July 20, 2015

Average U.S. Worker Pays At Least One-Third Of Their Earnings To The Government

The debate over federal tax reform in the United States often focuses on what U.S. businesses pay relative to their competitors in other countries. (The U.S. corporate tax rate is one of the highest in the world.) However, with forces in Washington debating the merits of corporate-only tax reform, which would cut the corporate tax rate only, versus comprehensive tax reform, which would revise the individual tax code in addition to the corporate one, it is worth taking a look at how U.S. workers are taxed versus individuals in other nations. Last Monday, the Tax Foundation, a right-leaning group that supports lower individual and corporate tax rates, issued a report that looked at U.S. employee burdens versus workers in other Organization for Economic Cooperation and Development (OECD) countries. The foundation, which looked at total income tax and payroll tax burdens (it did not analyze sales or property tax burdens), reported:

  • U.S. workers pay an average $17,372, or 31.5 percent, of their pretax dollars in income and payroll taxes;
  • The average payroll tax burden in the United States is $8,741 and the average income tax burden is $8,631;
  • The United States ranks number 24 among the 34 OECD countries in terms of employee tax payroll and income tax burden;
  • The average tax burden in OECD countries is 36 percent of pre-tax income;
  • In general, European countries have higher payroll tax burdens; and
  • In some countries, over 50 percent of workers’ total tax burden is paid by their employers (the United States is not one of those countries).

Even though the U.S. employee burden is lower than the OECD average, the Tax Foundation notes the average U.S. workers “end(s) up paying nearly one-third of their incomes to taxes.” For this reason, MSCI will continue to support comprehensive federal tax reform that will reduce the burden on U.S. businesses – and their employees.