You Want to Copy Scandinavia? Trust Me, You Don’t Want to Be Scandanavia

In a previous post about the Nordic economic model, I noted how the Scandinavian countries are not as “liberal” or “progressive” as Bernie Sanders and his sycophants would have you believe. Indeed, there are many things we should copy from the Nordic Model, like free trade, school choice, and low business taxes.

Now let’s talk about the things we should not copy. And I am not going to talk about nationalized health care or any of the other goodies: I am talking about things no reasonable person would favor. And that’s high taxes… On everyone, not just the rich.

Want free college, healthcare, and welfare? OK, how will you pay for it? Taxes! Unfortunately the rich won’t be the only ones paying it. It will be you, it will be me, it will be the working middle class. Sure, the rich will be paying for it too, but they do not have nearly enough money to pay for all of our needs. We’ll be forced to pick up the bill.

According to the Tax Foundation, America’s revenue as a percent of GDP from individual income taxes and payroll taxes is about 15%. Compare this to Denmark (26.4 percent), Norway (19.7 percent), and Sweden (22.1 percent).

Don’t get me wrong, the rich pay a lot of that. The following graph is the top marginal tax rate in each of the aforementioned countries.

Now, I know what you’re thinking: Ha, told ya so, the reason Sweden and Denmark have such high tax burdens is because the rich pay higher tax rates.

Not so fast. As the Tax Foundation notes, “the United States’ top marginal income tax rate is higher than Norway’s and only 18 percent lower than Sweden’s, yet raises 40 percent less income and payroll tax revenue than Norway and 50 percent less than Sweden.” So the extra revenue (compared to the U.S.) that these countries are raising cannot be fully explained by the amount paid by top earners. The gap is explained by the amount paid by the working class.

The Tax Foundation lays this out clearly for everyone to see:

Scandinavian income taxes raise a lot of revenue because they are actually rather flat. In other words, they tax most people at these high rates, not just high-income taxpayers. The top marginal tax rate of 60 percent in Denmark applies to all income over 1.2 times the average income in Denmark. From the American perspective, this means that all income over $60,000 (1.2 times the average income of about $50,000 in the United States) would be taxed at 60 percent.

Sweden and Norway have similarly flat income tax systems. Sweden’s top marginal tax rate of 56.9 percent applies to all income over 1.5 times the average income in Sweden. Norway’s top marginal tax rate of 39 percent applies to all income over 1.6 times the average Norwegian income.

Compare this to The United States. The top marginal tax rate of 46.8 percent (state average and federal combined rates) kicks in at 8.5 times the average U.S. income (around $400,000). Comparatively, few taxpayers in the United States face the top marginal rate.

The following graphic from the Tax Foundation illustrates this point:

Yeah, so the rich aren’t the only ones paying insanely high tax rates. So much for “equality” and “fairness.”

This doesn’t even get into the fact these nations have high Value Added Taxes (VAT). VAT taxes are extremely regressive and impact the poor much more than they impact the rich.

If, after reading this, you think more services from the government are worth the extra tax burden, that’s fine. But don’t insult my intelligence by saying the rich are the only ones picking up the tab. Have fun on April 18th.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s