Polly on taxation

But the IFS says Denmark successfully collects its high top rate because it has no dodges: the rich can be taxed if reliefs are blocked.

Well, given that Danish national income tax is 3.76%, with a top rate of 15%, yes, I think that they probably can successfully impose those rates on the rich.

That isn\’t all of it of course. There\’s also the local or municipal tax. Levied at the level of the commune which can be an organisation as small as 10,000 people. Where tax raising and tax spending are subject to what I call Bjorn\’s Beer limitation.

If you know that it\’s Bjorn who spends the tax money and you know where he has a beer on a Friday night then the tax money is likely to be well spent. For if it isn\’t Bjorn\’s going to find his supping being interrupted. Such intensely local taxation, I submit, is therefore likely to allow for higher rates of government expenditure.

It\’s also worth noting that the sum of all taxes may not exceed 51.5% of total income. And that\’s including the health tax (8%) and is thus more like our system of income tax plus both sets of national insurance.

In fact, it\’s not entirely certain that the Danish rate is higher than the UK\’s…….

12 thoughts on “Polly on taxation”

  1. The mirror of Bjorn’s Beer Limitation is Bjorn knows you, knows where you drink, knows if you’re paying your taxes or not and so knows who is to blame if we all can’t afford to have the bins collected. As his Friday night beer is being interrupted by friends unhappy their bins aren’t being collected, he’ll be popping into your pub to tell you all about it. Oh… and you’ll pay up soon enough.

    On the other hand – and I do hate to sound racist about it, but there is evidence of higher taxation levels being accepted in homogeneous societies – if, instead of our local bins, it’s Abdul’s granny’s benefits, 200 miles away, and she doesn’t speak English, or Danish, or Swedish and she has never worked here but came over to join her son and brought her brother and THEY’RE ENTITLED so shut up you racist. Well then, Bjorn will struggle to get the money out of you… if he can find you.

  2. The IDS data she points to suggests that in the financial and business services sector, bonuses went up from

  3. Sorry, shortened comment.

    The IDS data says bonuses in financial and business services sector went up from £69 to £143 a week, i.e. £74 per worker.

    Labour Market Stats in June says about 4.5m work in financial services, admin and support services and other services (note very generous definition of financial and business services).

    Clearly not all of them are top-rate tax payers, but let’s be super generous and assume half of them are.

    Therefore, £8.3m of tax a week lost due to bonus shifting (74x.5×0.05×2.25m).

    If we assume three months of bonus shifting (1 Jan to 31 Mar) that totals about £108m.

    That’s not nothing, of course, and as a personal preference I’d rather people hadn’t done this, but £108m is clearly not “gigantic” in the context of what Polly sees as £6.1bn missing from the tax take.

  4. So Much For Subtlety

    There-s also the local or municipal tax. Levied at the level of the commune which can be an organisation as small as 10,000 people.

    I know this is going to be a stupid question, but why aren-t there more Danish billionaires? At one point New York was contributing over a third of America-s income tax revenue. I bet London does today.

    If income tax is mainly local, then it will mainly hit the middle classes. You can hardly tax everyone 95% in some rural village. On the other hand if you try in Copenhagen, the billionaires will move to some smaller town where the rates are more reasonable.

    In other words, the billionaires should be more or less unaffected by income tax. It should not be a particularly progressive system. So why is inequality so low if it is not so redistributive at the top end?

  5. “On the other hand – and I do hate to sound racist about it, but there is evidence of higher taxation levels being accepted in homogeneous societies – if, instead of our local bins, it’s Abdul’s granny’s benefits, 200 miles away, and she doesn’t speak English, or Danish, or Swedish and she has never worked here but came over to join her son and brought her brother and THEY’RE ENTITLED so shut up you racist. Well then, Bjorn will struggle to get the money out of you… if he can find you.”

    It’s easier to be charitable when you can ‘walk a mile in his/her shoes’ as it goes. When you can’t relate at all to the people getting your ‘redistribution’, there will be more resistance.

    Brow beating people about racism will only hold that misalignment together for so long. Note that also applies to a lot of government spending, not just benefits.

  6. @ J Ledbetter – although Denmark is on at least one measure the most equal country in the world on income, which is surely more relevant in this context.

  7. Interesting you can be at the top of the equality stakes on income and the bottom on wealth.

    I wonder what causes that?

  8. @H: I’d say that wealth inequality is more important as it’s effectively the accumulation of income inequality over many years.
    @David Moore: Lack of social mobility? If you are poor you stay poor and if you are rich you stay rich.

  9. JL,

    Could be I guess. People who own the big houses and companies don’t earn massively more than everyone else, but keep hold of the big houses and the companies very tightly?

    That would describe New Zealand back in the seventies too.

  10. Income equality probably entrenches wealth inequality.

    If you can’t earn much more than everyone else, then you’re never going to be able to build up any real wealth.

    Fine for those families (such as Polly’s) who already have wealth, not so good for those who don’t.

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