Which Nations Have the Highest Income Tax Rates?

August 30, 2012 | By: TaxCure Staff

country income tax ratesNo matter where you live, chances are that you think taxes are too high. Many people agree that some taxation is needed in order to pay for the necessary services provided by the government. Items like law enforcement, defense, infrastructure, and education are things that people are often supportive of when it comes to paying taxes.

However, providing services, especially if a large number of social services are provided, gets expensive. The more services that are provided, the higher taxes are likely to be. Taxes are levied in different ways as well. Even though most agree that some taxes are needed to keep our society functioning, there are debates over the tax system. Arguments for a consumption tax only, instead of an income tax, are just one of the debates.

For now, it doesn’t look like much is going to change for the US tax system. And, even if personal income taxes are raised, the highest rate isn’t likely to be found in the United States. Indeed, our top personal income tax rate doesn’t even make the top 10. Here are the countries with the highest top marginal income tax rate based on a CNBC report using 2010 data, and the amount of taxable income (in US dollars) that triggers that rate:

  • Ireland: 48%, $43,900
  • Finland: 49.2%, $91,000
  • United Kingdom: 50%, $231,000
  • Japan: 50%, $217,000
  • Belgium: 50%, $46,900
  • Austria: 50%, $80,000
  • Netherlands: 52%, $74,500
  • Denmark: 55.4%, $76,000
  • Sweden: 56.6%, $81,000
  • Aruba: 58.95%, $165,000

Of course, this doesn’t take into account  corporate taxes, capital gains, and dividend income, or the fact that some of these countries have slightly lower rates for married couples (Aruba, for example, has a top rate of 55.85% for married couples.) And it doesn’t look at consumer taxes, such as sales taxes or VAT. However, it still gives you an idea of how the United States compares. And it is worth noting that many of these countries have cut taxes in recent years, due to attempts at economic stimulus. Some of the countries on this list had top tax rates of more than 60% at one time.

Not only does the United States have a lower top tax rate (currently it’s at 35%) than these countries, but the threshold for paying the top tax rate is much lower in other countries. The only country on the top 10 list that even comes close is the United Kingdom, with the top tax rate not being assessed until $231,000 in taxable income is reached.

This isn’t to say that the top tax rate has always been so low compared to other countries. At one point, in the early 1950s, the top marginal tax rate was 92%. And, as recently as 1980, the top tax rate was 70% (although there were extenuating factors, such as a top rate of 50% on earned income, even though the “official” rate was higher).

It’s important to note, though, those true comparisons of tax rates, and actual taxes paid, are hard to come by, since systems vary, and even in this country, other taxes, such as sales taxes, taxes on investment income, fuel taxes, communication taxes, and other taxes all add up. But it’s still an interesting exercise to consider how we compare to other countries – and to our past selves.