America’s Obsession: Taxes Have Reached the Lowest Level of the Past 20 Years

Out of the 34 countries in the Organization for Economic Co-operation and Development, the United States has the lowest taxes, after Chile and Mexico. According to the White House, the 2008 recession, along with the slow economic recovery, greatly affected fiscal incomes, which have not been this low since 1950.

As AFP states, income taxes – the Americans’ obsession – are now at the center of debates regarding the reduction of the budgetary deficit even though they are at their lowest level of the past 20 years, since Ronald Reagan stepped down.

The fiscal cliff, where taxes increase and spending falls automatically, takes effect in January in the absence of an agreement to reduce the budgetary deficit. The entire political class in Washington promises to maintain taxes at their current level for nearly all Americans.

Out of the 34 countries in the Organization for Economic Co-operation and Development, the United States has the lowest taxes, after Chile and Mexico. In the U.S., the mandatory taxes are considered to be equivalent to 21 percent of GDP, compared to 44.2 percent in France, the third most taxed country in the Organization for Economic Co-operation and Development. According to the White House, fiscal incomes in the U.S. have not been this low since 1950, which could be partially explained by the 2008 recession and the slow economic recovery.

For the wealthiest of Americans, income taxes have not been this low since the end of the 1980s. In the 1950s, income tax was as much as 91 percent and in 1981 it exceeded 70 percent. It then went down to 50 percent and then to 20 percent during Ronald Reagan’s presidency. While Bill Clinton was president, the upper limit of the income tax climbed up to 39.6 percent, only to be reduced to 35 percent, during George Bush’s presidency. This level has been maintained by Obama. In France, the maximum level of income taxation was 44 percent until this year, when it increased to 45 percent, applicable for incomes exceeding €150,000. Also as a result of the recession, Barack Obama introduced a reduction of social contributions.

These gradual tax reductions emphasized the fiscal differences between the United States and Western European countries. According to the Organization for Economic Co-operation and Development, a single person with no children and with an average salary pays an average tax of 28 percent in France, compared to 22 percent in the United States. In addition there are local taxes added. Americans do not pay federal Value Added Tax, unlike most developed countries, such as France, where this tax is 19.6 percent. American states and cities are subject to a consumption tax, generally between 5 to 10 percent; however, this is often waived, like in New York, for acquiring clothing under $110. In contrast, however, in America the income tax for companies is one of the highest – 35 percent – and President Obama has promised to reduce it.

The American budget is burdened by numerous tax breaks. For example, Americans can deduct from taxable incomes the interest of loans obtained to acquire homes. This measure was allowed briefly by former French President Nicolas Sarkozy.

According to the Center for Fiscal Policy, under the “fiscal cliff” in the U.S. there will be a rise of 20 percent in taxes as well as a reduction in public spending of almost 10 percent. In order to avoid this taking effect, the U.S. needs to either eliminate or limit these automatic fiscal measures.

At the same time, Barack Obama wants to increase taxes for the wealthiest two percent of Americans, despite the Republicans’ disagreement. Even so, there is no plan to increase taxes for the majority of the population.