In a follow-up to a previous post
, which looked at how the U.S.’ corporate tax rate compares to the rates in other countries, this one looks at recent findings on the U.S.’ personal income tax and Social Security rates. They come from a new report: KPMG’s Individual Income Tax and Social Security Rate Survey 2012
. How did the U.S. do? For the most part, its rates are smack dab in the middle of the list. For instance, the researchers examined the effective income tax and Social Security rates on US$100,000 of gross income. Between the two, the U.S. rate was 26 percent, putting it at number 55 out of 94 countries. Belgium’s rates topped the list at a combined 47 percent. Macau, on the other end of the list, has an income tax rate of 4.6 percent and no Social Security tax. Boost the income to US$300,000 and the results are similar. The U.S.’ combined rate is 30.5 percent, which puts it at number 53 out of 92 countries on the list. France took the top spot this time, with a combined rate of 54 percent, while Kuwait was lowest, with a combined rate of 2.7 percent. Similarly, the U.S.’ effective employer/employee Social Security rates at both income levels were slightly below the median rate. On US$100,000 the U.S. came in 44th out of 80, while on US$300,000, the U.S. was 55th out of 85. When comparing the highest rates of personal income tax among the 33 countries of the OECD, just seven countries have a lower rate than the U.S. What’s more, the income level at which the highest rate kicks in the U.S. is the second highest among 85 countries; only Spain’s is higher. (All income levels are converted to U.S. dollars.) So, while you need to earn $388,850 in the U.S. to pay the top rate of 35 percent, a Londoner earning $242,760 would pay the U.K.’s top rate of about 50 percent. When it comes to capital gains taxes, the comparisons are a little trickier, since some countries just use their income tax rate, some use other rates and some countries don’t have a capital gains tax. However, the U.S.’ current rate of 0 or 15 percent (which rate depends on the taxpayer’s income) lines up favorably when compared with many other countries. A few examples: Germany’s rate is 25 percent, Poland’s rate is 19 percent, Iceland and China are at 20 percent, and Brazil’s rate is 15 percent. A few other findings: • In 2012, the average top personal rate across the countries inched up by 0.3 percent. The report attributes this to increasing concerns about countries’ debt level; the top rates had actually declined between 2003 and 2009. Most increases were introduced via either higher tax rates for high income earners, or new, temporary taxes. • Looking at regional averages, the highest rate of personal income tax – 46.1 percent – was in Western Europe. The lowest, 15.6 percent, was Western Asia.