Global Tax Comparison: Where does the U.S. Stand?

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They say the only certain things in life are death and taxes. Many Americans feel taxed to death, especially during income tax season. However, compared to other countries, Americans surprisingly do not pay much more than average. In fact, many other countries have policies in place that require their citizens to pay considerably higher income tax rates than Americans currently pay or have paid in the past.

Income taxes are a modern concept that rely on several key ingredients: an economy based on money, the accuracy of account keeping, reliable records of expenses, profits, and receipts, as well as an orderly society in general. Throughout most of civilization, these conditions were not present, which caused taxes to be based on other factors, such as social position, wealth, and ownership of the means of production, such as slavery. In history, rudimentary precursors to taxes were the offering of first fruits and tithing. However, these practices were based on different concepts and lacked structure and order.

At the beginning of the Roman Republic, taxes were based on the wealth and property of each person. It was around 1%, and in times of war or other special circumstances it would climb to as high as 3%. However, tax rates varied by country and by region. At one time, taxes under the Xin Dynasty were as high as 10%.

The Birth of Modern Taxes

Modern tax rates can be traced back to Great Britain in 1799, when monies were needed to pay for equipment and weapons in the French Revolutionary War. In 1913, income taxes become a permanent part of law and life in the United States. By 1920, annual revenue collections in America were $5.4 billion. Taxes are in place in order to fund public programs and assistance. From our nation’s infrastructure, to unemployment benefits, to other government funded programs; our tax dollars are at work. In return for our tax payments, our government provides us with representation and executes putting our tax dollars to work according to policies set in place by our elected officials.

Global Tax Comparisons

Income tax policies, rates, and gross numbers vary across the globe. Tax rates and policies can have many different factors, including, population, economic factors, the wealth of citizens, and the location and the needs of the local citizens. The world average for income taxes is 16.3%. Africa is slightly lower at 14.6%, followed closely by the Middle East with 14.1%. The Asian Pacific region has the lowest rate at 10.7%, with Central America and the Caribbean next in line at 12%. North America is pretty close to average with 17%. South America is at 17.2%t for income tax, while on the high end of the spectrum are Central Asia and Eastern Europe at 20.2%. The highest income tax rate is at 26.5% and belongs to EU and EFTA. The tax burden in the United States of America is comparable to many other first world countries, if not slightly less.

In fact, based on a $100,000 income, the United States is 55th out of 114 countries with assessed income tax. Many countries supplement their income tax revenues with additional taxes such as a national sales tax, or value-added tax, also known as VAT. However, the United States does not do this; another factor into why Americans tend to pay less taxes than people in other parts of the world.

United States Tax Law and Policies

The United States has an intricate system of taxes. Citizens are liable to pay income taxes to the federal government, as well as their state governments (with the exception of the few states that do not collect income tax). Tax policies and laws are in place to spell out who pays taxes, how much they pay, the timeframes in which it needs to be paid, and how the money is used. Tax policy also includes penalties and punishment for those who lie about their income and tax liability or evade their taxes.

Federal and state tax policies have gone through many changes since the year 2000, with the federal branch of government seeing the most changes. Between 2001 and 2006, many income tax cuts were voted on and enacted by congress and the President. Many of these cuts are still in full swing today. Most of the cuts made affected all payers in the system. In 2009, more tax cuts were enacted by a Democratic president and congress, aimed at low to middle income taxpayers. High-income tax payers saw their tax cuts come to an end in 2013.

High Earners, High Payers

The American income tax system and policies are set up so that we pay taxes progressively. This means that higher-wage earners will pay more in income tax and bear a high burden. While lower-wage earners will pay less in income tax and not have as much tax responsibility. Higher tax rates apply to higher income brackets, according to U.S. Tax policy. The United States tax code and policy also allows tax payers credits and deductions for many different qualifying factors, such as having children or other dependents, medical bills, business expenses, childcare, education, interest paid on home loans and many other miscellaneous credits.

Although income tax will likely continue to make the old death and taxes cliché ring true, Americans may not be correct in thinking they are being taxed to death. Income tax is likely here to stay for our country; however, the policies that govern the ins and outs of taxes are ever-changing.