The Tax Cuts and Jobs Act (TCJA) this month will mark its 2nd birthday. After two full years of dealing with its provisions, the most tax code changes in 30-plus years, there's still debate over how much it's helped both taxpayers and the economy.
One thing is clear, however. The TCJA's focus on lowering tax rates for big business has transformed the United States' global tax ranking.
Since the TCJA took effect, the U.S. of A. has gone from a high-tax nation to one of the lowest-taxed countries in the world, according to the latest global tax report from the Organization for Economic Cooperation and Development. (OECD).
The Paris-based organization has 36 member countries. The average tax rate across them in 2018 — sans Australia and Japan which didn't their most up-to-date data to the group in time — was 34.3 percent of gross domestic product (GDP).
Last year's rate was just a fractional tick higher than 2017's of virtually unchanged since the 34.2 percent.
U.S. joins lowest taxed group: The United States came in well below that average. Its tax rate last year was 24.3 percent of GDP, among the lowest for major global economies in 2018.
Only Ireland (with a 22.3 percent rate), Chile (21.1 percent) and Mexico (16.1 percent) had lower tax rates, per the OECD analysis that was released Dec. 5. (Yes, it was released on Dec. 5, not May 12. Europe lists the day first, as in 5 December 2019.)
"Major reforms to personal and corporate taxes in the United States prompted a significant drop in tax revenues, which fell from 26.8% of GDP in 2017 to 24.3% in 2018," noted the OECD noted in its statement accompanying the report.
"These reforms affected corporate income tax revenues, which fell by 0.7 percentage points, and personal income tax revenues (a fall of 0.5 percentage points)," according the global economic group.
Overall global tax rate comparison: Fourteen other countries also reported decreases, according to the OECD.
Hungary led that group with a 1.6 percentage point drop. Israel was close behind, with a 1.4 percentage point drop in Israel.
At the other end of the tax scale, 19 OECD countries last year encountered increased tax-to-GDP ratios. Korea's 1.5 percentage point bump led that group, with Luxembourg next with a 1.3 percentage point increase.
Overall in 2018, the OECD found four countries with tax-to-GDP ratios above 43 percent. They were France, Denmark, Belgium and Sweden.
Four other European Union countries also recorded tax-to-GDP ratios of more than 40 percent last year. They were Finland, Austria, Italy and Luxembourg.
Corporate rates climb: Corporate income tax revenues also continued their increase since 2014, noted the OECD report, rising to 9.3 percent of total tax revenues across the groups member countries in 2017.
That marked the first time that corporate income tax revenues exceeded 9 percent of total tax revenues since 2008.
Taxes for social services drop: In contrast, the OECD says the share of social security contributions in total tax revenues continued a slow, but steady decline that's been happening for years.
In 2017, revenue in this category dropped to 26 percent, compared to 27 percent in 2009.
You also might find these previous blog posts of interest:
- Poland slashes taxes to keep young workers in country
- Nationalism, globalism and worldwide tax competitiveness
- Despite global efforts, tax haven nations — like these 24 — still abound