Tax Revenues As A Percentage
Gross Domestic Product
Selected Years
Are Americans taxed too heavily. Not according to these
figures calculated by Louis A. Ferleger and Jay R.
Mandle and reported in No Pain, No Gain (1992).
-
The data come from Organization
for Economic Cooperation and Development, the OECD. OECD
countries include Australia, Canada, Italy,
United Kingdom, Germany, Austria, France, Belgium,
Netherlands, Denmark, and Sweden.
Tax Revenues As Percent
of GDP
|
1970 | 1975 | 1980 |
1985 | 1989 |
| United States | 29.2 |
29.0 | 29.5 |
29.2 | 30.1 |
| Japan |
19.7 | 20.9 | 25.4 |
27.6 | 30.6 |
| OECD | 33.1 | 34.6 | 37.0 |
39.0 | 39.5 |
What do these figure mean?
-
As a percent of total goods and services produced, tax
revenues are no higher in the United States than elsewhere.
-
In fact, the percentage is lower than in
most European democracies.
-
Moreover, these nations' economies have grown at
rates equal to and usually higher than our own.
-
It's also worth noting that their standards of
living compare very favorable with ours.
-
It seems quite possible, then, that higher rates of taxation
do not necessarily stunt growth and prosperity.
Ferleger and Mandle point out that there is no correlation
between the rate of increase of taxes and productivity growth, as the following table suggests.
Average Annual Increase in Total
Factor Productivity 1973 to 1990
and
Increase in Tax Revenues
as a Percentage of GDP,
1975 to 1989
| Productivity
growth |
Tax Revenue
increase |
| United States |
0.0 |
1.1 |
| Canada |
0.5 |
2.9 |
| Australia |
0.7 |
2.5 |
| Austria |
1.0 |
2.4 |
| United Kingdom |
1.1 |
1.0 |
| Netherlands |
1.2 |
2.3 |
| Germany |
1.3 |
2.4 |
| Denmark |
1.3 |
8.5 |
| Belgium |
1.5 |
2.5 |
| France |
1.7 |
6.9 |
| Japan |
1.7 |
9.7 |
| Italy |
1.8 |
11.6 |
| Sweden |
0.6 |
12.5 |
Interpretation
-
Consider first the United States. Taxes grew (as proportion of the gross domestic
product) only about 1.1 percent, not much of a change.
Yet productivity growth, a measure of how vigorously the
economy is growing, did not go up at all.
-
In other words, in some years productivity increased, in others it decreased. The average over the time span was 0!
-
In Japan, by contrast, the 9 (almost 10) percent increase in taxes revenues from 1975 to 1989 did not prevent an annual increase in productivity of 1.7 percent.
-
These data suggest that Japan's economy grew about 2 percent a year, even though its government collected more taxes.
-
Similarly, sharp increases in taxes in other countries did not necessarily prevent economic growth.
-
So one wonders if taxes really do stiff le initiative and hard work. If they do, why don't we see the effect in other nations?
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Copyright © 1996 H. T. Reynolds
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