Tejvan Pettinger

The tax burden refers to the share of GDP that is collected in different forms of tax within an economy.

For example, in an economy with a size of £1,000bn – if the government collects tax of £300bn, then the tax burden will be 30%.

The tax burden gives a strong guide to the extent of government intervention in the economy. A high tax burden means an economy will have relatively higher levels of government spending – usually on health care, education, defence and social security spending.

[From a microeconomic perspective, the tax burden (or tax incidence) can refer to how a particular tax effects the price consumers pay and the price producers receive. e.g. the burden of a cigarette tax falls mainly on consumers because demand is inelastic.]

Tax Revenue as a % of GDP

Tax Burden OECD

This shows how the tax burden varies amongst selected OECD countries. From Mexico with a tax burden of only 16.2% to France with a tax burden of 46.2%. The USA is 27.1% and the UK 33.3%

Problems of a higher tax burden

The term ‘tax burden’ implies the higher it is problem, reducing economic welfare. Free market economists tend to argue a higher tax burden can lead to a fall in economic welfare for the following reasons.

Evaluation – benefits of a higher tax burden

This quality of life index

Source: Numbeo

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