Economics Department


Date of this Version

August 2006


Published in Economic Report of the President, 2006, (Chapter 5). United States Government Printing Office Washington, DC: 2006.


All governments face two important decisions. They must choose the scope and scale of public goods and services to provide for their citizens, and they must also decide how to collect the funds to finance those public services. Chapter 5, The U.S. Tax System in International Perspective, examines U.S. choices in the context of other countries. It makes three key points:

• Fundamental choices about tax systems matter because they affect the living standards of citizens.

• The United States has made different choices from other countries. The United States has a relatively low tax burden compared to the rest of the world, and we finance more of that burden with a tax on personal income instead of consumption.

• When viewed in an international perspective, the U.S. system has been significantly improved in recent years but could benefit greatly from additional reforms, particularly those focused on the taxation of capital income.

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