. These find the world average for business taxes amounting to about 43 percent of profits. The US figure is 46.8, slightly above the average; Germany is at 48 percent, Japan 48.6 percent, and France’s 65.8 percent is the rich world’s highest rate. Developing countries appear have higher rates: China is at 63.5, Brazil at 69.0 percent, and Argentina an ominous 108 percent. The lowest business-tax rates among rich countries are Singapore’s 25 percent, Ireland’s 27 percent, and Hong Kong’s 24 percent. These tables also find Brazil with a unique distinction: not only well above Latin America’s 48 percent average, but apparently also the most complicated anywhere in the world, requiring 2,600 hours to complete. If this is correct, the figure is nearly ten times the world’s 275-hour average, and more than twice the 1,080 hours the Bank finds for second-place Bolivia. Pity the Brazilian business-manager (or envy his/her accountant): http://www.doingbusiness.org/data/exploretopics/paying-taxes
And two unusual tax collectors from the Lusophone world –
Brazil’s Receita Federal administers the world’s most time-consuming tax system: http://www.receita.fazenda.gov.br/
And East Timor’s apparently well-stocked Finance Ministry explains tax and budget: http://www.mof.gov.tl/budget-spending/?lang=en
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