But more important we are not funding what we need to fund. We are misled about taxes (Americans think they are overtaxed).
We simply don’t want to pay for what we want and need.
The U.S. today carries roughly $35 trillion in national debt, is running an annual deficit of about $1.8 trillion, and is paying over $1 trillion per year in interest—now one of the largest items in the federal budget.
And in this fiscal environment, we lowered taxes‼️
The tax‑to‑GDP ratio is the percentage of a country’s total economic output (GDP) that the government collects in taxes. It shows how much fiscal capacity a government has and how heavy or light the tax burden is relative to the size of the economy.
📘 What the Tax‑to‑GDP Ratio Measures
- Tax revenue — all taxes collected (income, corporate, sales/VAT, property, payroll, etc.).
- GDP — the total value of goods and services produced in the economy
A country with $500B in tax revenue and $2T GDP has a 25% tax‑to‑GDP ratio.
🌍 Why It Matters
- Fiscal capacity — Higher ratios mean governments can fund services like infrastructure, healthcare, and education. Quickonomics
- Economic health — Shows whether tax systems are efficient and sustainable.
- International comparison — Developed nations typically have higher ratios due to stronger tax systems.
🌐 Typical Ranges
Country Type Typical Tax‑to‑GDP Ratio Interpretation
Developing nations 15%–25% Lower capacity, narrower tax base.
Developed nations 25%–40% Broader tax base, stronger administration.
Very high‑tax economies 40%+ Large welfare states (e.g., Scandinavia).
🧭 How to Interpret the Ratio
- Higher ratio → stronger government revenue, but potentially heavier tax burden.
- Lower ratio → lighter tax burden, but may indicate underfunded public services.
📊 Why Ratios Change Over Time
- Expansion of welfare programs (historically raised ratios in developed nations).
- Economic growth or recession.
- Tax reforms, subsidies, or credits that alter net revenue.
It all boils down to this in simple terms. Individuals can worry about and attempt to pay for things like child care, health care, college education, family leave, long-term care, etc. or society can ease those burdens and collectively fund them.
You pay as individuals or do without or you pay taxes and everyone is treated equally. It’s not socialism, but it is strong collective social responsibility.
Look at it this way, if we eliminated Social Security, would every worker use the new income to prudently save and invest for their entire working lives and always come out better, regardless of life’s misfortune along the way, than they will by paying FICA taxes?
And in old age what happens to the people who don’t?
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