The average American worker faces a total tax burden of 31.5%, according to (federal, state and local) and the payroll tax. The report notes that the latter is levied on both employee and employer, but the financial burden of the tax ultimately falls on the worker via lower take home pay. Payroll taxes are meant to fund programs such as Social Security, Medicare, and Unemployment Insurance funds.
The report is based on data from OECD countries, and there are 34 countries that make up the OECD (Organisation for Economic Co-operation and Development). The OECD surveys these nations regarding their labor tax burdens by adding together the income tax payment, employee payroll tax payment, and the employer-side payroll tax payment of a worker making the average wage in each country. The OECD then divides it by the total labor cost of this average worker, or what the worker would have earned in the absence of these three taxes. This is called the average tax wedge on labor income.
According to the Tax Foundation’s report, the OECD found that the average American worker faced a 31.5% tax wedge (this includes both income and payroll taxes). Additionally, the average worker paid an average effective income tax rate of 15.7% and an average effective payroll tax rate of 15.9%. The average worker in this scenario is a single worker without children who earned an annual income of $50,084.
The 31.5% tax wedge for a U.S. worker represents an $8,631 average individual income tax bill and an $8,741 average payroll tax bill for a total average tax bill of about $17,372. The result is an after tax income of $37,604.
But how does the United States fare with other OECD countries? As the chart below shows, the US average is slightly below the OECD average.
Belgium had the highest tax wedge at 55.6% and Chile came in last at only 7%.
