The rest of the OECD relies less on income taxes and much more on consumption taxes, aka taxes on goods and services, which generate a steadier flow of revenue. (These statistics are from 2021 because OECD averages for 2022 aren’t available yet.)
The main consumption tax around the world is the value-added tax, a sort of super sales tax levied at each stage of production, distribution or sale of a product or service. The U.S. has state and local sales taxes and some federal excise taxes but is the only OECD country without a VAT.
Imposing consumption taxes of OECD-average size would put U.S. government finances roughly into balance. The Congressional Budget Office proposed a VAT much smaller than that—5%, the same as Canada’s—as No. 16 of its “Options for Reducing the Deficit, 2023 to 2032 ” report last December. It said the tax would reduce the federal deficit, which was 6.3% of GDP in the fiscal year ended in September, by about 1% of GDP. There appears to be no chance of this actually happening soon. But as the U.S. bumps along from to debt-ceiling showdown to threatened government shutdown to who knows what else, something has to give eventually.
Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of The Myth of the Rational Market.