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Real U.S. Tax Rates Near Highest in World

November 21, 2016

Donald Trump says the U.S. is one of the highest-taxed countries in the world.

Hillary Clinton says the rich don’t pay enough.


Who’s right?


The top American rate is 39.6 percent. Those who disagree with the U.S. being a high-rate country point to Sweden, where taxes can reach as high as 59.7 percent of income. But let’s examine the context. If you account for state and municipal taxes, which in California and New York can reach 13.3 percent, the U.S. rate stands at 52.9 percent.


Add on the 3.8 percent Obamacare investment surtax, and we’re at 56.7 percent. Only four countries top that – Sweden, Finland, Canada and Belgium. But we’re not done. Americans also pay Medicare taxes to the tune of 2.9 percent each for employees and employers. So now we’re at 59.6 percent overall. That’s a lot, but in some places like New York City, there are other taxes still, like the “unincorporated business tax” that charges 4 percent on LLC and sole proprietorship income.


Property taxes in New York, New Jersey and Illinois could top $20,000 on a middle class home, and in Connecticut, taxes on a $130,000 home are about $4,000 per year.


So is the U.S. a high-tax or low-tax jurisdiction?


Our tax code is one of the more progressive ones – the more you make, the more you pay. The effective rates for poor people are around 0 percent, whereas it’s 30 percent or more for the rich. Such policies divide people into groups and play them against each other. Plus, high marginal rates create a disincentive to hard work, making people ask why they should work hard when the government will just take more.


The solution? Perhaps it’s a flat tax, which by the way, is also progressive.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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