The US has the 4th-lowest tax rates in the world following last year's GOP cuts

AP Photo/Evan Vucci
  • A sweeping tax overhaul signed by President Donald Trump pushed US rates to among the lowest in the world last year.
  • Just three of the 34 countries analysed – Chile, Ireland and Mexico – had lower tax burdens than the US last year.
  • In the 12 months after the law took effect in January 2018, tax revenues declined even as economic growth picked up.
  • Visit Business Insider’s homepage for more stories.

A sweeping tax overhaul signed by President Donald Trump pushed US rates to among the lowest in the world last year, the Organisation for Economic Cooperation and Development said Thursday.

The US posted a steeper drop in tax rates than any other OECD country in 2018, falling to 24.3% of gross domestic product from 26.8% a year earlier. That put it roughly 10 points below the organisation’s annual average rate.

Just three of the 34 countries analysed – Chile, Ireland and Mexico – had lower tax burdens than the US last year. The decline was driven by a $US1.5 trillion tax-cut package Republicans passed in 2017, which was the largest in decades.

“Major reforms to personal and corporate taxes in the United States prompted a significant drop in tax revenues,” the OECD said.

In the 12 months after the law took effect in January 2018, tax revenues declined even as economic growth picked up. Corporate tax revenue fell by 0.7 percentage points, while personal income tax revenues slipped 0.5 percentage points.

Along with increased government spending, that has lifted the US budget deficit to record highs. In July, the White House and Congress agreed to lift the debt ceiling and increase spending by approximately $US320 billion. The gap between federal receipts and outlays is expected to surpass $US1 trillion for the 2020 fiscal year.

Economists and policymakers have warned that the current pace of deficit growth in the US was unsustainable and would undermine tools to fight a recession.

“Even with lower rates and even with decent growth, there is still going to be a need to reduce these deficits,” Federal Reserve Chairman Jerome Powell told a congressional committee in November. “Frankly, if we don’t do it, what happens is our children will wind up spending their tax dollars on interest rather than things they really need.”

Read more: ‘A lot of people don’t need to pay back their debt’: A student-loan expert explains why popular repayment advice is false – and shares how to save up to 50% on interest payments

Screen Shot 2019 12 05 at 10.34.47 AMOECD

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