I’m a Dane and I thought that showing a simplified version of my budget might be informative in this context. I’m 37, mostly single, work with IT in the public sector, own an apartment, drive a MX-5 and earns a salary slightly above average for my age and if I earned just a few bucks more the last of those would be taxed with some 63% (btw. Christian’s figures of only 1000-2000 being rich is way off).

The numbers (monthly) and with 5 KR = 1 US to make it easy:

6500 Salary
—————
850 Pension. Tax free now. 40% tax when I retire.
1800 Income tax (6500-850-1600)*44%
—————
3850 What I get in my hand.

(The 1600 is tax deduction. Personal and from interest paid on my apartment loan)

Then there are the taxes not based on income but on useage.

210 Property tax (1% of value yearly – fronzen to 2001 level)
75 Car tax (based on car gas consumption, mine does 27 mpg which is not good)

2040 Morgage and so. (Big 1 bedroom apartment)
200 Gas (2/3 of this is tax)
200 Car insurance
40 Insurance (theft, travel, accident…)
100 Unemployment ensurance
80 Broadband (20 of this is VAT)
150 Electricity (most of this is tax)
40 TV/Radio non-commercial (If you own a TV or have internet access you must pay)

—–
705 The rest which goes for food, phone, toys(The car), Unicef, clothes… I need to make more money

I’m very happy with the system we have in Denmark. When I was younger I did consider moving to a country with lower taxes (The US, the UK…) but the more I learned of other countries the less I liked to live there. Sure I could do great personally with my IT background and so but the feeling of living in a place where no one must live on the streets, the environment is high on the agenda and with key words like freedom/equality/democracy/education/safety and basically a good living for everybody beats everything.

Sometimes I wish our car taxes would be lower since it’s basically (price+180%TAX)+25%VAT meaning buy one and pay for three. This means my little sports car is considered a luxury item. But in reality we have more than enough cars so we can afford them. This should illustrate how http://jp.dk/uknews/business/article1327660.ece

It is also correct that taxrates are graded so you pay more the more you earn. from 60.000 dollars and up you pay 63% (ouch) – but 20% lower for the first 60.000 – so on average its about 50% for most people.

It’s a funny thing since the danish model has a very effective redistribution of income it is very difficult to talk about removing the highest tax rate of 63% eventhough the federal income it produces is quite small and would probably be countered by people working more if the got to keep more of their salary. But as soon as it is mentioned somebody starts to talk about tax cuts for the rich – eventhough the “rich” is probably maximum a 1-2000 people. It’s an inefficient tax that 40% of the population now pay. The state needs the income but it makes people not want to work after a point.

You need a lot of federal income to keep everything afloat such as healtcare, welfare, education and so on. Peripheral Visionary said that the boom is due to lower birth rate. That might have something to do with it, I don’t know. But please note that from a working population of just 3.5 million people – 900.000 adults between 18-65 are NOT working. They are on federal income of some kind – welfare, student grants, pre-retirement etc. So 2.6 million people is takin care of 2.7 million. Some of the same figures can be made for Norway and Sweden too.

So i think the birth rate issue is a bit of an oversimplification.

I’m from France and I just wanted to say that here, there is a lot of talk about the danish “flexsecurity” and if we could make it work in France. Unfortunately, this system has a high price tag, especially training back people and I don’t know if the country will manage to get enough money to put this system into effect.

Sorry for my english, and thank you for your blog, it is great, I just love it.

Beacuse here I am in chicago….and I pay approx 28% in federal income taxes. Probably another 2.5-2.8 % in State income taxes (nominal rate is 3% of Federal AGI) 10% in sales taxes (don’t get me started on cigarette taxes) plus the implicit costs of Property taxes in my rent, and various license fees and industry taxes for my daily consumtpion (e.g business licences etc.) for what adds up to…I’m guessing another 5-10% of taxes on my gross earning.

Add that all together, and I am paying close to 50% is total taxes already. And what am I getting for that 50%? maybe the demographics and geography of America are not conducive to the Danish model, but seriously, if my total tax burden is relatively similar to that which I’d pay in Denmark, I feel it’s fair to ask…Can we not do better with what that 50% of my gross earnings I’m shelling out one way or another?

All of that ends as the population bulge hits old age. As the bulk of the population reaches ages where their productivity drops, the demographics become heavily skewed toward nonproductive members. Societies that have set up generous retirement benefits will be doubly impacted as the elderly become, not just unproductive, but a massive drain on resources. Without internal replacement of workers, there is no end game other than massive importation of immigrant workers, resulting in an inevitable change of culture and an inevitable reduction in prosperity as the nation is flooded with impoverished foreigners.

Zero population growth is a neat little stunt, but it only works so long, and the European countries are starting to see the results come into focus. Thankfully, the U.S. has remained skeptical of the European model, as well it should, as the full results will take a generation to assess. Like home equity extraction, it works fantastically well until it all comes to an end. I suggest the touting of the success of “flexicurity” is premature, and that we revisit it in twenty years and see how well it has worked out.

P.S. Europe isn’t the only region to engineer a massive one-time economic boom through a low birth rate . . .

If Bear Stearns (or LTCM) had been allowed to go bankrupt, the problem would have been resolved in a couple of years. It’s active support by the government that has prevented readjustment to the financial sector.

Unfortunately, IBs have understood that the proper approach to business is to take (or pretend to have taken) the economy as their hostage. “If I die, the hostage dies!” So what we have instead is a sort of asphyxia, with the financial sector draining out most of the oxygen in the room, leaving the rest to live miserable lives.

Tell your lawyer buddy to take a job at the federal government, say at the department of justice or whatever, he’d work less hours and still make more than an engineer!

You are probably right that it isn’t good for society to have so many people going into finance, law, and so on. However, I’m not sure these issues can really be addressed without Jimmy Carter levels of taxes and regulation and/or Pat Buchanon levels of barriers to trade and immigration.

If my engineer-lawyer buddy drops dead of a heart attack, the extra dough ht makes will not have been worth it. I hear him complain every time we speak of how stressed, overworked and sleep deprived he is.

As someone who has chosen to be downwardly mobile (remember I once worked on the Street), these big ticket jobs often (not always, but often) come at a high personal price. These people have no lives. And lawyers in particular are getting squeezed badly on fees by corporate clients. The law. at least for firms that serve corporate clients, is no longer a comfortable, well paid profession. Like medicine, it has become a not as highly paid, high stress, time pressured occupation where you also face uncertainty on whether you will collect fully on your time spent.

And I agree with the comment from Finland that this is not serving our society to have so much talent sucked into service professions.

Engineers make less than lawyers, to say nothing of bankers, trades, fund managers, and hell even a lot of analysts. In 2006, the median engineer had comp of $74,000, while the median lawyer had comp of $102,500, and the interquartile range was between $69,910 and $145,600. And even though the spread isn’t huge in absolute dollars, it is significant in percentage terms, and in terms of utility given that we’re talking salaries of around $100,000 or less. Compared to the typical engineer or lawyer, it sounds like your friend is getting paid well. Although compared to a finance type, not so much.

Also, I’ve met many people who majored in science, math, or engineering that decided to do other things because they thought engineers didn’t get paid much. Some needed to force themselves to be sociable, even though they were introverts by nature.

Something doesn’t add up with the WSJ numbers.

IMF nominal GDP/Capita estimates in US dollars:
Norway 83,922 (2nd highest in the world)
Iceland 63,830 (4th)
Denmark 57,261 (7th)
Sweden 49,655 (8th)
Finland 46,602 (9th)
USA 45,845 (11th)

PS if anybody wonders who is number 1, it’s Luxembourg. According to the IMF the country has already achieved 100,000 USD/Capita.