Some pundits, reflecting on the looming U.S. budget deficits, claim that Americans are vastly undertaxed compared with other major nations. I was wondering, to what extent is that true?
The most common metric for answering this question is taxes as a percentage of GDP. However, high tax rates tend to depress GDP. Looking at taxes as a percentage of GDP may mislead us into thinking we can increase tax revenue more than we actually can. For some purposes, a better statistic may be taxes per person, which we can compute using this piece of advanced mathematics:
Taxes/GDP x GDP/Person = Taxes/Person