Americans often admire Europe for its high social spending. They imagine importing such systems to the United States. U.S. politicians, aware of this, promote two misleading ideas. First, they downplay the U.S. government’s substantial spending on pensions and health care. Second, they suggest that only taxes on the wealthy prevent a European-style welfare state in the U.S.

The situation is more complex. Expanding America’s tax burden poses risks. Some other wealthy countries have more extensive safety nets than the U.S. Yet, they fund these through broad taxes on the middle class. Rising defense spending pressures national budgets, pushing these already high taxes higher.

Across the Organization for Economic Co-operation and Development (OECD)’s 38 member countries, average tax rates on wages have increased for four consecutive years. In 2025, an average earner faced a tax burden of 35.1%, the highest in a decade according to a recent OECD report.

Many OECD leaders overpromise, then seek to tax income for steady revenue. Some countries avoid rate hikes by not adjusting income thresholds for inflation, pushing more workers into higher brackets. This has consequences. The 2026 OECD report shows a growing tax wedge in 24 countries compared to 2024, shrinking in 11, and staying the same in three. Of the 13 countries with a growing tax wedge, rising personal income tax on labor costs was the cause. In the 11 countries with reduced tax wedges, nine lowered personal income taxes, including places like Australia, Denmark, and the U.S. The U.K. saw the largest tax increase from a jobs tax rise between 2024 and 2025.

The U.S. lowers the average tax rate across the OECD. America’s tax wedge remains the lowest among advanced economies in the Group of Seven (G7).

Households with children generally face greater tax burdens than singles across the OECD. The difference in tax wedges for a household with one earner and two children versus a single household dropped to 8.9 percentage points in 2021 from a peak of 10 percentage points during the pandemic. This indicates reduced tax benefits for families. However, the U.S. is notably generous with tax breaks for one-earner families. An average American family keeps 9.3 cents more of each additional $1 earned than a single-earner household.

Yet, not all parents benefit equally. A single parent with two children in the U.S. earning 67% of the average wage loses half of any pay raise to increased taxes and reduced benefits.

It’s notable that roughly half of federal spending in the U.S. is dedicated to pensions and health care. Despite its similar spending level to some European nations, America maintains low taxes by incurring deficits. Having the global reserve currency obscures problems with this setup, but the low tax regime is unsustainable if spending habits persist uncontrolled. The U.S. national debt has exceeded $39 trillion, surpassing 100% of GDP, a significant milestone.

This spending issue threatens the benefits of America’s positive economic policies. Last year, real wages increased by 1.2% and post-tax income rose by 4%. This indicates more earnings and savings for Americans.

Economic growth can lessen fiscal strain. Lower tax rates foster higher growth.

The OECD report from 2026 details how much of their earnings individuals can retain based on family size and income level across developed countries.