Economics, Pethokoukis

Why the Left might like to raise the US tax burden by 40%

Just how high do Democrats/liberals/progressives want to raise taxes over the long run to pay for the level of government spending they desire? If you are going to spend like Europe, you need to tax like Europe. A helpful tax fact from the FT may provide a clue:

Including state and local government taxes, the US remains a low-tax nation compared with other developed countries, with revenue as a share of GDP of 24.8 per cent in 2010, compared with an average of 33.8 per cent for OECD countries.

So the average OECD tax burden is 36% higher than that of the US.

If you narrow the list down to the seven largest non-US advanced economies in the OECD, you get Japan, Germany, France, United Kingdom, Italy, Canada, and Australia,.Their average tax burden is a bit higher at 34.4%.

7 thoughts on “Why the Left might like to raise the US tax burden by 40%

  1. I think that this is might be true if you look at only taxes, but not if you look at spending. Last time I checked, the Feds were spending about 25% of GNP and the state/locals spent another 16%, for a total of 41%.

    The only way the 24% is true is if you exclude 17% of gvt expenditures because they come from borrowing rather than taxes.

  2. Using 2010 distorts the picture. Tax receipts fall faster than GDP in recessions. Normally, federal receipts are over 19% of GDP, and S&L receipts are about 9%. It is reasonable to project that total government receipts will rise to about 28% of GDP under current law as the economy recovers up to its long term trend line (or potential GDP). Tax law does not have to change to get from 2010’s 24.8% to roughly 28% sometime in the next 5 years or so.

    • Total receipts according to BEA are about $4.3 trillion while spending is about $5.5 trillion. I think Cantrell double counts federal transfers to the states.

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