Where Do We Stack Up on Taxes? A Comparison of Tax Rates Between Countries, States and Cities

"I don't have a dollar to my name. Hey brother can you spare a dime?". That was a common refrain during the Great Depression. With the rate of tax increases across the country, it may become a common refrain once again. Just how much off are Americans when it comes to taxes than their international counterpart? How does America stack up when it come to taxes? To hear it from Corporate America and the super wealthy, the US is the most heavily taxed country on the planet. Why, they can hardly earn a decent profit on their investments! But how true is that? According to the Tax Policy Institute, which is part of the world famous Brookings Institute, Americans are taxed on average 26% of the Gross Domestic Product. This compares to an average of 33% among the world's developed countries---the Organization for Economic Co-operation and Development (aka the OECD).

By comparison, Denmark is the highest taxed country in the world with a tax rate of 48%, followed by France which has a tax rate of 45% and Belgium, which has a tax rate of 44%. Germany has a tax rate of around 36%, and Norway, which is the lowest taxed nation among the Scandinavian countries, has a tax rate of about 38%. Israel has around a 33% tax rate while Japan's is right at 31%. The US, as we said, is 26%, and just below Switzerland and just ahead of South Korea with 25%. Of all of the 35 OCED countries, the least taxed country is Mexico. It's tax rate is around 16%.

Where does this tax come from? After all, someone has to pay for government services. Nothing is free. According to the same article, 48% of America's tax revenue comes from income and profits. 24% comes from Social Security while 17% comes from taxes on goods and services. The least taxed sector is property, which accounts for just 10% of the tax source. Meanwhile, Australia gets about 55% of its taxes from income and profits with about 25% from goods and services. Roughly 9% comes from property tax . However, there is no tax on social safety net type programs. New Zealand is pretty much the same way.

If we look at Denmark, which is the heaviest taxed of all the 35 OCED countries, we find that about 55% comes from income and profit. About 33% is from goods and services and least than 1% comes from social safety net programs. Turkey taxes income and profit at about 25% but about 48% on goods and services. Property tax is about 5% while it taxes social programs at 30% The average among OCED countries is 34% on income and profits, 32% on goods and services, 26% on social safety net programs and 6% on property tax.

So, what does this mean for the US when compared to the other developed nations? It means that we're in the top 25% when it comes to tax on income and profits while we tax less on goods and services, collecting just 17% compared to the OCED average of 32%. In terms of property tax, the US taxes an extra 4% over the OCED average (the majority of this and taxes on goods and services are collected at the state and local levels). In terms of Social Security or social safety net programs, the US collects slightly less tax---24%---compared to the OCED average of 26%. An interesting aside, several countries on the list collect over 40% in taxes on social safety net programs!

Therefore, in answer to our original question, America is actually among the least most taxed countries among the OCED nations, coming in 30th out of 35. However, we are tax heavy on incomes and profits and slightly higher on property taxes, which affects middle class Americans the most (property ownership is typically the largest investment among the middle class). Meanwhile, goods and services, which pertains primarily to businesses get off pretty light compared to other countries by almost half.

This brings us to the second half of our look at taxes, namely how do the states compare with each other? This is perhaps particularly important as Tax Day---April 15th---quickly approaches. As of 2015, most Americans paid almost 1/3 of their income in taxes. In 2015, the IRS assessed taxes of $1.454 trillion dollars on Americans. Based on 150.6 million returns processed and an average income of $71,258, that means on average Americans paid approximately $9,655 in taxes just to the federal government (which equates to a tax rate of 13.5%).

In addition, most Americans pay state and local taxes, Social Security tax, property tax, sales tax, plus so-called "hidden taxes" such as on water, drainage, electricity, toll, usage, garbage, and gas. Meanwhile, corporations levy their own taxes in the form of access fees, late fees, processing fees, convenience fees and a whole range of other fees and add-ons which often doubles a bill. Often times, corporations will claim that these are merely fees actually charged by local or state governments which they are "obligated" to pass on. Some claim that this or that charge is "voluntary" but added on without our consent. As many of you know, trying to obtain details about these various fees is often so difficult most of us simply give up, which I suspect is their intent.

In terms of personal taxes, which states have the lowest and highest? Let's start with the highest personal tax rates by state first. Coming in tenth is Wisconsin which has a state tax rate of 7.65%. In ninth place is New York at 8.82%. The eighth spot goes is the nation's capital, the District of Columbia. It's tax rate is 8.95%. This ties with Vermont. New Jersey is next with a 8.97% state tax. The fifth highest taxed state is Iowa at 8.89%. Coming in at fourth is Minnesota with 9.85%. Third place belongs to Oregon. Its tax rate is 9.9%. Second place goes Hawaii with 11%. Finally, the most taxed state is California whose tax rate is a staggering 13.3%. No wonder so many people are leaving.

So, now let's find out who has the lowest state taxes. Here there is a bit of a surprise since we have ten way tie! That's right. We have ten states with no state tax. They are Alaska, Florida, Nevada, South Dakota, Texas, Washington State, and Wyoming. While Tennessee and New Hampshire have no state income tax, they make up for it taxes on dividends and interest. Many of these states also use a consumption tax in lieu of a income tax. Among the states which do have an income tax, the state with the lowest is Pennsylvania which has a tax rate of 3.07%.

If we look just at property tax, the top three highest spots belong to three counties in New Jersey (Union County with 8.13%, Essex County at 8.27% and 8.79% in Passaic County). The bottom three in terms of least highest property tax all belong to Louisiana. In Vernon Parish it's 0.25%. For Assumption and Grant Parishes the tax rate on property is 0.26%. However, all isn't gumbo and crawdads in Louisiana. Louisiana has the nation's highest sales tax at 9.98%, followed by Tennessee with 9.46%. Arkansas comes in third place with a 9.30% sales tax. As for the lowest, that technically belongs to Alaska which has a 1.78% sales tax. I say "technically" because Oregon, Delaware, New Hampshire and Montana have no sales tax.

In terms of which cities have the highest local taxes, Louisville Kentucky is ranked 21st in terms of worst cites to live when it comes to taxes with an average tax bill of $11,517 despite an average income of only $49,439 coming in just ahead of Atlanta and just behind Los Angeles. I expect Louisville with move up on the list even higher very shortly. The mayor is proposing a 300% tax increase on insurance to make up for a "surprise" pension shortage which the city has known about for just over two years. As an aside, the mayor, who just ran for reelection, publicly stated on several occasions that the city actually had a surplus. What wasn't disclosed was the wasted millions of dollars on numerous pet projects such as bike lanes, paying gang members and criminals to monitor other gang members and criminals (which was hidden from the public), floating private non-profit organizations which are not self-supporting, and buying property or putting up bonds on behalf of corporations. This doesn't include top heavy agencies or executive "make jobs".

If that isn't bad enough, the residents of Louisville will be facing a new gas tax, an increase in gas and electricity rates, sewer rate, water rate, and property rate increases for 2019, which is one reason many people and businesses are moving out of Jefferson County. Meanwhile, public outrage is palpable. A number of groups have come together to fight these tax and rates increases. However, it's expect that despite public outrage, the local Metro Council will likely rubber stamps the increases while the Kentucky State Legislature does likewise.

In tenth spot of the worse taxed cities is Boston Massachusetts where the average tax bill is $14,623, not to mention being one of the worse taxed states in the country. Ninth place belongs to Oakland California. The average tax bill for residents there is $14,916. In the eighth spot is New York City, where the average resident can expect to pay $14,987. Unlucky number seven belongs to Portland Oregon with a average total tax of $16,034, followed by Seattle with $16,891 in taxes shelled out. The fifth place loser is Virginia Beach Virginia, a big military supported city. Residents there can expect to pay on average $17,763. fourth place belongs to San Diego California, another big military city. It has an average tax bill of $18,143.

In the third spot of worse taxed cities, we have Washington DC. Residents there have a average tax bill of $20,686! That's almost inconceivable for the average American. Coming in second is San Francisco, which is represented by Senator Nancy Pelosi (D-CA) in Congress. Bay City residents pay, on average $27,810 in taxes. Lastly, the worse city to live in when it comes to taxes is San Jose California which is represented in the US Senate by Ellen "Zoe" Lofgren (D-CA). San Jose is on the southern edge of the Bay Area outside San Francisco. Its residents pay an average of $27,973 in taxes! That's simply outrageous. However, we should bear in mind that while the cost of living...and taxes...are much higher, so is the overall income level.

The best spots to live in to avoid these municipal leeches include Houston, Dallas, El Paso, and San Antonio Texas, Tampa Florida, Milwaukee Wisconsin, and Tucson Arizona. However, the top three in reverse order is New Orleans Louisiana. It's residents have an average tax bill of $6,928. In the number two position is Memphis Tennessee. While residents pay approximately $5,882, Memphis is known to have a high crime problem. Next on the list is Detroit Michigan. Detroit has long been known for having its share of problems, especially with crime and corruption as well as a population flight creating a "hollowed out" or "donut" city, it's residents pay on average $5,505 in taxes. Perhaps if they paid a bit more, they could hire more cops Now, for the best place to live in terms of lowest taxes, is Miami Florida. You wouldn't think a city as large as Miami would have the lowest average total tax---approximately $5,050---but apparently it does.

So, there you have it, how America stacks up to other countries in terms of taxes, along with the best and worse states and cities to live in when it comes to taxes. Overall, America does well when compared to other industrialized nations, yet it puts too much emphasis on individuals to meet its tax obligations. In terms of states, there are a surprisingly large number of states with no or a very low tax rate. The majority of these state use consumption tax to collect revenue, which is really the most practical way to collect taxes. Others make up for having no state sales taxes by going after interest and dividend payments; essentially taxing those with the most money the most.

As for cities, it goes to show that there are a lot of places to live where the average tax rate is reasonably affordable. However, in several cases, we find instances of low tax rates and high crime rates, high unemployment, poor social services and crumbling infrastructures. In the case of a few, such as Louisville Kentucky, we see incompetence (and many would add corruption) in government to the point of committing economic suicide while a small elite profits. Sounds familiar doesn't it?

The city has tried numerous public funded ventures, only to see them fail. Nowadays it's putting all its eggs into revitalizing the "Bourbon Trail" downtown which had last prospered there over 100 years ago. Instead, the city should focus on basics. While will likely happen at its current rate is creating a Southern version of "Detroit". Other cities manage to survive thanks to a large corporate base which underwrite its services. If they go, so goes the city. Detroit is a classic example. Cities like this often fail to listen to their residents. It's politicians become arrogant and out of touch. When that happens, it's just a matter of time. Taxes are also the price we pay for convenience. Some would say it's the price we pay for civilization. However, taxes should be thought of as a limited resource, especially for ordinary people. If it's managed properly, we all prosper. If not, cities, like civilizations, crumble and fade away.



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