PAGE
3
13
FORTUNE.COM // JULY 2019
COUNTRY TAXES ON WAGES
AND CHANGE SINCE 2017
The tax wedge shown here is the tax on labor income
for an average single worker with no children (including
the tax paid by both the employee and the employer).
OECD AVERAGE
A BIG TA X CUT SETS AMERICA APART
In labor economics, the “tax wedge” is the share of wages that
goes to income and payroll taxes. America’s wedge has long been
small by the standards of the industrialized world, and the Tax
Cuts and Jobs Act of 2017 widened that gap dramatically. For the
typical single U.S. worker, the wedge is now 6.5 percentage points
lower than the OECD average. In theory, a lower wedge encourages
a livelier job market—employers face lower barriers to hiring, and
employees keep more of their pay, so they have more incentive to
work. And indeed, the U.S. unemployment rate is the envy of the
OECD right now. The tradeoff: a less robust social safety net than
that in, say, Western Europe or Canada. —MATT HEIMER
GRAPHIC BY NICOLAS RAPP
