Americans for Tax Reform Foundation partnered with the Paris-based free-market think tank Institut Économique Molinari for the publication of the first edition of “The Tax Burden of Global Workers: A Comparative Index,” published by James Rogers and Nicolas Marques of the Institut Économique Molinari.
In the index, South Africa and the United States had the lowest tax burdens, while European Union member states took the bottom 25 spots in the 34-country ranking. The 34 countries studied represent 58.2% of the global economy. The annual study calculates a “tax liberation day” for each country, indicating how many days’ worth of work compensation is extracted from workers by their governments each year. The amount of taxes extracted were calculated as a combination of income taxes and social security contributions by both the employee and employer for an average worker in each country.
The governments of three countries (Austria, France, and Belgium) were found to extract more money than the worker himself or herself receives; for example, in Austria, the government receives $1.35 for every $1.00 that the average worker receives in take-home pay, for a total real tax rate of 54.76%. Meanwhile, in the United States, the government only receives $0.41 for every $1.00 that the average worker takes home, for a total real tax rate of 27.11%.
According to the index, Austria and France share the latest tax liberation day (July 19th), while South Africa has the earliest day (March 7th). American workers can celebrate their tax liberation day on April 9th this year.
The study notes that this year the overall average “real tax rate” throughout Europe decreased as a result of small policy changes and pandemic relief measures, though different European countries saw differing effects. 2021’s tax liberation days arrive earlier in 10 European countries, later in 8, and on the same day in 10 as compared to last year, according to the authors.
“We are excited to partner with the Institut Économique Molinari to analyze tax burdens from major countries around the world,” said Grover Norquist, President of Americans for Tax Reform. “While the United States fortunately performed well in this ranking, U.S. officials must remain wary to not fall into the burdensome taxation trap implemented by many of their European allies. Lower tax rates allow workers to keep more of their own hard-earned money and provide an environment for innovation to thrive. We need to stop the $2.9 trillion USD tax increase proposed by the Biden-Harris Administration, otherwise we will end up with the same level of taxation burden as European Union workers.”
“Expanding our research to include all continents reveals a sharp contrast between the European Union and the rest of the world when it comes to taxing the salaries of workers,” said James Rogers, co-author of the study and Research Fellow at Institut Économique Molinari. “Workers outside of the EU, with the exceptions of tiny Malta and Cyprus, get to keep significantly more of their earnings. American workers celebrate their ‘tax liberation day’ earlier than any of their European counterparts and enjoy the third-highest take-home pay around the world––while the cost of hiring them, thanks to the relatively labor-friendly tax rates, is cheaper than in 10 European countries.”
“Through 12 years of study, the correlation between payroll taxes and the unemployment rate is clear in many European Union countries,” added Rogers. “Looking at the global picture, this is generally the case, with low-tax countries such as Australia, Ireland, the U.S. and the U.K. experiencing lower unemployment than the EU average.”
The full study can be found here: https://www.institutmolinari.org/wp-content/uploads/sites/17/2021/07/tax_burden_on_global_workers2021.pdf