US Has Most Progressive Tax System in OECD, New Index Shows

While the US taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. code is often believed to be insufficiently progressive, the data continues to show otherwise. A new study from the Fraser Institute ranks the progressivity of tax systems in Organisation for Economic Co-operation and Development (OECD) economies and finds the US has the most progressive taxA progressive tax is one where the average tax burden increases with income. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden. system of the 33 countries studied.

Measuring progressivity in a systematic way is challenging because tax codes are complex and easily conflated with broader redistribution and transfer policies. The Fraser Institute study strikes a balance by creating an index comprised of multiple tax metrics that are indicative of progressivity, readily attainable, and comparable across countries.

How the Fraser Institute’s Index Measures Progressivity

The index uses five metrics to determine and compare tax structure progressivity across 45 jurisdictions covering 33 OECD countries (excluding Chile, Colombia, Costa Rica, Mexico, and Türkiye due to a lack of data):

• Marginal personal income tax rate range: the percentage point difference between the top and bottom marginal personal income tax (PIT) rates.
• Distance to the top tax bracket: the level of income, relative to the national average, at which the highest marginal income tax rate applies.
• Low-income tax protection: the size of the basic personal exemption relative to the national average income. In the United States, this measures the relative size of the federal and state standard deductions combined.
• Income tax share of tax revenue: the ratio of personal income tax revenue to total federal tax revenue. Income taxes tend to be the most progressive type of tax, so a higher share indicates greater progressivity.
• Consumption taxA consumption tax is typically levied on the purchase of goods or services and is paid directly or indirectly by the consumer in the form of retail sales taxes, excise taxes, tariffs, value-added taxes (VAT), or income taxes where all savings are tax-deductible. share of tax revenue: the ratio of consumption tax revenue to total federal tax revenue. Consumption taxes are generally considered regressive, as a consumption tax of the same amount is a smaller portion of a high-earner’s income than a low-earner’s income, so a higher share indicates less progressivity.

To account for variations in progressivity within countries where subnational authorities have significant taxation power, the index samples regions that reflect the range of local tax policies. In the United States, California and Texas represent the highest and lowest top state PIT rates, respectively, with Texas having no state-level PIT.  PIT policy variables are calculated to reflect the combined national and subnational PIT structure (in the US, federal and state). For tax revenue variables, only national (federal) data are used due to data limitations.

Table 1 reports the overall progressivity rankings for the 45 OECD jurisdictions measured, as well as the rankings across each of the five metrics.

Table 1. Fraser Institute Tax Progressivity Rankings, out of 45 OECD Jurisdictions

Source: Grady Munro, Milagros Palacios, Nathaniel Li, and Jason Clemens, Measuring Progressivity in High-Income Countries (OECD), Fraser Institute, November 2025, Tables 1-3.

California is ranked as the most progressive of the 45 OECD jurisdictions, and Texas ranks fourth, behind Newfoundland & Labrador (Canada) and Korea. California ranks highest on the marginal PIT rate range, while Texas ranks 28^th. Both states rank highly in the measure of distance to the top tax bracket: 8^th and 12^th, respectively. California ranks 39^th on low-income tax protection, in part because the higher average wage reduces the relative size of the standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. Taxpayers who take the standard deduction cannot also itemize their deductions; it serves as an alternative., while Texas sits at 24^th.

The tax revenue variables drive the US’s high overall ranking. In the income tax share of tax revenue category, the US is second to Denmark. Moreover, in the consumption tax share of tax revenue category, the US ranks as the most progressive, with the lowest revenue share in the OECD.

The Index’s Strengths

While the Fraser index offers another comparative measure of the progressivity of the US tax system, the study design is unique in several ways.

Unlike many progressivity studies that combine analysis of the tax system with broader analysis of spending and welfare policies, the Fraser index isolates tax policy design. This provides insight into the distributional burden of how countries raise tax revenue, separate from how they spend or redistribute that revenue through transfer payments. Although individual economic outcomes depend on total fiscal incidence, distinguishing between tax and transfer progressivity is important for identifying which component of redistribution is most relevant for potential reform. For example, two fiscal systems may result in the same individual outcomes, yet achieve them through different combinations of tax and spending policies.

The index also accounts for differences in tax mix between the US and other countries, setting it apart from other studies that only measure income tax progressivity. Including both income and consumption taxes constructs a more complete picture of an economy’s tax structure, as each type of tax has different implications for overall progressivity. The US ranks highly in these tax mix measures of progressivity in part because it lacks a national consumption tax, compared to other OECD countries that are more reliant on value-added taxes.

The Index’s Weaknesses

In other ways, the Fraser index may miss important details.

Because the index uses statutory tax rates and standard deductions (or personal exemptions) to gauge progressivity, tax credits are not accounted for in the measure. Tax credits—especially refundable credits that target lower-income households—play a major role in the progressivity of the US tax code, especially when compared with other OECD countries. Their exclusion omits an important way tax systems distribute the tax burden.

The treatment of tax credits poses a second challenge for the index. Since credits reduce income tax collections, which are incorporated into the tax revenue variables, the index may interpret the progressive implementation of credits as a decline in progressivity. As a result, tax credits may affect the index indirectly, but in a manner that is inconsistent with their actual distributional effects.

Additionally, the index does not account for cross-country differences in income inequality or market composition, which can affect measured tax progressivity. Its reliance on summary data, such as mean income and bottom tax rates, provides only a partial view of how tax burdens are distributed across the full income scale. Incorporating measures of income inequality or tax burden by quintile would give a more complete picture of the progressivity across the income distribution.

Unfortunately, estimating such measures internationally encounters several practical hurdles. Countries differ in how they measure and report income and tax burdens, making reliable comparisons difficult. Currently, no dataset provides detailed distributional tax and income data across all OECD countries.

When specific data is available, the assessment of progressivity is more precise. In the US, recent data from the Congressional Budget Office shows the US is highly progressive, even when accounting for the share of income versus the share of tax paid.

Cross-country comparisons are made more challenging by differences in income reporting, particularly business income reporting. The growth and size of the pass-through sector in the US shifts more business income to individual returns, impacting measured income concentration. As a result, more business income is taxed under the PIT, making top incomes appear more concentrated, and increasing the measured share of income tax revenue. Comparisons of income tax share without controlling for the size of the pass-through sector, such as those in the Fraser index, may reflect reporting differences rather than underlying progressivity.

The Bottom Line

Taken together, while differences in income distribution and reporting make it difficult to construct perfectly comparable measures of tax progressivity across countries, the Fraser Institute index still provides a useful and credible framework for comparing the progressivity of tax structures across OECD countries. By focusing on tax structure rather than redistribution and using metrics that capture the measurable tax structures of respective economies, it isolates tax progressivity in a novel way.

The results are consistent with other studies indicating the US has the most or nearly the most progressive tax code in the developed world, depending on the measure. Before making decisions to further increase progressivity, US policymakers should understand the international context as well as the potential downsides of higher marginal tax rates, which can include slower economic growth and increased avoidance with relatively little additional revenue.

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