(11-13-2022 11:08 PM)Gamenole Wrote: I know you well enough to know that you have reasons for what you say and facts to back them up, and I'm very curious about Scandinavian social democracy vs. redistributionism and how the Democrats are falling on the redistribution side of the line.
The Scandinavian countries do provide a much more comprehensive safety net than the USA does, and that is expensive. Their philosophy is one where everybody pays and the same government-funded benefits are available to all, rather than one of tax the rich and means-tested benefits. The latter transfers significant income and wealth from high earners to those who qualify for welfare programs, making a substantial redistribution of income and wealth, while requiring a large and expensive bureaucracy to administer and gate keep. There's a reason why the top 3 counties in the USA for average household income, and 7 of the top 12, are in the DC metro area. Fat cat bureaucrats are damned expensive.
Scandinavian taxes are high overall, but not as "progressive" as one might expect. Per the OECD Tax Database (
https://www.oecd.org/tax/tax-policy/tax-database/), as of November 2022, here are what OECD calls the total tax wedge including the "all-in" tax rates (income tax plus social security employee and employer contributions) on wage and salary income at 67%, 100%, 133%, and 167% of average wage income, plus a ratio of the 167% rate to the 67% rate (measure of "progressiveness"):
Income as % of average wage 67 100 133 167 Ratio
Country Marginal tax rates and wedges
Denmark Total tax wedge i 38.7 41.7 55.5 55.5 143.5%
Finland Total tax wedge i 54.5 56.1 59.0 59.0 108.3%
Iceland Total tax wedge i 40.1 40.1 47.6 47.6 118.7%
Norway Total tax wedge i 41.8 49.9 49.9 52.6 125.8%
Sweden Total tax wedge i 46.2 49.3 63.7 66.0 142.9%
USA Total tax wedge i 31.5 40.8 40.8 42.7 135.3%
Data extracted on 14 Nov 2022 14:29 UTC (GMT) from OECD.Stat
Yes the Scandinavian countries have the highest top rates, but note that their lowest rates are also all substantially higher. That is the everybody pays part. As far as progressiveness, Denmark and Sweden are 8% more "progressive" than the USA (with the "Trump tax cuts" and not with democrat proposals), while Finland, Iceland, and Norway are respectively 27%, 17%, and 10% less progressive than the USA. Finland and Iceland, in particular, are almost flat tax jurisdictions. So yes, the top individual tax rates are higher in Scandinavia, but not as much higher as many in the USA are led to believe, and on the whole not really more "progressive." And again, this is based on the "Trump tax cuts." Current democrat proposal would push the USA rates for top earners, along with the progressiveness index, near the top of that comparison. And a top tax rate in the Scandinavia range plus a progressiveness index higher than any in Scandinavia, would clearly be redistributive in nature.
Keep in mind one other thing, the Scandinavian countries are at the high end of the scale regarding individual income taxes, and the rest of Europe would tend to be lower, in many cases much lower.
Perhaps even more interesting is a comparison of the corporate tax rates. Again, from the OECD Tax Database, combined national and state/provincial/local corporate tax rates:
Denmark 22.0%
Finland 20.0%
Iceland 20.0%
Norway 22.0%
Sweden 20.6%
USA 25.8%
And again, the USA rate is with the "Trump tax cuts" and would go substantially higher with democrat proposals. With the disparity between individual and corporate rates, Scandinavian business owners can achieve considerable tax savings by simply taking out of their corporations just enough to support their lifestyle and letting the remainder accumulate in their corporations. And with a 4-6% tax differential applied to hundreds of millions of profits, the competitiveness scale tips away from the USA, leading companies to offshore their profits.
Looking at the benefits side, pretty much nothing is "means-tested" in Scandinavia. Everyone benefits, so there is much less of a transfer effect on that side than in the USA. How do they manage more comprehensive benefits without extremely "progressive" tax structures? Three points:
1) Since they don't have "means-testing" they don't need the extensive gate keeping bureaucracy that consumes up to 75% of USA welfare program costs. With an administrative burden more in the 10-20% range (comparable to USA nonprofits) they can pay out a lot more benefits for less total cost.
2) Their tax structures allow few, if any, of the non-business exclusions and deductions that complicate USA taxes, so their effective rates are much closer to their statutory rates. Both the Bowles-Simpson and Domenici-Rivlin deficit reduction studies of a decade ago recommended such a structure for the USA.
3) They--and all other developed countries--have something that the USA doesn't--national consumption taxes (VAT/GST), which are clearly not "progressive." The combination of relatively flat tax rate structures plus consumption taxes make European taxes in general far less "progressive" than in the USA, but at the same time their GINI coefficients indicate far less unequal distributions of income and wealth. Also, consumption taxes come with one more benefit--they are collected on imports (without counting as tariffs) and some substantial part is rebated on exports, giving them a subtle but significant trade protection impact. As an aside, one reason that the USA has trouble negotiating favorable free trade agreements is the consumption tax disparity.
With a 15% personal income tax, 15% business income tax, and 15% VAT, the USA would have lowest the total tax byte--lowest personal income tax, second-lowest corporate tax (to Ireland) and lowest consumption tax--on the planet. The USA would be a tax haven.
And those taxes coupled with Bismarck universal private health care and a subsistence-level universal basic income based on Friedman's negative income tax or the Boortz-Linder prebate/prefund, would generate enough tax revenues to balance the budget and start paying down the debt. And flat taxes plus universal benefits (the guy living under the bridge gets the same benefits as Bill Gates and Mark Cuban) takes away the vast majority of redistribution effect. As far as republicans calling this socialism, I would only point out that Bismarck, Friedman, Boortz, Linder, and proponents of flat taxes and consumption taxes have all come from the conservative/libertarian side of the aisle.
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"First you fix crazy then you fix policy." (Aka Why demos need Trump)
