U.S. workers are – by far – the most taxed workers in the world. Evidence supporting the previous claim can be found in $39 trillion worth of federal debt.
Yet not everyone agrees. A recent report by Adam Michel and Santiago Forster at the Cato Institute reported the opposite of what you just read. In the words of the budgetary scholars, “The United States remains a relatively low-tax country compared to its global peers.” But if what they say were true, Treasury wouldn’t have so much debt.
As is the case with individuals, businesses and surely governments, borrowing capacity is an effect of how much you’re taking in now along with how much the markets expect you to take in going forward. Michel and Forster put it correctly when they write that “The federal government confiscated $5.23 trillion of Americans’ money in fiscal year 2025.” Except that they might agree the number cited isn’t evidence of low taxation. Quite the opposite.
It firstly speaks to the danger of balanced budgets so popular among conservatives and libertarians. Hopefully readers can see that based on Treasury tax collections in 2025 alone, a balanced budget amendment would legalize enormous federal government growth in the future. This is made evident not just by how much the federal government confiscated last year, but even more so by the federal debt itself. It yet again signals tax collections in the future that will dwarf 2025’s confiscations.
From there, Michel and Forster contend that American workers pay “low taxes.” They have a point in that their charts show most American workers don’t pay much federal tax at all, if any.
Where they might agree they err is in judging levels of taxation through tax rates. Certainly relative to the EU countries in their chart, Americans pay the lowest rate of taxation of all the countries listed. But what a misleading look at taxation.
To see why, just contemplate not just the location of the most innovative and valuable corporations in the world, but also where most of the investment in the world is directed: the United States. Which is a reminder that just as all singers, dancers and athletes aren’t created equal, neither are the enterprising.
While Americans endure what Michel and Forster describe as “low taxes” relative to Belgians, Austrians and Germans, the productivity of the typical American worker, and in particular the most productive American workers, is many, many miles ahead of .01 percenters in EU countries. Translated, Elon Musk, Jeff Bezos and Mark Zuckerberg could be taxed at .01% versus the 50%+ level in certain EU countries, yet Treasury would still collect more in taxes.
What you’ve read has yet again been validated by all of Treasury’s debt. That’s no coincidence, rather it’s evidence of how Americans (particularly at the top) are wildly overtaxed without regard to rates of taxation. The genius of compounding ensures that markets for money are ruthless.
Puzzlingly, Michel and Forster conclude at the end of their post that “Instead of raising taxes, Congress should reduce spending to maintain America’s outlier status as a country where the government confiscates less of your paycheck.” They imply that more tax revenue will evetually be needed to reduce the debt.
No, it's the expectation of rising revenue that's enabling all the debt. Michel and Forster have it backwards, and that's not a critique at this point. Seemingly everyone agrees with them.
Which is why readers can rest assured that federal debt will continue to rise alongside falling borrowing costs. If the experts aren’t clear on why there’s debt, how can they craft solutions to bring it down?
