The United States has a lower tax burden compared to other developed nations. In 2021, total tax revenue in the US amounted to 27% of its gross domestic product (GDP). This is significantly lower than the average of 34% GDP for the other 37 member countries of the Organisation for Economic Co-operation and Development (OECD). Only a handful of OECD countries, including Chile, Colombia, and Ireland, collected a smaller percentage of GDP in taxes. Conversely, several European countries, such as Denmark, had tax revenues exceeding 40% of GDP, reflecting their more extensive social safety nets and public services.
Figure 1: Total tax revenue as a percentage of GDP in OECD countries (2021).
Breaking Down US Tax Revenue Sources
The composition of tax revenue also differs between the US and other OECD nations.
Income and Profits Taxes
Nearly half (48%) of US tax revenue in 2021 came from taxes on individual and corporate income and profits. This contrasts with the OECD average of 34%. Only a few countries, like Australia and Denmark, relied more heavily on income and profit taxes. Notably, personal income taxes alone contributed a larger share (42%) to total US tax revenue compared to the average for other OECD countries (27%).
Figure 2: Composition of tax revenue in the US and other OECD countries (2021).
Social Security Contributions
Revenue from Social Security and related programs accounted for 24% of total US tax revenue. This is lower than the OECD average of 29%. Countries like the Czech Republic and Japan derived over 40% of their revenue from these contributions.
Property Taxes
Property, estate, and gift taxes constituted 11% of US tax revenue, exceeding the OECD average of 7%. The majority of property tax revenue in the US is collected at the state and local levels. This funding often supports local services like schools and public infrastructure.
Goods and Services Taxes
The US relies less on taxes on goods and services (17% of total revenue) than any other OECD country (average 28%). This includes general consumption taxes and specific sales taxes. Chile stands out with the highest reliance on goods and services taxes at 53%. A key distinction is the absence of a value-added tax (VAT) in the US, a common consumption tax used in most OECD countries. Instead, consumption taxes in the US are primarily levied by state and local governments.
Conclusion
The US tax burden, measured as a percentage of GDP, is lower than most other developed countries. While income taxes contribute a significant portion of US tax revenue, the country collects comparatively less from social security contributions and consumption taxes. The absence of a federal VAT and the significant role of state and local governments in collecting property and consumption taxes further differentiate the US tax system. These differences reflect varying approaches to funding government services and social programs. Understanding these international comparisons provides valuable context for discussions about tax policy and its economic implications.
