OECD (2025), Taxing Wages 2025: Decomposition of Personal Income Taxes and the Role of Tax Reliefs, OECD Publishing, Paris, https://doi.org/10.1787/b3a95829-en
This annual publication provides details of taxes paid on wages in OECD countries. This year’s edition focuses on the decomposition of personal income taxes and the role of tax reliefs, which can take the form of tax allowances or tax credits on the taxes levied by different levels of government. For the year 2024, the report also examines personal income taxes and social security contributions paid by employees, social security contributions and payroll taxes paid by employers, and cash benefits received by workers. It illustrates how these taxes and benefits are calculated in each member country and examines how they impact household incomes. The results also enable quantitative cross-country comparisons of labour cost levels and the overall tax and benefit position of single persons and families on different levels of earnings. The publication shows average and marginal effective tax rates on labour costs for eight different household types, which vary by income level and household composition (single persons, single parents, one or two earner couples with or without children). The average tax rates measure the part of gross wage earnings or labour costs taken in tax and social security contributions, both before and after cash benefits, and the marginal tax rates the part of a small increase of gross earnings or labour costs that is paid in these levies.
Summary of some key findings
- The average tax wedge for a single worker earning the average wage increased in a majority of countries in 2024
- The tax wedge for most household types with children fell in a majority of countries in 2024
- Average wages and post-tax incomes recovered in real terms across the OECD
Decomposing personal income taxes
Chapter 2. contains a special feature on “Decomposing personal income taxes” that examines the impact of credits and allowances on personal income tax rates of three household types: a single worker earning the average wage, a single parent with two children earning 67% of the average wage, and a one-earner married couple with two children
where the principal earns the average wage.
• Tax credits reduced the tax liability of a single worker earning the average wage by 1.9% on average across the OECD in 2024. The equivalent reduction was 4.7% for the one-earner married couple and 7.3% for the single parent.
• Tax allowances amounted to 15.9% of taxable income for the single worker earning the average wage, 21.7% for the one-earner married couple and 27.7% for the single parent.
• For a single worker earning the average wage, tax allowances amounted to 5.4% of post-tax net income on average across OECD countries in 2024 while tax credits amounted to 2.6%. For the single parent, tax credits amounted to 7.4% of net income while allowances were 5.7%; for the one-earner married couple, credits were 5.4% of net income and allowances were 5.2%.
• Excluding credits and allowances reduces the structural progressivity of personal income tax among almost all OECD countries for all three household types; excluding credits has a greater
impact on progressivity than excluding allowances.
Read the full report