While the Trump administration has been a mixed bag on economic policy, its tax policy has been solid. According to the Organization for Economic Cooperation and Development (OECD), thanks to President Trump’s tax cuts in 2017, the U.S. tax burden has become one of the lowest among developed countries in the world.
In 2018, the nation’s tax burdens fell by the largest amount among the developed countries within the OECD’s ranks. As a result of Trump’s tax cuts, the U.S. has a lower tax burden than all but three countries in the OECD.
Fueled by the 2017 tax reforms, the tax burden at all levels of government went down to 24.3 percent of the gross domestic product in 2018. In comparison, the combined tax rates in America made up 26.8 percent in 2017 and 25.9 percent in 2016. According to the OECD’s report, the 2.5 percent drop from 2017 to 2018 was the fourth time since 1995 that a country’s tax burden fell by that amount in one year when there was no financial crisis.
With these tax reforms in place, taxes are now 10 percent lower than the 2018 OECD average of 34.3 percent. Only Chile, Ireland, and Mexico have lower tax burdens among OECD countries. On the other hand, countries like France and Denmark have tax burdens that are twice as large as the U.S.’s.
The U.S. has undergone a series of tax cuts since the presidency of George W. Bush in the early 2000s. Congress allowed some of those tax cuts to expire at the end of 2012, under President Barack Obama’s watch. Some taxes were also raised on high-income households during the Obama administration. Overall, the U.S. has made solid improvements since 2000. In 2000, the U.S. government collected 28.3 percent of GDP in taxes, which was in the middle of the pack of other OECD countries, with Japan, South Korea, and Switzerland have lower taxes.
The U.S. tax system is unfair to America’s highest earners. Contrary to popular belief, America’s top 1% shoulder 33.3 percent of the overall tax burden according to Congressional Budget Office estimates. Tax cuts allow America’s hardest working people to keep more of their money. Nevertheless, all tax reform must be accompanied by spending cuts to make the reforms durable. The current budget deficit stands at $984 billion and the national debt is at an alarming $23 trillion. The U.S.’s budget deficit is the largest of all OECD countries according to the latest report.
Trump should be given credit for his tax reforms. But the administration should not remain complacent. Instead, the administration should focus on fiscal restraint as its next priority to ensure that future generations don’t have to pay for the fiscal misbehavior of their predecessors.