Justin Fox, Columnist

Why the U.S. Overtaxes Labor

There's a more efficient way to tax Americans. It won't happen.

April 11, 2017 at 4:28 PM UTC

Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of “The Myth of the Rational Market.”

Heavy lifting.
Photographer: David Paul Morris/Bloomberg

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The overall tax burden faced by Americans is, at 26.4 percent of gross domestic product, quite low by international standards. Among the 35 members of the Organization for Economic Cooperation and Development, only four -- Mexico, Chile, Ireland and Korea -- tax less. (And yes, state and local taxes are included in these calculations.)

But when you focus just on taxes on work, as the OECD does in a new report out this morning, the U.S. starts looking a little less like a low-tax paradise. The total "tax wedge" -- which measures "the difference between labour costs to the employer and the corresponding net take-home pay of the employee" -- was 31.7 percent of labor costs for the average single U.S. worker with no children1491915596265 in 2016, higher than in 10 other OECD countries.