United States is mid-pack in global tax system rankings
Sunday, October 23, 2022
Americans are inordinately competitive, especially when it comes to international matchups. But there's not much for the United States to cheer as far as our ranking in the Tax Foundation's latest International Tax Competitiveness Index.
Each year, the Washington, D.C.-based tax policy nonprofit measures the degree to which the tax systems of the Organisation for Economic Co-operation and Development's (OECD) 38 member countries promote competitiveness.
The U.S. tax system basically is middle of the pack in the Tax Foundation's 2022 evaluation. OK, lower mid-pack.
For the third year in a row, we've settled in at 22nd.
Given my fellow Americans' love for the top spot, I don't see (or hear) them chanting "We're number 22!"
But 22 does get some love from the ol' blog. That figure is this weekend's By the Numbers selection.
Lower rankings in other tax areas, too: In getting to the overall ranking, the index looks at countries' various taxes.
For the United States, 22 also is the ranking for our corporate taxation methodology. America's individual tax system comes in one spot higher.
Since we don't have a national value added tax (VAT) like most of the other OECD countries, the various 50 state (plus District of Columbia) and (many more) local sales taxes, let's us take the third spot in the consumption taxes category.
U.S. property taxes, however, come in 29th. That's due to the real and personal property taxes across the nation. These levies are our single largest source of state and local revenue, with the collections funding, among other things, public schools, transportation projects, and public service agencies such as law enforcement.
The United States' worst ranking, number 35, comes from our cross-border tax rules. For those of us who tend to be more insular in our tax observations, the Tax Foundation tells us that cross border rules help countries determine how, or if, corporate income earned in other countries is taxed domestically.
Top tax systems: The best tax system, according to the Tax Foundation's analysis is a repeat winner.
"For the ninth year in a row, Estonia has the best tax code in the OECD," notes Daniel Bunn, president and CEO of the Tax Foundation. Its ranking, which global research fellow Lisa Hogreve helped determine, was aided by four positive features of the Estonian tax system.
Bunn notes that the Northern European nation has —
- a 20 percent tax rate on corporate income that is only applied to distributed profits;
- a flat 20 percent tax on individual income that does not apply to personal dividend income;
- a property tax that applies only to the value of land, rather than to the value of real property or capital; and
- a corporate territorial tax system that exempts 100 percent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions.
The remaining top five tax systems are, in order, Latvia, New Zealand, Switzerland, and the Czech Republic (also known as Czechia).
The Tax Foundation map below offers a colorful look at the rankings. And a geography lesson. 😉
At list's end: Where there are winners, there also are losers. At the other end of the OECD tax competitive rankings scale are —
OK, taxes may be terrible in those bottom five nations. Only Italy offers us individual taxpayers any good news, with its rank of 15 in that category.
But c'mon. Scenic landscapes. Historic sites. Ancient cities. Castles. Mediterranean beaches. Art. Guinness. Wine.
I'll let y'all peruse the full and thorough Tax Foundation's international index to find which country might appeal to you from a tax perspective.
Meanwhile, I'm off to create my own tax vs. lifestyle index that I can use to determine where to vacation, if not move fulltime.
You also might find these items of interest:
- Federal FBAR suit seeks $26 million in penalties
- French use AI to track swimming pool tax evaders
- Marshmallow seller doesn't owe s'more (or any) VAT to HMRC
- Japanese tax officials hold contest to encourage drinking…and alcohol tax collection
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