Data from the Organization for Economic Cooperation and Development clearly shows that the United States is not a particularly heavily taxed country at all. Indeed, out of 35 developed economies, the United States’ tax burden as a share of GDP—26 percent—is the lowest save for four others: Turkey, Ireland, Chile, and Mexico. (Turkey, Mexico, and Chile are considerably poorer than the United States, and have considerably younger populations.) The social democracies of northern Europe, like Denmark and France, take in nearly 50 percent of their GDPs and spend the money on ample welfare states, including child-care benefits and old-age pensions. “From a global perspective, [our tax rate is lower] than average,” said Scott Hodge, the president of the Tax Foundation, a Washington-based think tank. “The difference is that other countries tend to have a value-added tax, in addition to the same system we have with income taxes, payroll, and all that stuff.”
Moreover, Trump has insisted that the United States has an extremely high corporate-tax burden, one that forces businesses to keep money overseas and hurts jobs and income growth here at home. He is correct that the United States has very high statutory tax rates on corporate incomes, with a top rate of 39 percent on business’ profits. But the American corporate tax code is also full of exceptions, special provisions, and loopholes that companies use to reduce their tax bills. Factoring in deductions, credits, and so on, the effective corporate tax rate is about 19 percent—lower than the top marginal rate that Republicans would put in place. The OECD has found that the United States is about average when it comes to hitting companies with income taxes.
Nor is the United States’ tax burden especially heavy now when compared with the country’s recent history. The measure of federal income as a share of GDP has waxed and waned around the same narrow band—15 to 20 percent, give or take—since the end of World War II, while nearly all other developed economies have chosen to increase tax revenue as a share of GDP to build bigger, stronger welfare states. Nor are taxes on America’s wealthy heavier than they have been historically. As noted by the economist Gabriel Zucman, the United States’ marginal tax rates on its top earners are similar to those in the 1920s, though the government is three times bigger now than it was then. Indeed, the top federal income tax rate has generally been far higher than it is right now: 92 percent in the 1950s, 70 percent in the 1970s and 1980s. Under the Senate proposal, the top rate would be set at 38.5 percent, higher than it was after the George W. Bush tax cuts but lower than at most other times since World War II.
All in all, the Republican plan cuts taxes, driving the bulk of benefits to businesses and wealthy families, with negligible effects for most lower-income and middle-class families a few years out. As a result, taxes as a share of GDP would fall. Current law and government forecasts suggest that government revenues would be 18 percent of GDP in 2020. Under the Senate bill, they would be just 16.7 percent after accounting for the slightly bolstered growth the legislation would generate—with the government taking in $245 billion less in tax revenue than current law would have it in that one year alone.