NCPA - National Center for Policy Analysis


June 29, 2009

A thorough new study of 30 nations from the Institut Constant de Rebecque in Switzerland reveals serious shortcomings in America's tax system, says Daniel J. Mitchell, an economist with the Cato Institute.

The study, entitled "Tax burden and individual rights in the Organization for Economic Co-operation and Development (OECD): An International Comparison," creates a Tax Oppression Index based on three key variables: the overall tax burden, public governance, and taxpayer rights.  According to the researchers:

  • Switzerland appears as the country with the lowest tax oppression -- due to a relatively low tax burden and a more (classical) liberal institutional order, including its citizens' right to veto legislation, political decentralization, and protection of financial privacy.
  • Germany and France, on the other hand, whose governments have supported the OECD's efforts, are among the most questionable states in terms of safeguarding their residents' individual rights.

The index enables relevant conclusions about the tax burden and individual rights among those countries, says Mitchell.  For instance:

  • Switzerland earns the top ranking in the report, followed by Luxembourg, Austria, Canada and Slovakia.
  • Italy and Turkey have the worst systems, followed by Poland, Mexico and Germany.
  • The United States is tied for 19th, behind the welfare states of Scandinavia.

The good news, says Mitchell, is the United States has a comparatively low aggregate tax burden, though America's score on this measure would be much better in the absence of a punitively high corporate tax rate.  The bad news is that corruption and inefficiency in Washington drag down America's score for public governance.  The ugly news is that America has a very low rating for protecting taxpayer rights -- largely because politicians have tilted the playing field to favor the IRS, including the fact that taxpayers lose the presumption of innocence provided in the Constitution.

With President Obama promising to raise tax rates and increase the power of the IRS, it may just be a matter of time before the United States is competing for the world's most oppressive tax regime, says Mitchell.

Source: Daniel J. Mitchell, "Tax Oppression Index Ranks America in Bottom Half of Industrialized Nations," Cato Institute, June 2009; based upon: Pierre Bessard, "Tax burden and individual rights in the OECD: an international comparison," Institute Constant de Rebecque, June 2009.

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