The Bill for Bigger Government Is Coming Due for World’s Taxpayers
Rich countries are raising more money from taxpayers than they have in decades to finance a burst of state spending as surging interest rates make borrowing less attractive. Tax revenues have risen to record levels as a share of economic output in a number of major economies, including France, Japan and South Korea, according to data published by the Organization for Economic Cooperation and Development, the club of mainly rich countries. The increases are worth hundreds of billions of dollars in additional revenue for governments that are navigating an array of new spending needs, from military priorities to industrial policy.
They underline a trend toward big government, amplified by the Covid-19 pandemic and fueled by national-security concerns in a world of geopolitical divisions, the need to care for aging populations and the fight against climate change. In the U.S., tax receipts at all levels of government climbed to nearly 28% of GDP last year, up from 25% in 2019 and the highest level since at least 1965, aside from a brief period of budget consolidation during the Clinton administration. During the late 1990s, the U.S.
turned budget deficits into surpluses with tax increases, spending restraint and fast economic growth. In France and Germany, tax receipts have increased by around 1 percentage point of GDP since 2019 from already high levels, to about 46% and 39% of GDP respectively. In both countries, tax-to-GDP ratios are at the highest levels since records began in 1965.
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