Over the past few decades Americans have become increasingly aware of our membership in a global economy. We’ve seen what happens in Europe affect our pocketbooks here in America. All of us have either experienced firsthand, or have certainly heard the stories of displaced American workers whose jobs moved to foreign labor pools willing to do the work for less. So, according to several U.S. tax attorneys, a recent report from the Organization for Economic Cooperation and Development (OECD) entitled “Taxing Wages” should be of particular concern to American taxpayers.
The OECD’s report looked at, among other data, how income is burdened by the average tax and social security obligations. Tax lawyers explain that the measurement, referred to as the “tax wedge”, increased last year (2010) in twenty-two (22) of the OECD’s thirty four (34) member states. According to Jeffrey Owens, the director of OECD’s tax division, “there’s clearly now a trend for this figure to rise, reflecting the recent pressure for countries to consolidate their budgets.”
Of particular note, American tax attorneys point out the United States was one of the twenty two (22) countries experiencing a rise in the burden on its’ workers’ wages. These same tax lawyers observe the OECD has encouraged member countries to tighten their belts and sure-up their budget shortfalls, but the trick for these governments is how to increase revenues (by some form of tax increase) to balance those budgets and make-up shortfalls, while at the same time minimizing the risk to long-term growth.
The OECD’s report also noted the average corporate tax rates were unchanged in 2010, and commented that governments were hesitant to raise taxes on businesses out of concerns companies can move and/or reduce overhead through employee layoffs.
Perhaps an even more distressing revelation in the report is that indirect taxes are also rising, both globally and among the Western industrialized countries. The report indicates the average indirect tax rate increased to 18.28% in 2010, as compared to an average of 17.70% in 2009.
So what does all this mean for American taxpayers? Tax attorneys say the short answer is American workers’ incomes are being increasingly burdened by rising taxes and social security obligations while corporate tax rates are holding steady in hopes of not damaging the economic recovery. Tax lawyers suggest it may not be fair, and it may not even make sense, but taxpayers need to be prepared for paying higher taxes and managing with less for the foreseeable future.
If rising tax burdens are causing you to fall behind, or if you already owe back taxes, speaking with a tax attorney or other tax professional may help you save money, resolve the back taxes you owe, and better manage any future tax liabilities going forward. At a time when you are being asked to pay the lions-share of budget shortfalls caused by the poor fiscal management by world governments, getting the right answers about your taxes is critical to your financial well-being.
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