High Income Taxes Not Good for Labor
I’m sure that the title of this post comes as a surprise to many of you. Or not. Seemingly, however, Denmark didn’t realize this until now:
Denmark is the home of “flexicurity,” the catchy name given to a system that pays ample unemployment and welfare benefits but, unusually in Europe, imposes almost no restrictions on hiring and firing by employers. The mixture has served Denmark well, and its economy barreled ahead in 2006 by 3.5 percent, one of the best performances in western Europe. The country is effectively at full employment.
But success has given rise to an anxious search for talent among Danish companies, and focused attention on émigrés like Sorensen. The Organization for Economic Cooperation and Development, which is based in Paris, projects that Denmark’s growth rate will fall to an annual rate of slightly more than 1 percent for the five years beginning in 2009, reflecting a dwindling supply of a vital input for any economy: labor.
The problem, employers and economists believe, has a lot to do with the 63 percent marginal tax rate paid by top earners in Denmark – a level that hits anyone making more than 360,000 Danish kroner, or about $70,000. That same tax rate underpins such effective income redistribution that Denmark is the most nearly equal society in the world, in that wealth is more evenly spread than anywhere else.
As John Hawkins writes, finally a tax that indeed causes people to change their behavior: they’re moving abroad. And this is happening, not just in Denmark, but also in the Netherlands. Quite some of those who earn a couple of hundred of thousands each year, or even millions, prefer to live in Belgium or Monaco. The reason? Taxes.
The European welfare states force their richer citizens to ‘give’ more than 50% of what they earn to their fellow citizens / the government. Not because they want to, not because it’s even morally defendable – it’s not – but because they’re the minority and the majority believes that it has every right to steal from those who have and earn more than they do. It’s, in my eyes, one of the worst unintended consequences of full democracy.
Anyway, not only does the majority rob the minority, they actually hurt themselves and society as a whole by overdoing it (again a logical result of full democracy).
Ah, if only we could do it all over again. For now, the best we can hope for is damage control.
H/t Memeorandum.
And here at least, the so-called Progressives. (oxymoron if there ever was one) feel that group should pay ever so much more.
O yes, the same here Interested. They’re still talking about each carrying a burden as heavy as he can, raising taxes on the rich, etc.
And then there’s this from Obama, which seems to indicate that he still thinks Europe’s social policies should be adopted here:
http://www.extrememortman.com/presidential-election/the-obama-domino-theory/
Christine: that’s a serious problem. American conservatives have to oppose it as much as they can.
When they start implementing some of those policies you’ve got a problem on your hands. Once they implement them it’s virtually impossible to undo it.