This is interesting

Noodling around about something else I found out what the national income tax rates are in Denmark.

For such a highly taxed country they seem just fine really.

After the personal allowance (about £5k) the national income tax is 3.76%.

Yes, that\’s 3.76%, not 37.6%.

Over around £40,000 that national income tax rate goes all the way up to 15%.

I think we could live with those sorts of tax rates, couldn\’t we?

Yes, there\’s also something akin to national insurance, at 8%.

Sweden\’s system isn\’t all that different either (they add in a 25% national income tax rate).

So, err, why don\’t we become more like the Nordics?

The kicker is, of course, that in both countries there are quite high municipal amd county taxes on income: some 22-35% depending.

So the total tax rate is indeed high….but the great bulk of the money is raised locally and spent locally: the national government seems only to be taxing for what the national government must do rather than centralising everything, both revenue collection and disbursement of the funds.

While I\’m not all that keen on such high tax rates, the basic idea of the system seems like a great idea to me. Raise locally what is to be spent locally, raise nationally only that which must be spent nationally.

I know Polly\’s shouted about the iniquity of local income taxes before but why don\’t we be more like the Nordics?

4 thoughts on “This is interesting”

  1. Caveat: you may not see everything correctly here. I suspect that Denmark is somewhat similar to Finland, at least Sweden is: although a large portion of the taxes are nominally collected for local authorities, they are not really spent locally – I mean that the way the money is spent is not decided locally. They are spent to fulfill state-imposed requirements to services and monetary transfers, who are still determined centrally. Thus, comparing to e.g. British system may not be so straightforward.

    One thing is good to understand, though, and this is where Denmark is different from its neighbours: the mandatory employer contributions (I believe this is called National Insurance in the UK) are practically nil. Everything goes in the income tax which is visible to employees. The overall tax rate visible to employees is therefore fairly high, the bonus being that there are no “hidden” (i.e. payroll tax) payments by employers.

  2. I agree with UK caveats.

    The population of Greater Copenhagen is 1.9 million and the city has social problems. It has disparate populations, but the wealthy and poor contribute towards the same pot.

    A London borough is smaller than Copenhagen, and some boroughs do not have many rich people. So local income tax and land value tax are essential, but there will still be a requirement for central redistribution in the UK. (Is there a town that might be described as “average”?)

    Thanks to pjt for the info in the post above.

    Tim adds: Interesting though but “Greater Copenhagen” is not a municipality. Copenhagen is….500,000 or so people, not greatly dissimilar from a London Borough.

    And some minicipalities are much smaller, down to 20,000 or so.

  3. Although Mr Worstall claims to be a supporter of LVT,it is left to Charlieman to mention that the Danish municipalities levy a local land value tax.As there is a nationally directed property tax as well ,it can be seen that the Danes have a quite different attitude to tax.We rely on Income Tax partly because of the whittling away of the old British land tax at the behest of the Landed Interest in the nineteenth century.Richard Cobden and Charles Bradlaugh pointed out this was happening at the time.

  4. Some of my business partners are Swedish.

    They pay tax at a high rate, there can be no doubting that. But having compared notes with them, it is clear that me and my UK business partners pay higher rates.

    And my Swedish business partners don’t pay private school fees, private medical insurance etc from their after tax income.

    Polly and her fellow travellers do not understand the Nordic countries. They think they want the UK to be like Sweden but there are a ton of things they would hate about Sweden but it is those things are crucial in making Sweden work as it does. You might as well say we should become like Saudi Arabia because it has a great welfare system for Saudis whilst ignoring its oil, Islam, and its feudalism.

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