A Comparison of the Tax Burden on Labor in the OECD by Cristina Enache published by Tax Foundation (5/2020)
“Key Findings
- Average wage earners in the OECD have their take-home pay lowered by three major taxes: individual income, payroll (both employee and employer side), and value-added (VAT) and sales taxes.
- Before accounting for VAT and sales tax, the average tax burden a single average wage earner faced in the OECD was 36 percent of pretax earnings in 2019. The average OECD tax burden on labor has dropped 1.4 percentage points over the past two decades.
- The average tax burden varies substantially from one OECD country to another. In 2019, a worker in Belgium supported a tax burden seven times higher than that of a Chilean worker.
- In 2019, the average tax burden from income and payroll taxes that families in OECD countries faced was 26.4 percent, 9.6 percentage points lower than that of single taxpayers without children. In general, countries with higher tax wedges provide greater tax relief for families with children.
- Accounting for VAT and sales tax reveals that in 2019, the average tax burden on labor was 41.5 percent, which is 5.6 percentage points higher than when only income and payroll taxes are considered.
- When looking at the tax wedges for different employment forms, the United Kingdom, Netherlands, and Italy show a high degree of dispersion. The differences between the maximum and minimum tax wedge range from 10 percentage points in the United Kingdom up to 33 percentage points in Italy…”
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