While many people assume the US tax code favors the wealthy, data consistently reveals a different story. A comprehensive index published by the Fraser Institute ranks the tax systems of 33 Organisation for Economic Co-operation and Development (OECD) nations. The findings? The United States actually features the most progressive tax system among the advanced economies analyzed.
What makes this study unique is its focus. Instead of muddying the waters by combining taxes with government welfare spending, this index isolates the tax architecture itself. It looks strictly at how revenue is collected, offering a clear baseline for policymakers.
Deconstructing the Progressivity Score
Measuring the true fairness of a tax system across global borders is notoriously difficult. To establish a baseline, the index evaluates 45 distinct jurisdictions across 33 OECD nations using five core pillars:
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Marginal PIT Rate Range: The percentage-point gap between the lowest and highest marginal Personal Income Tax (PIT) brackets.
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Distance to the Top Bracket: How high an individual’s income must climb relative to the national average before triggering the highest tax rate.
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Low-Income Tax Protection: The financial cushion provided by standard deductions and personal exemptions relative to average national earnings.
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Income Tax Reliance: The proportion of federal revenue generated by individual income taxes. Because income taxes scale with earnings, a higher reliance signals greater progressivity.
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Consumption Tax Reliance: The percentage of revenue sourced from sales and Value-Added Taxes (VAT). Since lower-income households spend a larger share of their income on basic goods, heavy reliance on consumption taxes is inherently regressive.
To ensure accuracy in nations where local governments wield significant taxing authority, the study samples regional data. For the United States, it uses California (representing high-tax states) and Texas (representing states with no local personal income tax) to capture the full spectrum of American fiscal policy.
How the World Ranks
The final index reveals that the visual landscape of taxation varies dramatically across the developed world. The table below outlines how these jurisdictions stack up across the five core metrics.
Fraser Institute Tax Progressivity Rankings (Out of 45 Jurisdictions)
| Jurisdiction | Overall Progressivity Rank | Marginal PIT Range | Distance to Top Bracket | Low-Income Protection | PIT Revenue Share | Consumption Tax Share |
| California (US, High-Tax) | 1 | 1 | 8 | 39 | 2 | 1 |
| Newfoundland & Labrador (Canada) | 2 | 6 | 3 | 3 | 6 | 5 |
| Korea | 3 | 10 | 1 | 36 | 21 | 6 |
| Texas (US, Low-Tax) | 4 | 28 | 12 | 24 | 2 | 1 |
| Austria | 5 | 20 | 21 | 3 | 18 | 12 |
| Japan | 13 | 7 | 10 | 18 | 26 | 4 |
| Australia | 18 | 3 | 13 | 5 | 20 | 4 |
| Germany | 19 | 23 | 14 | 12 | 14 | 13 |
| United Kingdom | 26 | 32 | 27 | 7 | 10 | 19 |
| Sweden | 41 | 36 | 40 | 40 | 12 | 16 |
| Hungary | 45 | 44 | 45 | 41 | 28 | 33 |
Note on the Data: High rankings (closer to 1) represent greater progressivity. For consumption taxes, a higher rank means less reliance on this regressive revenue source.
California secures the top spot globally, driven by a wide marginal rate spread and a heavy reliance on income tax over consumption tax. Remarkably, even with zero state income tax, Texas ranks fourth overall.
The heavy lifting for the US ranking happens at the federal level. The US ranks second only to Denmark in its structural reliance on income tax. More importantly, because the US lacks a national Value-Added Tax (VAT)—a staple across Europe—it ranks as the most progressive nation in the consumption tax category.
Analytical Deep Dive: Strengths vs. Weaknesses
No economic model is flawless. To fully appreciate what these rankings mean, it helps to weigh the structural merits of the index against its blank spots.
The Strengths
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Isolates Revenue Collection: By separating tax design from social safety net spending, it clarifies how heavily the tax burden itself falls on various income brackets.
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Captures the Entire Tax Mix: Looking at both income and consumption taxes prevents the distortion common in studies that only evaluate income tax, ignoring the heavy VAT burdens placed on low-income Europeans.
The Blind Spots
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The Tax Credit Mirage: The index relies primarily on statutory rates, meaning it overlooks massive refundable tax credits like the Child Tax Credit (CTC) or the Earned Income Tax Credit (EITC). These programs heavily subsidize low-income American households, making the actual US system even more progressive than the index indicates.
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Corporate Reporting Distortions: The US has a massive “pass-through” business sector, where business profits are reported directly on personal tax returns. This artificial inflation makes top incomes look more concentrated on paper and swells individual income tax revenues, potentially overstating structural progressivity compared to nations where businesses file separately.
The Bottom Line
While cross-border data comparisons are never entirely seamless, the Fraser Institute’s index delivers a clear takeaway: the structural architecture of the US tax system is remarkably progressive by global standards.
These findings mirror domestic data from the Congressional Budget Office (CBO), which consistently shows that top earners bear a share of the total tax burden that far outpaces their share of national income. For policymakers looking at future fiscal reforms, the data suggests that further steepening the US tax curve could risk economic growth or encourage tax avoidance, yielding far less revenue than conventional wisdom predicts.