Although it's vital that politicians have a healthy debate about how to best solve America's money woes, the current debate may be giving the false impression that the U.S. is one of the most taxed nations on earth. That sure may seem like the case, but nothing could be further from the truth.

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If you consider how much federal income tax Americans pay as a percentage of gross domestic product (GDP), their taxes are among the lowest in the developed world. GDP is the monetary value of all finished goods and services produced within a country over a specific time period, and it helps give a sense of the health of a country's economy. (To learn the underlying theories behind these concepts and what they can mean for your portfolio, check out The Importance Of Inflation And GDP.)

For the past couple years, federal tax revenues in the U.S. have only been about 15% of GDP, which is less than the post-World-War-II annual average of 18.5%. Our tax revenues are even lower than the 17.3% level achieved in 1984 under Ronald Reagan and he's one of the U.S. Presidents most often associated with low taxes. Federal tax revenues averaged 18.2% of GDP throughout Reagan's presidency.

Among 28 of the world's most advanced countries, the U.S. ranks 26th in tax revenues as a percentage of GDP, which sits at 24% according to the latest available data from the Organisation for Economic Co-operation and Development OECD (2010). Here are the top five, along with some details on why the taxes in these countries are the highest in the developed world.

Denmark
Tax revenues as a percentage of GDP: 48.2%
Why taxes there are so high: A big reason is the public sector is one of the world's largest, employing 30% of Denmark's full-time workers. By contrast, only about 8% of U.S. workers are in the public sector. A large public sector requires much higher tax revenues to maintain it. (Read Government Financial Careers: What To Expect.)

Sweden
Tax revenues as a percentage of GDP: 46.4%
Why taxes there are so high: Like most European countries, Sweden is very big on social services like heavily subsidized healthcare for all citizens, a fully financed education starting at age 6 and a guaranteed basic pension for all elderly citizens. Sweden's tax collection system is known for being extremely simple, with annual filing often consisting of nothing more than a text message to the Swedish Tax Agency.

Italy
Tax revenues as a percentage of GDP: 43.5%
Why taxes there are so high: Italy spends a lot on social services. Pension payments are 14% of GDP, which is the highest percentage in the OECD. Look for tax revenues as a percentage of GDP to climb even further in Italy as the government raises taxes to help balance the country's budget and reduce its crushing debt burden. (International investors need to be aware of the staggering correlation between tax rates and economic performance, check out How International Tax Rates Impact Your Investments.)

Belgium
Tax revenues as a percentage of GDP: 43.2%
Why taxes are so high there: As a country with a constitution that guarantees "the right to health," Belgium has an especially costly health care system to maintain. The government bears the bulk of the cost, with Belgian citizens paying only a small fee for care. Belgium also needs high tax revenues to keep up with its expenditures on infrastructure and industry subsidies.

Finland
Tax revenues as a percentage of GDP: 43.1%
Why taxes are so high there: Finland has high-quality, but expensive, healthcare and social security systems. The Finnish government also spends a lot on the country's education system, which is considered the best in Europe.

The Bottom Line
As a percentage of GDP, tax revenues in the U.S. are at historic lows and are far lower than those of most other developed countries. In addition to the ones mentioned here, those countries include Austria, France, Norway, The Netherlands, Hungary, Germany, Spain, Japan and more than a dozen others.

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