Saturday, September 19, 2009

More Taxes, Anyone?

Postscript on Danish government debt added at the end.
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Since the subject has been taxes for two posts running...

Four decades of unbridled voodoonomics like Friedman's old "the only social responsibility of business is to increase its profits" and more recent neo-liberal screeds, have turned Americans into "Just Say No's" when it comes to taxes.

For them, the following facts about Denmark:
  • Denmark has the rich world's (OECD-18) second-highest total taxation burden at 48.8% of GDP (USA at #17 at 29.6%).
  • It probably has the highest environmental and energy taxes of any country.
  • There are taxes on drinking water and the disposal of waste water.
  • Every company pays waste disposal charges and households are charged for garbage collection.
  • Packaging is taxed.
  • Danes pay 25% VAT (Value-Added Tax) on all goods and services.
...and yet...
  • Forbes magazine - you know, the Capitalist Tool - just rated Denmark as the #1 country in the world for business. For the second year in a row.
  • Economist magazine just did the same and added that this is to be so for another five years.
  • Danes are #1 in life satisfaction (USA #11).
  • Since 1980 Danish GDP has grown 70% while total energy consumption has remained flat.
Obviously, low taxes don't make for an enviable economy and it follows that lowering taxes does not make for infallible public policy, as Bush II and his incompetent gang proclaimed.

Now, no one enjoys paying taxes, and I'm sure Danes don't, either. But if tax revenues are demonstrably used for the greater benefit of the entire society - as apparently they are in Denmark - people will pay them with a great sense of civic duty and pride.

So, let's come to America. How can anyone justify the immense expenditure of public money to support the continued existence of a financial system that is based on little more than gambling? Unlike the Danes, what are Americans to expect for their $13 trillion in direct bailouts and guarantees to the likes of AIG? A better living standard, less pollution, increased energy security, better health and social security services? Hardly.

Instead, we are comforted to know that Goldie, Morgan et. al. are on track to pay record-breaking bonuses this year. Sorry, but this is insane.

Here's a suggestion: any bonus in the financial sector over, say $50,000, to be taxed at 95%. Confiscatory, you say? Are we kidding? Recipients of such bonuses should be ecstatic to keep 5% of any such money they got, since it came directly from the public, or was made possible only because of public guarantees.

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PS: A reader mentioned Danish debt. According to Eurostat, Danish government debt at the end of 1996 stood at 69.2% of GDP, whereas at the end of 2008 at 33.3%.

36 comments:

The Cynical Economist said...

Danish culture and society is very different than ours in US. The hard life surviving the natures fury in that part of the world made them bond and carry for each other. Here we have the law of the jungle. The most corrupt you are the bigger your chances to survive.

We need to change our culture of corruption and go back of being a republic again. Society choosing representatives from the people for the people

What we have now is oligarchy. Those oligarchs would make everything possible to stay on top of us even by oppressing us. Throughout history oligarchies have been tyrannical , being completely reliant on public servitude to exist. Don't we see it right now?

Until we change the system back, the amount of taxes you pay would not matter. The oligarchs will always pocket the money, without any positive results for the society as a whole.
Think who benefited from the bailout and the stimulus money? I would love to be a bank owner or owner of road re pavement company with ties to politicians.
Thats one of the reasons the bailouts and stimulus don't work.
Nothing has changed in a positive way from a year. Politicians and corrupt businesses are swapping money from each others pockets on the expense of the middle class

Thai said...

The thing about teamwork and cooperation is that it really helps when:

A. You all share similar values
B. You pick better players
C. The players all like each other (related to A)
D. You make the right decisions

Hell, I would be very careful when pulling one of these "holding all other variables constant, isn't it remarkable how variable X correlates so well with the success of an entire society" arguments.

There are a lot of other countries that also have higher taxes than us but against which Mississippi compares quite favorably.

Personally I prefer the "Am I personally willing to leave my newborn infant unattended in a stroller on the sidewalk outside a store that I shop in" variable as predictor of economic success.

But I guess taxes are another variable ;-)

mich said...

Yeah, well, have you seen their household debt vs. income? Housing bubble to-the-max baby! Haven't lived there but lived in the Netherlands and New Zealand. I'm sick of the eternal debt syndrome. How nice it looks on the outside, you don't see the chain and gigantic ball of debt. And don't forget the huge transfer of wealth to the people having no problem to leverage to the hilt.

Bobby said...

Startling numbers to be sure, but I'd agree that they should be examined with cultural differences in mind. Cultural expectations correlate with happiness, and that is a very slippery metric. Which is to say, the "cultural pride" Americans might get from providing healthcare for their fellow man would be severely mitigated by the fact it might cost them more in taxes.

23Skidoo said...

> The hard life surviving the natures
> fury in that part of the world

You're probably thinking of Iceland. The climate in Denmark is not much different from Germany.

Petros said...

this may be of interest:

http://www.marginalrevolution.com/marginalrevolution/2009/09/where-do-countries-stand-on-the-laffer-curve.html

marcus said...

Thai presents a stinking red herring wrapped up in a specious argument:

Let's look at income distribution Thai. Not GDP.

Germany population below poverty line: 8%

http://www.economywatch.com/
world_economy/germany/

Mississippi population below poverty line: 20%

http://www.census.gov/Press-Release/
www/releases/archives/hurricanes
_tropical_storms/005673.html

And think about it all those poor people in Germany have health care, "doctor".

Hell talks about taxing the hell out of the bankrupt entities using tax-payer money to further distort income distribution, and maybe ease the strain of poverty and social services such as health care. No more ripe herring huh? Bad for your health

marcus said...

Deal with the main thrust of Hell's argument Thai not some nebulous gobbledygook about values and social equations.

Your writing speaks more to your alienation and fear of your own society rather than Hell's main arguments.

Debra said...

By the way, Marcus, you really enjoy going for the throat, don't you ?
Somehow I don't think that you would do so well in Denmark, would you ?
As far as GOING BACK to being a republic... this country never even started out with the assumptions that could have preserved it from oligarchy, re Howard Zinn, for info.
Yeah, I think that taxation has the possibility of cementing/creating some kind of social solidarity. And the past 25-30 years emphasis on wiggling out of taxes by any available means is a simple translation of the worst side effects of exacerbated individualism.
The problem being, of course, that now that almost everyone perceives taxes to be.. UNFAIR (yeah you got it, I'm throwing out an incredibly childish word to name an incredibly childish attitude...) it's going to be really tough to infuse a little team spirit in the game.

Superportal said...

Hellasious, I disagree.

1. You criticize free markets and then the bailouts.

The U.S. doesn't have a free market--if we did none of those banks would be bailed out and none of those people would be getting bonuses. Their employer would be bankrupt and many of them would be in jail. Furthermore many of their profits were made due to fraud and government intervention.

Your analysis has other serious errors.

2. The Economist points out Denmark is among the most expensive countries in the world (cost of living). While many of the basics are covered through heavy taxation, everything else is extremely expensive.

Denmark has one of the world's most COSTLY government's vs. GDP. So the question is not "do they get something in return". It is more accurate to ask--is the return commensurate with the massive taxpayer cost?

3. Most of Denmark's electricity comes from coal. True they are adopting green energy policies but that's easier in a very small country (for a lot of reasons).

The entire population of Denmark is 25% of the Greater New York City metropolitan area.

4. You mention Denmark's high economic growth with low energy cost. That is simply because they have very little heavy industry (which is energy-intensive ie. mining, materials, construction, auto).

They are mainly a service economy. Same reason why they are growing fast--the service industry is growing rapidly throughout the world, including the U.S. However, in countries like the U.S. with a more diversified economy (not only service) growth will be slower and energy consumption is higher.

5. Denmark is very different from the US and a poor case to compare.

As noted, it is extremely small in population. It's one of the least important developed economies and is not among the most innovative nations. It's a homogenous nation of 90% native-born same race/culture people. 80% belong to the same State-run Church. Their Defense is virtually non-existent and they were occupied by the Nazis in WW2.

Most free market proponents do not claim that a socialist system *never* provides any benefit to anybody, just that it does so in a manner that is inefficient, impractical, unfair, and against freedom and innovation.

Denmark succeeds IN SPITE of taxation and socialism, not because of it.

marcus said...

Debra, I don't "enjoy going for the throat", I try to use an appropriate tool for the job, In cases of extremely density a forged hammer is the tool of choice.

"The problem being, of course, that now that almost everyone perceives taxes to be.. UNFAIR (yeah you got it, I'm throwing out an incredibly childish word to name an incredibly childish attitude...)"

Childish words? Knew words had genders in some languages but not degrees of maturity. Where does "justice" fall in in your maturity ranking?

And what poll did you glean this pertinent piece of evidence from about attitudes on taxes? Fox News viewers?

The Cynical Economist said...

O yeah, did you read the news today?
Sweden slashes income tax further to boost jobs

David said...

If Americans knew any history, they might be aware that Hell's recommendation for taxation mesh nicely with the sense of civic responsibility promoted by such bleary eyed Socialists as Dwight D. Eisenhower.

Chris said...

David, "if Americans knew any history" they would insist on limited government as the USA founders did, and distrust big government. Civic responsibility would be exercised by the individual, not by a committee who has confiscated his income. btw, Eisenhower warned against the military industrial complex--how'd they work out?

"My reading of history convinces me that most bad government results from too much government."(Thomas Jefferson)

"It's not tyranny we desire; it's a just, limited, federal government." (Alexander Hamilton)

"A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government." (Thomas Jefferson)

"Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated." (Thomas Jefferson, Letter to Albert Gallatin, 1817)

Jeff Skilling said...

Yeah David! Chris is really good at bringing up disengenous quotes too!

Chris said...

Jeff, I believe you mean "genius quotes"

Debra said...

Interesting info about Denmark you guys. Thanks. But WHY consistently and without question believe the mantra that because Denmark is small, and the U.S. is big, their "solutions" are inapplicable to OUR problems ?
For the founding fathers, I was NOT aware that they were... GODS, or that the Constitution was the BIBLE, by the way.
Back in the good old days when I enjoyed the music in my childhood Protestant churches there was a hymn called "Once to every man and nation", very majestic, very moving. I quote from it :
"New occasions teach new duties
Time makes ancient good uncouth
Those must upward still and onward
Who would keep abreast of truth."
James Russell Lowell, 1844
KInd of like that one.
Marcus, I have been posting long enough on this blog for you to know my positions on "justice", a much overrated ideal in my book, and for very complicated reasons that would take too long to expose here.
As for Fox news viewers, the last time I heard/thought about it, THEY too are part and parcel of the republic... EVEN the gun touting, almost rabid ones...
Any "solution" to OUR problems is going to have to INCLUDE THEM, something I feel that WE/YOU forget all too often.

Superportal said...

Debra, to answer you best I can at this late hour:

1. Size matters. In general, central management of an economy is not smart or efficient at all. BUT...in a very small market, central management has less cost barriers and can be somewhat "efficient enough", even if flawed. This is impossible in a large market.

2. "For the founding fathers, I was NOT aware that they were... GODS, or that the Constitution was the BIBLE".

The Constitution IS the bible of US government, the basic law which governs our nation. It is the basis of the legitimacy for all Federal laws, Bill of Rights, of the Presidency, Congress and Supreme Court. That's kinda important, isn't it???

The Founding Fathers are not GODS but were BRILLIANT philosophers and revolutionaries we should all learn from. They conceived of a United States (and Constitution) based on the idea of LIBERTY (not "sharing"). In practical terms they were not always successful in realizing that--ie. slavery continued (and they were aware of this contradiction and most lamented it, but that's a whole other story)--but the concept of liberty was sound.

I think going back to the writings of the Founding Fathers, such as the Federalist Papers, Anti-Federalist Papers and their biographies/writings is very instructional as to the proper role of government. They were not sitting around the TV all day. They were debating, exchanging correspondences, reading the Classics and developing plans for a new government from scratch over decades. They debated extensively ideas like should the government be big or small, should it be active in citizen's lives or minimal. They put their lives on the line. They figured it out already.

It's shocking this is forgotten in our country today and disrespected. I couldn't help notice when I was on Facebook--Marx has 70,000 fans and Jefferson has 2,000. I've studied both extensively and Jefferson is far more persuasive AND accomplished than Marx could ever hope to be.

3. Good point about Fox viewers. I look at forums on various sides of the debate and see dumb ad hominem attacks by all. Either we agree to debate the facts and issues and learn, or sink into an abyss of name calling and destroy each other.

(Superportal=Chris)

Anonymous said...

The Founding Fathers did their founding three centuries ago. Let's de-deify them and start thinking about the US of the 21st century, as opposed to the Colonies of the 18th.

Would you want your tooth pulled by a barber or your illumination to come from sperm whale oil? So why must we still look to Jefferson for socio-political wisdom?

Move on..

Superportal said...

>> The Founding Fathers did their founding three centuries ago.

Three centuries ago is nothing! Parts of the US Constitution (ie checks and balances, Senate) are from the Roman Republic 2,000+ years ago.

>>why must we still look to Jefferson for socio-political wisdom?

Because it's the most wise political philosophy. Truth is timeless.

And your alternative is...

(warning: the last guy I asked cited an Indian Swami and the metaphysical universe, which ended up quite convoluted. Perhaps you will fare better)

Thai said...

Does anyone have a link on whether you actually can change inequality on a long term basis through taxation?

I can see how it would work the first time it was used as a policy and briefly reduce inequality. But I also see how society would quickly readjust and that subsequent increases in taxes would yield diminishing returns in achieving the stated goal of reducing inequality.

I spent about 45 minutes looking for any primary research links on the subject and found nothing (but my search was limited to the Internet). I founds lots of opinions from both the "yes it works" and "no it does not work" camps, but I couldn't find any actual research on whether the question has been actually answered one way or the other.


I have presented my readings on the Sugarscape model developed at the Brooking's Institution on this blog numerous times in the past; to be fair to people like Marcus, it is nothing more than a model.

Anybody have any links?

This has to have been studied- no? It is such a primary framing aspect of the entire argument between liberals and conservatives.

Greenie said...

"Mango farmers in India work very little to produce sweet, delicious fruits. The lemon farmers in California work much harder and spend lot more energy, yet they are unable to get anything remotely as sweet. Hence, Californians are more stupid than Indians. No wonder, California needs to import all its software engineers from India."

In a nutshell, that is what I think of your Denmark-USA comparison, Hell.

Joe said...

Superportal is spot on when he talks about our early Republic. Furthermore, Debra, they did have a huge provision in the Constitution against the oligarths.

Money shall only be coined in Gold/Silver did 2 things.

1. Limited the size of government.
2. Kept the banksters honest. If you did not have the metal to back up your book, you simply go BK. Our current situation is not possible under a Gold standard.

Joe M.

JR said...

There is no provision in the Constitution that says money can only be gold and silver.

The two relevant items are:

Section 8 - Powers of Congress
The Congress shall have Power ... To borrow money on the credit of the United States; ...
To coin Money, regulate the Value thereof, and of foreign Coin ...

Section 10 - Powers prohibited of States
No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; ...

The reference in Section 10 is the only mention of gold in the Constitution. Congress can make anything legal tender: cattle, bronze ingots, cowries, cacao beans, British coppers, first-born sons, or Federal Reserve Notes.

But What do I Know? said...

With taxes, it's not just what you spend, it's what you get. Although the Europeans generally pay more taxes, they also get health care and university fees paid for. To focus just on the level of taxes is myopic.

Greenie said...

Europeans do not pay state taxes either. This whole comparison of different countries of different sizes, history and homogeneity is completely meaningless. I expected better from Hell, but he is a commie and Europhile to start with.

Thai said...

@BWDIK- agreed

Which was actually part of my (and many other's) point ;-)

Anonymous said...

Singapore has one of the lowest global tax rates and yet has the largest per capita reserves and lowest government debt. It's all about the management at the top.

Debra said...

These days in France, at least, we are getting.... the WORST of both worlds.
Generalized liberalism has created the nasty impression (yes Marcus, here we go again, but I hold firmly to this...) that taxes are unfair.
What we are getting for our "taxes" is... steadily drying up as liberalism progresses.
The Post Office (which has long functioned as a privatized public service, a "public" service that is run like a business, to make money--thanks E.F. Schumaker for calling my attention to this one-- is now discarding any semblance of public service.
The University system is in a shambles because it is inadequately funded.
OUR money is going through too many agencies which have become top heavy and themselves the reason for their own existence (not mission oriented).
And in France, there is the added complication of "prélèvements", or "charges", which are NOT TECHNICALLY taxes. (What ARE they, Hell, if they are NOT taxes ? Government takes them off employer/employee paycheck, but I don't think that they are really the equivalent of withholding at source...)
And, about the Constitution...
I sometimes feel that Americans have a peculiarly MUSLIM attitude about it.
Yeah, that means that since Mohammed was not using electric lighting, the believers are not supposed to be using it either.
It's called....LITERALISM, and Thai already knows where THIS debate will take us, don't you, Thai ? ;-)
(Sorry Marcus, but if you want to know more, you'll have to haul over to Street Rat...)

Debra said...

And I will persist although most of you girls and guys snicker when I make this remark :
There is some kind of starry eyed idealism in Americans' attitudes toward the Old World in certain respects. A kind of nostalgia that historically goes way back and that ensures that a certain rose colored glasses vision colors the European experience.
Although MOST of you see France as a country where social assistance is the norm, this is quite simply UNTRUE.
Liberalism and its underlying (Protestant...) attitudes have wreaked havoc over here in the past twenty years. The European Union is an equivalent ideological sparring partner for the U.S. and dreams of beating it on its own turf.
So.... it is even MORE painful over here where, after WWII, there was great solidarity after so much hardship ON OUR OWN SOIL.
Maybe, just maybe...
We are missing some collective HARDSHIP to cement some solidarity these days ???
Nothing like a "little" war ON YOUR OWN SOIL to level out those persistent inequalities, is there ???

Joe said...

jr,

We were on a Gold standard in this country until 1971. Nixon cut the tie and created a pure fiat currency.

Also note the Coinage Act of 1792 where Gold/Silver weights were specified.

Keenan said...

JR writes:
Congress can make anything legal tender: cattle, bronze ingots, cowries, cacao beans, British coppers, first-born sons, or Federal Reserve Notes.

With the exception of bronze and copper none of those other items are consistent with the word "coin" used in section 8.

Debra said...
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Debra said...
This comment has been removed by the author.
Anonymous said...

Stupid idea.

They would just increase base salary...oh, most banks already have.

Next...

JS said...

Long time reader (infrequent commenter) here catching up on your blog. Found this post interesting as I spent 3 weeks in Denmark this summer. Yes it is a small country with cultural aspects that are different and in some ways opposite to, contemporary America. And a certain degree of that is probably reflected in the differing attitudes towards taxation and the role of government.
Despite the differences, that does not automatically mean that ideas or innovations - yes there are some - are inapplicable to the USA.
For example, I found a lot of progress in green energy; much of it done privately. In particular the islands of Samso and Aero.
Danes are quick to shoot down a compliment, and never miss an opportunity to criticize their government and point out any shortfalls. Despite that I heard very little outright complaint about taxation.
Also interesting was that attitudes towards renewable energy, did not fall along "rural/urban" or "conservative/liberal" divisions; rather it seemed to be viewed as a practical approach to a real (not perceived) problem. This was a refreshing change from the politicization and hyperbole of any debate involving energy, government or society in the US.
I suppose that's what I mean by cultural differences.
Their system may not be easily replicated in the governmental-ly diverse US with its competing and overlapping Fed/State/County/City system. But I do think that US society would definitely benefit from some of their ideas.