Happy tax day, America! You have the most progressive tax structure in the world.
Thanks to the always-eloquent Veronique de Rugy for pointing me toward this 2008 study produced by the OECD which estimates the progressivity of tax systems in 24 industrialized countries. The study develops two separate indices to measure tax progressivity. One lists the U.S. as having the most progressive tax structure in the world and the other lists the U.S. second, just behind Ireland.
"But wait," you say, "top marginal tax rates for personal income taxes are lower in the U.S. than elsewhere in the OECD!" True, but top marginal tax income tax rates in the U.S. only apply to the very wealthy. Throughout Europe, much of the middle class is subject to the top marginal tax rates. As de Rugy explains, the top U.S. tax rate of 35 percent only applies to those making over $379,000. In France--the presumed "model" welfare state--the top rate of 41 percent applies to anyone making over $91,000.
The U.S. tax code also relies much more heavily on the progressive income tax and taxes on capital accumulation (e.g. capital gains taxes and taxes on dividends). Although European leaders are often stymied by inflexible labor market strictures, they at least recognize the economic destruction that is wrought when governments penalize saving and investment with capital gains taxes and the like.
Instead, most developed nations rely more heavily on consumption taxes, including the value-added tax (VAT).
Also, leaders in other OECD nations have resisted creating tax "loopholes" that decrease the value of work relative to liesure by paying individuals not to work. The U.S., by contrast, has a host of exemptions for low-income households and tax credits like the earned income credit that help render the U.S. tax code more progressive than those of other advanced nations.
So, according to the OECD, the U.S. redistributes wealth at a faster pace than any other advanced nation on Earth.
Happy tax day, America! Premier Khrushchev would be proud!
Or...perhaps I should say, "Премьер Хрущев мог бы гордиться!"
