The average single American is forking over about 25 percent of their paycheck for income tax and social safety taxes — which in the U.S. include programs like Social Security and unemployment insurance. But when compared to other high-income nations, Americans typically are taxed on the lower end of the scale: the U.S. ranks No. 25 out of the 34 developed nations according to new data released Friday. The U.S. average is a few points below the Organization for Economic Cooperation and Development, or OECD, average of just under 36 percent.
Use our interactive to find your weekly pay after income and social safety-type taxes are factored into your paycheck. The table below gives you and idea of how you’d fare if the U.S. had a wage tax structure similar to any of the 33 other OECD countries.
Belgium has the OECD’s highest average tax rate at nearly 56 percent, while Chile has the lowest, at 7 percent. Note: These numbers include employer contributions, but our calculator above only includes what an employee pays.
“Social security contributions, in Europe in particular, are very important, said Pierre LeBlanc of the OECD’s Center for Tax Policy and Administration. “In Belgium you’ll see a clear example of that. That’s how they finance all of their pensions, all of their health care, and more generous unemployment insurance, and that shows up in substantially higher tax rates.”
Meanwhile, Chile has a couple factors at play, including the country’s standard deduction, which is high enough that people earning average wages don’t pay personal income tax. It only begins to kick in at higher incomes, LeBlanc said.
“The other consideration is that a pretty big chunk of their pension plan is organized privately,” Leblanc said. “You’re required to contribute to a fund. It’s a bit like, say, you had a mandatory 401(k) fund. Since that’s handled in the private versus the public sector, that tax isn’t included.
Taxes are extraordinarily complicated, as anyone who’s ever filed knows too well. Given that every tax situation is unique, the report’s authors made various assumptions to create a usable comparison across countries. For example, they only considered wage-based taxes, not taxes for non-wage income like net wealth taxes. State and local taxes were also not included.
Something worth keeping in mind when looking at the comparisons is what’s included and what’s not and how the taxes are used.
“Taxes and social security contributions are paying for different bundles of services in different countries. In the U.S., take health care for example. The payroll tax for Medicare would be covered,” LeBlanc said. “But any premiums that people have to pay through their workplace for health care coverage aren’t, because that’s in the private sector. In most, not all, but most other OECD countries, that’s covered through the public sector.”
“There’s those sorts of decisions, there’s positives but those taxes are buying services that people value. So it’s about trade-offs. Each country will decide how to make those trade-offs.”
(The OECD calculates average U.S. pre-tax income for a single person at $48,463.)