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US vs Europe: how different is the tax wedge really?

By NetPayMap Editorial · 2026-06-27

In short: A single average US worker faces a tax wedge of about 29.9% of labour cost — well below the OECD average of 34.9% and far below the EU-22 average of 41.6%. But the difference with Europe is driven by social-security contributions, especially employer contributions, not by income tax: US and German income tax are almost identical at around 16-17%.

“Europe taxes workers to death, America doesn’t” is a popular shorthand — and on the tax wedge it’s partly true. But the real story is more interesting: the transatlantic gap is almost entirely about social security, not income tax.

The headline numbers

For a single worker on the average wage (2023 data):

Country/areaIncome taxEmployee SSCEmployer SSCTotal tax wedge
United States16.6%7.7%8.1%29.9%
OECD average15.4%9.6%16.4%34.9%
EU-22 (in OECD) average———41.6%
United Kingdom14.8%8.9%11.2%31.3%
Germany17.0%20.5%20.0%47.9%
France16.2%11.3%36.3%46.8%
Belgium26.0%14.0%27.1%52.7%
Switzerland12.2%6.4%6.4%23.5%

It’s social security, not income tax

Look at the income-tax column: the US (16.6%) and Germany (17.0%) are nearly identical. What separates them is the rest of the table. Germany layers on a 20.5% employee contribution and a 20.0% employer contribution; the US adds roughly 7.7% and 8.1%. That’s the whole gap.

This matters for how you interpret “low-tax America”:

Europe isn’t monolithic

Lumping “Europe” together hides huge variation. Switzerland’s wedge (~23.5%) is lower than the US. The UK (~31.3%), Ireland (~35.1%) and the Netherlands (~35.1%) sit much closer to the US than to the continental heavyweights. The true high-wedge cluster is Belgium, Germany, Austria, France and Italy.

The bottom line

The US does tax labour more lightly than the OECD average — but the difference is social security, and it comes with a trade-off in what’s publicly funded. Compare individual countries directly rather than trusting “US vs Europe” as a single number.

Figures from OECD Taxing Wages (2023 data year), CC BY 4.0. Modelled averages — not personal tax advice.

Frequently asked questions

Is the tax wedge really lower in the US than in Europe?

Yes, substantially. At about 29.9% for a single average worker, the US wedge is below the OECD average of 34.9% and well under high-tax European economies like Belgium (52.7%), Germany (47.9%) and France (46.8%).

Is that because Americans pay less income tax?

Mostly no. US income tax for an average worker (~16.6% of gross) is very close to Germany's (~17.0%). The gap is social security: US employee plus employer contributions are far lower than in continental Europe, where they often exceed 30-50% combined.

Which European countries have a US-like tax wedge?

Switzerland (~23.5%) is lighter than the US, and the UK (~31.3%), Ireland (~35.1%) and the Netherlands (~35.1%) are much closer to the US than to France or Germany.

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Last updated: 2026-06-27