I’m wondering about the relationship between income inequality and tax revenues as a percent of GDP. After gathering tax revenue data from the Blackrock and inequality data from OECD I produced the following graph, depicting the inverse relationship between income inequality and tax revenue as a percent of GDP.
As tax revenue as a percent of GDP increases, income inequality decreases. (Note: tax revenue includes taxes on income, profits, payroll, property, goods and services and social security.)
As observed in the following graph the U.S. is among the lowest countries in rank of tax revenues as a percent of GDP.
I’d wondered about that relationship as well. Any chance you looked at the relationship between GDP/capita and tax revenue as a percent of GDP?
I’m wondering if the result is counter intuitive. Might some economies have high tax rates and effective ways of spending such that the over all economy improves?