A Bigger Government Means Giving Up Almost Half Your Paycheck

If federal spending continues to rise, the US budget will increasingly resemble government budgets in Europe, where government spending dominates economic activity. High spending requires high taxes, which affect not only wealthy taxpayers but also lower- and middle-income earners. Workers earning the average wage across a group of 22 European countries pay $11,676 more in taxes than they would if they lived in the United States. Lower-income workers, higher-income workers, and families also pay significantly higher taxes than in the United States. High wage taxes disincentivize work, resulting in lower material well-being compared to Americans, who benefit from relatively lower tax rates. Absent significant spending reforms, Americans may face a future resembling the European tax system, requiring an almost 50 percent tax increase on many middle-class Americans. America can avoid the European fiscal model by decisively cutting major spending programs to reduce the current $2 trillion annual federal budget deficit. This report describes the size of European governments, the tax systems used to finance their high levels of spending, the middle-class tax burden in the United States and in member countries of the European Union, and the impact of high taxes on incentives to work.