Source: Flickr/TaxCredits.net.
U.S. companies and individuals have been begging for a simpler, more competitive tax code, as the current one runs a migraine-inducing 70,000 pages long and is too high compared with the rest of the world. But things could be changing. For the past few years, Rep. Dave Camp (R-Mich.) has been working on a vast overhaul of the U.S. tax system. This week he finally unveiled the efforts of his work in what's being called the Camp Plan. Read on for how our current rates compare with the rest of the world's and how the Camp Plan's proposals would change our status.
The highest income tax rates in the world
Following is the list of the top 50 highest individual income tax rates in the world. The list uses the highest marginal tax rate in the country as the rate. As of 2012, the U.S. was tied for 36th with 10 other countries, but when the highest rate was changed in 2013, the U.S. moved to 34th place, with a top marginal tax rate of 39.6%.
| Rank |
Country |
2013 |
|---|---|---|
|
1 |
Aruba |
58.95% |
|
2 |
Sweden |
56.6% |
|
3 |
Denmark |
55.56% |
|
4 |
Netherlands |
52% |
|
4 |
Spain |
52% |
|
6 |
Finland |
51.13% |
|
7 |
Japan |
50.84% |
|
8 |
Austria |
50% |
|
8 |
Belgium |
50% |
|
8 |
Israel |
50% |
|
8 |
Slovenia |
50% |
|
12 |
Curacao |
49% |
|
13 |
Ireland |
48% |
|
13 |
Portugal |
48% |
|
15 |
Norway |
47.8% |
|
16 |
Zimbabwe |
46.35% |
|
17 |
Iceland |
46.22% |
|
18 |
Australia |
45% |
|
18 |
China |
45% |
|
18 |
France |
45% |
|
18 |
Germany |
45% |
|
18 |
United Kingdom |
45% |
|
23 |
Luxembourg |
43.6% |
|
24 |
Italy |
43% |
|
25 |
Greece |
42% |
|
25 |
Papua New Guinea |
42% |
|
27 |
Chile |
40% |
|
27 |
Croatia |
40% |
|
27 |
Gibraltar |
40% |
|
27 |
South Africa |
40% |
|
27 |
Switzerland |
40% |
|
27 |
Taiwan |
40% |
|
27 |
Uganda |
40% |
|
34 |
United States |
39.6% |
|
35 |
South Korea |
38% |
|
36 |
Namibia |
37% |
|
37 |
Argentina |
35% |
|
37 |
Barbados |
35% |
|
37 |
Cyprus |
35% |
|
37 |
Ecuador |
35% |
|
37 |
Malta |
35% |
|
37 |
Thailand |
35% |
|
37 |
Tunisia |
35% |
|
37 |
Turkey |
35% |
|
37 |
Vietnam |
35% |
|
37 |
Zambia |
35% |
|
47 |
Venezuela |
34% |
|
48 |
India |
33.99% |
|
49 |
Colombia |
33% |
|
49 |
New Zealand |
33% |
Source: KPMG.
The proposed Camp Plan will simplify the U.S. tax system for individuals so that there are just three tax brackets, instead of the current seven. The top marginal tax rate would move down from 39.6% to 35%, moving the U.S. back to 36th place. You can read more about the Camp Plan and what it might mean for you here, and the following table shows average rates by region around the world.
|
Africa average |
29.77% |
|
Asia average |
28.35% |
|
Latin America average |
32.66% |
|
Oceania average |
37.75% |
|
EU average |
37.85% |
|
Global average |
31.95% |
Source: KPMG.
Tax rates matter especially for high-income individuals, who are best equipped financially to move to take advantage of lower rates. A great example exists in France, where the top marginal tax rate will jump to 75% on incomes above 1 million euros and has led to an exodus of top earners.
What this means for you
The Camp Plan's changes to the tax code would be a net positive if adopted. Lowering the U.S. top marginal tax rate will make us more competitive with the rest of the world. But no matter what happens, it shouldn't change your investing strategy. Continue to educate yourself, find great companies, and invest for the long term.
