The United States Relies More on Individual Income Taxes and Property Taxes than Other Developed Countries

The United States Relies More on Individual Income Taxes and Property Taxes than Other Developed Countries

Developed countries raise tax revenue through a mix of individual income taxes, corporate income taxes, social insurance taxes, taxes on goods and services, and property taxes. However, the extent to which an individual country relies on any of these taxes can differ substantially.

A country may decide to have a lower corporate income tax to attract investment, which may reduce its reliance on the corporate income tax revenue and increase its reliance on other taxes, such as social insurance taxes or consumption taxes. For example, in 2015, Estonia raised only 6.2 percent of total revenue from corporate income taxes but made it up by raising a combined 75.2 percent of total revenue from social insurance taxes and consumption taxes.

Countries may also be situated near natural resources that allow them to rely heavily on taxes on related economic activity. Norway, for example, has a substantial oil production industry on which it levies a high (78 percent) income tax and thus raised a significant amount of corporate income tax revenue.

These policy and economic differences among Organisation for Economic Co-operation and Development (OECD) countries have created differences in how they raise tax revenue. The chart below shows how the United States compares to the OECD average.

Source: Tax Foundation https://tinyurl.com/y3nc6kpx