TAX AROUND THE WORLD
It turns out our tax season could be a lot worse. Single American taxpayers making the average wage gave 26 percent of their earnings to the federal government in the form of personal income tax and employee social security contributions in 2017, according to an annual report by the Organization for Economic Cooperation and Development. Among OECD member countries, only five put a lower tax burden on the average wage earner. Here's a look at average incomes (in U.S. dollars) and tax burdens (income tax and social security) in other countries.
Average gross earnings before taxes: $58,545
Net income after taxes: $34,823
Tax burden: 40.5%
Belgium has a progressive tax, which means people with higher incomes pay more taxes than those with lower income. Its top rate is 50 percent, and income from property, work, investments, and miscellaneous sources is all taxable. A social security tax is roughly 13 percent of all income, but the government allows deductions for business expenses, charity, and 80 percent of alimony payments.
Average gross earnings before taxes: $63,551
Net income after taxes: $38,207
Tax burden: 39.9%
Germany's progressive income and capital tax tops out at 45 percent, although sources of taxable income include agriculture, forestry, business ownership, employment, self-employment, savings and investments, rental property, and capital gains. There is a 25 percent withholding tax on interest and dividends and a 15 percent withholding tax on royalties. Members of certain churches pay an 8 percent or 9 percent church tax, which is tax deductible.
Average gross earnings before taxes: $56,211
Net income after taxes: $36,072
Tax burden: 36.1%
Denmark’s progressive income tax is just the foundation. There's an 8 percent Danish labor market contribution tax, a 5 percent health care tax, 22.5 percent to 27.8 percent in municipal taxes, social security taxes, capital gains taxes of 27 percent or 42 percent, and a withholding tax of 27 percent on dividends and 25 percent on royalties. There's also a church tax, but employment income, bonuses, fringe benefits, business income, fees, pensions, annuities, social security benefits, dividends, interest, capital gains, and real estate rental income are all taxable.
Average gross earnings before taxes: $31,417
Net income after taxes: $20,814
Tax burden: 33.7%
Slovenia has a progressive tax ranging from 16 percent to 50 percent. Residents have to pay taxes on all income, and capital gains, interest, dividends, and rental income are taxed at a flat rate of 25 percent. But the tax rate on capital gains decreases according to the length of the holding period.
Average gross earnings before taxes: $26,012
Net income after taxes: $17,298
Tax burden: 33.5%
Hungary assesses a flat personal income tax of 15 percent, and it applies to all income. Even dividends, interest, and property rentals are taxed at 15 percent. Each spouse is treated as a separate taxpayer, and social insurance contributions are 18.5 percent of income for employees.
Average gross earnings before taxes: $57,581
Net income after taxes: $38,912
Tax burden: 32.4%
Austrians' progressive taxes can be as high as 55 percent on all employment income. Investment income and capital gains are taxed at 27.5 percent. White-collar employees contribute 18.07 percent of a capped amount of income to social security, while blue-collar employees contribute 18.2 percent.
Average gross earnings before taxes: $43,304
Net income after taxes: $29,803
Tax burden: 31.2%
Italy's tax system can be a bit difficult for newcomers to digest. It's a progressive income tax ranging from 23 percent to 43 percent, but it's applied differently based on residency. Full-time residents get the full brunt of the tax, while new arrivals can pay a flat tax on their non-Italian income. There's a flat tax on productivity bonuses, additional tax on stock options, and both regional and municipal income tax.
Average gross earnings before taxes: $62,981
Net income after taxes: $43,836
Tax burden: 30.4%
In the Netherlands, “income” falls into three categories: salaries, wages, benefits, pensions, and homeownership income; enterprise income from businesses; and savings and investment income. Each category has its own rates, and social security taxes are factored into the final rate.
Average gross earnings before taxes: $49,013
Net income after taxes: $34,218
Tax burden: 30.2%
Finland's progressive rates range up to 31.75 percent, although there are also social insurance contributions and a public broadcasting tax. Meanwhile, Finland's income tax applies to salaries, wages, pensions, social benefits, and investment income — and all of that is subject to national taxes, municipal taxes, and church taxes.
Average gross earnings before taxes: $21,755
Net income after taxes: $15,357
Tax burden: 29.4%
There are no local income taxes in Latvia, but the nation's progressive federal tax structure just went into place recently. Anything shy of $22,500 is taxed at 20 percent; the bracket up to $71,000 is taxed at 23 percent; and income above that threshold is taxed at 31.4 percent. Changes in tax law increased other income taxes, too. Dividends, for example, were taxed at 10 percent before 2018 but are now taxed at 20 percent, while tax on capital gains increased to 20 percent from 15 percent.
Average gross earnings before taxes: $48,339
Net income after taxes: $34,228
Tax burden: 29.2%
France's progressive tax rate rises all the way to 45 percent. It tacks on an extra 3 percent for every dollar above $283,344 and another 4 percent for every dollar above $566,687. There are also numerous social surcharges for employment income (9.7 percent), rental income, dividends, interest, and capital gains (all 17.2 percent).
Average gross earnings before taxes: $65,716
Net income after taxes: $46,625
Tax burden: 29.1%
Luxembourg's progressive tax starts as low as 8 percent but hits the top bracket with a 42 percent levy, which doesn't include a solidarity tax of 7 percent (or 9 percent for those making more than $170,000). But Luxembourg has a tax classification strictly for single parents that reduces the levy a bit.
Average gross earnings before taxes: $63,661
Net income after taxes: $45,421
Tax burden: 28.7%
Iceland has a progressive income tax, but it's all of two tiers. The first $7,404 is taxed at 22.5 percent; the rest is taxed at 31.8 percent. But each segment is also subject to an extra 14.44 percent in municipal tax, making the two tiers 36.94 percent and 46.24 percent, respectively. There's a 22 percent tax on capital gains.
Average gross earnings before taxes: $29,263
Net income after taxes: $21,093
Tax burden: 27.9%
Turkey’s progressive income tax rates range from 15 percent to 35 percent, and they cover a lot. Income tax applies to commercial, agricultural, and professional activities; salaries and wages; income from property; dividends, interest, and royalties; and other income, including capital gains. There are some deductions for medical and educational expenses, pension and private health insurance expenses, and certain charitable donations, but they're limited.
Average gross earnings before taxes: $56,401
Net income after taxes: $40,829
Tax burden: 27.6%
Norway's taxes are notoriously onerous and complicated, with taxable income including salaries, dividends, interest, royalties, real property, capital income, and industrial, commercial, and agricultural profits. Workers, employers, and the nation all contribute to social insurance that pays pensions and medical benefits. Taxpayers get an unlimited deduction for interest paid on debts, while those under 34 who are saving to buy a house get to deduct 20 percent of that savings.
Average gross earnings before taxes: $30,888
Net income after taxes: $22,400
Tax burden: 27.5%
Portugal's lowest tax rate is 14.5 percent, but anything above $91,394 gets taxed at 48 percent, with an added 2.5 percent to 5 percent solidarity rate tacked on for good measure. Portuguese taxpayers are allowed a nearly $9,500 deduction at the highest rate. There are separate rates for capital gains and investment income.
Average gross earnings before taxes: $35,165
Net income after taxes: $26,034
Tax burden: 26%
The progressive tax in Greece stretches from 22 percent to 45 percent, but the bar for that highest rate is fairly low: If you make more than $45,400, you're in the top tax bracket. Meanwhile, real estate property taxes are also considered income taxes, and range from 15 percent to 45 percent. At the average U.S. wage, roughly 7.5 percent of that income tax is a solidarity tax that will weaken to 5 percent in 2020.
Average gross earnings before taxes: $27,816
Net income after taxes: $20,844
Tax burden: 25.1%
In Poland, any income below $96,000 is taxed at 18 percent. But if your income is above that, the tax on the base is 15.4 percent, while the tax on anything over that is 32 percent. If you're running a business, you can opt for a flat 19 percent tax rate instead.
Average gross earnings before taxes: $47,658
Net income after taxes: $35,751
Tax burden: 25%
Sweden's national income tax doesn't look so bad, with brackets of zero percent to 25 percent. Income up to roughly $50,000 falls into the zero percent bracket (with the middle bracket taxed at 20 percent and anything above $71,000 taxed at 25 percent). It's a mandatory 32 percent municipal tax that's particularly punishing. Capital gains aren't necessarily safe either, as all capital income is taxed at a flat 30 percent rate.
Average gross earnings before taxes: $55,099
Net income after taxes: $41,665
Tax burden: 24.4%
Unless you make more than $128,000 a year, you won't touch Australia's top 45 percent tax bracket. But it's a steep climb from zero percent to 19 percent to 32.5 percent and finally to 37.5 percent. That doesn't include Australia's Medicare tax of 2 percent, which increases another 1 percent to 1.5 percent for high-income taxpayers without private health insurance. The good news: There are no local taxes to add to the burden.
Average gross earnings before taxes: $27,536
Net income after taxes: $20,898
Tax burden: 24.1%
The Czech Republic has a flat tax, but that doesn't mean everyone pays the same. If you make more than $52,000 a year, for instance, there’s a solidarity contribution of 7 percent for income exceeding that amount. It applies to employment and entrepreneurial activities only.
Average gross earnings before taxes: $23,484
Net income after taxes: $17,958
Tax burden: 23.5 percent
Up to roughly $40,000 of income is taxed at 19 percent; anything above that is taxed at a 25 percent rate, which is the Slovak Republic's highest tax bracket. Dividend income is taxed at only 7 percent, while capital gains are taxed at 19 percent.
Average gross earnings before taxes: $54,319
Net income after taxes: $41,599
Tax burden: 23.4 percent
The progressive tax rate in the U.K. stretches from zero percent to 45 percent, with the top tier reserved for those making $193,000 or more. The zero percent rate is for savings and basic income only, and the rates after that start at 20 percent. Dividends are taxed at the highest marginal tax rate. There are no local taxes on income in the United Kingdom, which somewhat simplifies matters.
Average gross earnings before taxes: $40,983
Net income after taxes: $31,623
Tax burden: 22.8 percent
Our neighbors to the north are actually taxed less — federally. But Canadians have a sprawling system of provincial and territorial taxes that range from 11.5 percent to 25.75 percent, depending where you live and how much you make. Ontario tacks on another 20 percent to 56 percent surtax based on income. That puts Canada's highest tax rates at 47 percent (in Nova Scotia) to 54 percent (in the Northwest Territories).
Average gross earnings before taxes: $52,946
Net income after taxes: $41,127
Tax burden: 22.3 percent
Japan's seven tax brackets range from 5 percent to 45 percent, with the highest bracket requiring $361,000 in annual income. But there's also a 2.1 percent surtax imposed on national income tax and a roughly 10 percent regional and local tax.
Average gross earnings before taxes: $40,451
Net income after taxes: $31,920
Tax burden: 21.1 percent
Spain divides its income into two categories: “savings taxable income” and “general taxable income.” The first consists of dividends, interest from equity sales, insurance income, and capital gains from transfers of assets. The latter involves employment income and other capital gains. Savings taxable income is taxed on a progressive scale from 19 percent (on the first $6,700) to 23 percent (on $53,000 or more). Income tax, however, starts at 19 percent and goes as high as 45 percent for those making $67,500 or more.
Average gross earnings before taxes: $45,093
Net income after taxes: $36,354
Tax burden: 19.4 percent
Thank you to Ireland for keeping it nice and simple. If you make less than $40,000, you're taxed at 20 percent. If you make more than $40,000, you're taxed 20 percent of the first $40,000 and then 40 percent on the remainder. (Various credits, allowances, and reliefs do slightly complicate the picture.) People 65 and older are tax exempt up to $20,000 if they're single or widowed, and up to $40,000 if they're married.
Average gross earnings before taxes: $26,796
Net income after taxes: $21,875
Tax burden: 18.4 percent
It doesn't get simpler than Estonia's flat tax of 20 percent (with a basic exemption, or non-taxable amount, for the average taxpayer). Pension payments are subject to a 10 percent tax, while dividends get a 7 percent levy, but employment and business income, capital gains, rents and royalties, interest, dividends, certain insurance proceeds, pensions, scholarships, grants, prizes, and lottery winnings all fall under Estonia's income tax.
Average gross earnings before taxes: $39,826
Net income after taxes: $32,604
Tax burden: 18.1 percent
While New Zealand's progressive taxes on income start at just 10.5 percent, income over $33,000 is taxed at 30 percent to 33 percent. Anything over $48,000 is taxed in the country's highest bracket.
Average gross earnings before taxes: $39,215
Net income after taxes: $32,267
Tax burden: 17.7 percent
Israel takes a 50 percent cut of any income in excess of $178,000 and taxes income over $48,000 at more than 30 percent. Passive income (rental, dividends, etc.) is taxed at 31 percent for all taxpayers under 60.
Average gross earnings before taxes: $70,835
Net income after taxes: $58,870
Tax burden: 16.9 percent
Switzerland has federal, regional, and municipal taxes, but Switzerland's federal taxes are incredibly low for a Western nation: You could bring in more than $750,000 a year and still be taxed at 11.5 percent. In Zurich, however, the regional tax adds another 8 percent at the average U.S. wage, while Geneva would tack on another 15 percent. Interest and dividends are also subject to a 35 percent withholding tax.
Average gross earnings before taxes: $52,505
Net income after taxes: $44,878
Tax burden: 14.5 percent
You have to make more than $445,000 to land in South Korea's 42 percent top tax bracket, but South Korea's federal tax brackets are somewhat misleading: local taxes add an average of 2.4 percent to taxes on the average U.S. income.
Average gross earnings before taxes: $12,730
Net income after taxes: $11,303
Tax burden: 11.2 percent
Any income over $23,500 is taxed at more than 30 percent, and income over $180,000 falls into the highest bracket, taxed at 35 percent. Mexico's 11 tax brackets start at less than 2 percent, but they don't include the taxes that states are allowed to charge for professional fees, rental income, real estate sales, and other items.
Average gross earnings before taxes: $22,616
Net income after taxes: $21,033
Tax burden: 7 percent
If you make more than $101,000 in Chile, you get hit with the top 35.5 percent tax rate. But you can make as much as $42,000 and still pay a single-digit rate. With no local income taxes to consider, Chile's tax system can be incredibly forgiving.