- Government takes a large percentage of the total production of the country (up to 50%, say) and the uses this to provide public goods, social and welfare services and to redistribute income.
- Capital and corporation taxes are low. Sweden doesn’t even have an inheritance tax. The basic national income tax rate in Denmark is 3.76%, the top one 15%. The tax systems of all four countries (Denmark, Sweden, Norway and Finland) are more regressive than the tax systems of either the US or UK.
- They raise a great deal more money in heavily regressive and high rates of VAT.
- There is no national minimum wage in any of the EU Nordics.
- Taxation for social spending tends to be bottom up rather than top down. In Denmark, as an example, the social security taxation is set by the commune, a grouping of as few as 10,000 people. The rate might be 25-30% added to that national income tax noted above. This is collected and spent locally.
More from Tim Worstall. HT: Jason Shafrin.
No inheritance tax? No national minimum wage? Top income tax is 15%? We should consider being more like the Nordics.
Interesting. And a few surprises.
Nordic countries are Welfare States in the truest sense. People pay a large portion of their income in taxes. But (depending on their circumstances) they get back the majority of their taxes in social services. Basically, the Nanny State decides how you spend a substantial portion of your earnings. If you’re a wealthy single man, you probably pay for far more than you get; if you are a poor couple with children, you get far more benefits than you pay for.
Something I noticed when I was in Norway was that everything was very expensive. The exception was reindeer-skin rugs. I guess there’s not much of a market for them. Alcohol, on the other hand, was exorbitantly expensive. We were told that most people brew their own beer to avoid the high cost of taxes.
Interesting, Devon. I wonder how much the factors related to the welfare state have contributed to the price equilibrium being so high in some of these countries.
What no one really knows is how many more of these welfare states are going to collapse before the E.U. parliament realizes that the model isn’t working.
+1 on the previous site architecture comment. Please add edit to comments in future upgrades.
The social welfare model works best where there are low birth rates, little if any immigration, no racial or religious animosity (because everyone is the same race and religion), and honest governments that are not afraid to raise taxes.
That covers Scandinavia, plus France and Germany to a large extent.
Everywhere else, including America, the social welfare model is a potential (or actual) disaster.
Politicians strive to hide the tax highlight the service. The VAT serves this end well. If the voter new what they were paying for Government provided services, I think that they would to do less through Government.
I agree with @Alex that we should consider being more like the Nordics, but perhaps we should take these facts in context.
First of all, @Devon, Norway has a higher purchasing-power-parity GDP per capita than the US, so your point is rather moot.
@Bob Hertz, perhaps you should turn your attention to another quote in the kickstarter page: “I’ll consider other arguments of course: the standard one about Sweden is that as a homogenous society it’s easier to get everyone to pay up for government because everyone is part of the same tribe. Given that Sweden has a higher portion of the population that is foreign born than the US that one might not pass muster as a serious argument though.”
I’d also refer you to Steven Pinker on whether or not government is incompatible with ethnic differences or whether government works to mitigate those differences.
Now, back to context. Government taking “a large percentage of the total production of the country (up to 50%, say) and the uses this to provide public goods, social and welfare services and to redistribute income” is not uncommon in “free-market” economies. You only have to look to Singapore, Heritage’s 2nd freest market, where government controls about 20% of GDP, owns all the land, and provides almost all housing.
These countries also have SIGNIFICANTLY less income inequality, so I wouldn’t expect a very progressive tax system or inheritance taxes. The difference in the US system and the Nordic system is that America tries to fix systemic inequality through taxation, whereas Nordic countries eliminate the system of inequality.
It’s good to see John Goodman at least tacitly admitting that a VAT is regressive–Romney and Ryan both support one.
Why should there be a minimum wage when there is a guaranteed standard of living? Progressives would be all for eliminating the minimum wage, but only if it came with a much tighter-strung safety net. This blog, however wants the former without the latter, morally defensible or not.
Finally, this “commune” sounds interesting… maybe the anarcho-syndicalists aren’t so crazy after all.
Good comments, Dave. Another relevant fact in Nordic countries that labor unions and labor parties have pushed hard for wage ‘compression’ for 50 years. A waiter is supposed to make a living wage, and not rely on tips and similar barbaric practices.
One small item puzzled me: “Sweden has a higher percentage of foreign-born than the US.” Huh? Where in Sweden are these immigrants? Does Sweden have racial minorities at all?
That is not a major item, but a puzzling one.
More than half of this piece is a personal pitch for money by the author. Is this a new research paradigm?
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