Tholos Foundation Partners on International Tax Burden Index, USA Ranks Second-Best
The Tholos Foundation partnered with the Paris-based free-market think tank Institut économique Molinari (IEM) for the publication of the second edition of “The Tax Burden on Global Workers: A Comparative Index,” authored by James Rogers and Nicolas Marques of IEM.
In the index, South Africa and the United States had the lowest tax burdens, while European Union member states took the bottom 24 spots in the 34-country ranking. The 34 countries studied represent 58.2% of the global economy.
The annual study calculates a “tax liberation day” for each country, indicating how many days’ worth of work compensation is extracted from workers by their governments each year. The amount of taxes extracted were calculated as a combination of income taxes and social security contributions by both the employee and employer for an average worker in each country.
The governments of four countries (Austria, Belgium, France, and Germany) were found to extract more money than the worker himself or herself receives; for example, in Austria, the government receives $1.12 USD for every $1.00 USD that the average worker receives in take-home pay, for a total real tax rate of 54.34%. Meanwhile, in the United States, the government receives $0.35 for every $1.00 that the average worker takes home, for a total real tax rate of 27.29%.
According to the index, Austria has the last tax liberation day (July 18th) while South Africa has the earliest day (March 8th). American workers can celebrate their tax liberation day on April 10th this year.
The study notes that this year the overall “real tax rate” across Europe decreased by 0.3 percent this year due to the continuation of pandemic relief measures and other policy changes, resulting in the lowest average European tax rates in a decade. Compared to 2021, this year’s tax liberation days occur earlier in 14 countries, later in 14 countries, and on the same day in the remaining six countries, according to the authors.
“Taxes that penalise job creation and wage growth must be reduced further,” argued Nicolas Marques, general manager of the Institut économique Molinari. “A significant proportion of taxes on production, which are abnormally high in France, are passed on to employees in the form of less generous wage increases. These taxes are detrimental to both wealth creation and purchasing power and represent societal errors.”
“French and Belgian wage earners are still devoting more than half of the amounts distributed by their employers to social contributions and taxes,” noted James Rogers, associate researcher at the Institut économique Molinari. “It’s worth asking why they are not getting the top schools, the best health care and the most generous pensions in return and why they are not the leaders in indicators of human development or well-being.”
“Two good things happen when you have low payroll taxes: First, it makes it cheaper to hire people, which means more people have jobs. Second, all of those working people end up with more money in their pockets,” continued James Rogers. “This year’s research illustrates these points once again: America’s payroll taxes are among the world’s lowest, and so is its unemployment rate. Europe’s is currently twice as high. At the same time, American workers’ take-home pay is more than double the average in the European Union countries.”
“Although the United States performed comparatively well in this index for the second year in a row, policymakers must remain wary to not fall into the taxation traps implemented by many of their European allies,” said Grover Norquist, President of Americans for Tax Reform. “The Biden Administration continues to push trillions of dollars in tax increases, including dangerous proposals like the global minimum tax, which would harm U.S. taxpayers and weaken American competitiveness abroad.”
The full study can be found here.