Is Trump Right about America Being the “Highest Taxed Nation”?


In my ideal world, we’re having a substantive debate about corporate tax policy, double taxation, marginal tax rates, and fundamentaltax reform (plus spending restraint so big tax cuts are feasible).

Image Credit: KAZ Vorpal CC by 2.0

Sadly, we don’t live in my ideal world (other than my Georgia Bulldogs being undefeated). So instead of a serious discussion about things that matter, there’s a big fight in Washington about the meaning of Donald Trump’s words.

Politico has a report on this silly controversy. Here are some of highlights.

“We are the highest taxed nation in the world,” President Donald Trump has repeated over and over again. …He said it at a White House event last Friday. He’s tweeted it, repeated it in television interviews and declared it at countless rallies. It is his go-to talking point, his favorite line… It is also false — something fact checkers have been pointing out since 2015.

This fight revolves around the fact that Trump is referring to corporate taxes, but generally does not make that explicit. So you have exchanges like this.

White House press secretary Sarah Huckabee Sanders sought for the second time in less than a week to defend the comment… “We are the highest taxed corporate tax [sic] in the developed economy. That’s a fact,” Sanders said when pressed on the comment during a briefing. “But that’s not what the president said,” a reporter retorted. “That’s what he’s talking about,” Sanders responded. “We are the highest taxed corporate nation.” “But that’s not what he said. He said we’re the highest taxed nation in the world,” said the reporter, Trey Yingst.

Sigh. What a silly exchange. It reminds me of the absurd debate about “what the definition of is is” during the Clinton years.

I start with the assumption that all politicians aggressively manipulate words, either deliberately or instinctively. Or maybe just out of sloppiness.

So let’s look at three bits of data, starting with the numbers that are least favorable to Trump. Here’s a chart from the Organization for Economic Cooperation and Development. It’s definitely not my favorite international bureaucracy, but it has good apples-to-apples figures for developed nations. And you can see that the United States (highlighted in red) definitely does not have the highest overall tax burden.

For what it’s worth, we should be happy about these numbers. Indeed, I think they help to explain why Americans are much more prosperous than our European friends. And it’s also worth noting that Trump – at best – is being sloppy when he asserts that America is the “highest taxed nation.”

The President’s defenders can argue, with some legitimacy, that he often makes that claim while talking about business taxation. In those cases, it’s presumably obvious that “highest taxed” is a reference to corporate rates.

And if that’s the case, looking at a second set of numbers, the President is spot on. The United States unambiguously has the highest corporate tax rate among developed nations. And the U.S. may even have the highest corporate rate in the entire world depending on how certain severance taxes in developing nations are categorized.

Moreover, the United States has a very onerous system of worldwide taxation, accompanied by rules that rank very near the bottom.

In other words, Trump has a very strong case, but he undermines his argument when he doesn’t explicitly state that he’s talking about corporate taxation.

There’s even a third set of numbers that Trump could cite when discussing the “highest taxed nation.” As I’ve noted before, the United States actually has the most “progressive” tax system in the developed world.

But the President shouldn’t cite me when he can easily use quotes and data from the Washington Post on September 19, 2012.

The United States has by far the most progressive income, payroll, wealth and property taxes of any developed country.

Or the same newspaper on April 4, 2013.

…the American system remains the most progressive tax system in the developed world.

Or the Washington Post on April 5, 2013.

A few readers were surprised by my mention Thursday that the U.S. tax code…is actually the most progressive in the developed world. But it’s true! …Our top 10 percent…pays a much higher share of the tax burden than the upper classes in other countries do.

Here’s the most relevant chart.

These numbers may not be terribly relevant for the current controversy since Trump’s tax plan is focused more on business taxpayers rather than individual taxpayers.

But our friends on the left are very anxious to impose more class-warfare taxation, so we should file this data for future reference.

P.S. The April 4, 2013, story in the Washington Post includes this very important passage.

…social democracies like France, Germany and Sweden have actively regressive systems heavily reliant on value-added taxes.

This reinforces what I’ve repeatedly noted, which is that Europe’s costly welfare states are financed by lower-income and middle-class taxpayers (in large part because of punitive value-added taxes). The bottom line is that we should listen to Bernie Sanders and become more like Europe. But only if we want ordinary citizens to pay much higher taxes and to accept much lower living standards.

This is a guest post by Dan Mitchell “a high priest of light tax small state libertarianism”
  • daves

    The thing that’s misleading about this story is that it discusses the tax rate, not what is actually paid after deductions. Apples to apples you should be discussing the effective rate compared to the rest of the developed world.

  • Robert

    The USA might have the highest Corporate tax rate in the world, but just name me one Corporation which pays that rate, most pay 20% or less Corporate rates. Even if the top 10% pay the most Income Tax it is the lower 90% who pay the most taxes in the USA, everything you touch is taxed, sometimes three or four times, and who do you think pays the taxes from the riches money, you do in your products you buy, that is all part of price structuring on everything, Excise tax is enormous, and who pays that not the rich, but the General population and they have to to purchase things.
    The only people who ever benefit from a tax reduction are the rich who can afford to pay more but find all kinds of ways to avoid the taxes, withing two years of a tax increase inflation has eaten up everything that the working class gets but the rich keep on benefiting because they do not have to use the majority of their money for expenses.

    • Joe Brake

      Goobert: As to the “enormous excise tax” you are raving about endlessly, it doesn’t make up over 5% of federal revenue as you can see from the thin red line on the chart.

      As I have told you before all these state and local taxes have nothing to do with the federal tax rates. You love all the “Socialist European Democracies” and their sales taxes, which are three times as high as the sales taxes in the US, so why are high sales taxes good in socialist European countries, but bad in the US? The poorest people are all on welfare, so any taxes which they pay comes from money which they got from the government in the first place. They pay nothing. Every married couple earning less than $50,000 will be paying less taxes under Trump’s tax plan than they are now. And just because we have inflation is no reason not to give them a tax cut, as you keep insisting. I know you are terribly disappointed that Hillary didn’t get to jack up everyone’s taxes all the way to the sky as she was planning to do, but you will just have to live with it. It’s a lot easier for you to make a lot of wild unfounded assertions than it is for someone to straighten out all your lies. No sane person believes that the US corporations can be competitive with the highest corporate tax rates in the world. Only crackpots have that idea. I can name more than one company that pays over 36% of their income in income taxes: Here are a few of the larger ones for example, and what they paid for 2015: Kinder Morgan 73.1%; Amazon 60.6%; Colgate-Palmolive 44%; United Healthgroup 42.6%; Lowe’s 42.4%; Facebook 40.5%; CVS Caremark 39.3%; Union Pacific 37.7%; Home Depot 36.4%; and Norfolk Southern 36.3%. You don’t even know the difference between corporate revenue and net income, Gubert, and you spent three days trying to convince me that they are the same thing awhile back. HAVE A NICE DAY!!!

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