Enough on the Fair Tax. Let's get back to the something important like Danish tax rates

A national sales tax would not work because the weathly you are, the easier it is to avoid the tax. The 'Luxury' tax on yachts during the first Bush administration should have taught you something. It all but killed an entire industry. Since many states already have a sales tax, the actual rate people would have to pay maight be as high as 40%. The incentives to get around the tax would be enormous.

Even so, the revenue generated is meagre - just over 2 percent of total tax revenue. This is so, mainly because a marginal tax rate of 63 percent discourages work in favour of leisure (highly educated Danes have one of the shortest average working weeks in the world - and the fourth lowest in the EU: some 32 hours/week)! And of course because it drives talented Danes abroad.

Or, to put it another way "this is so, mainly because a marginal tax rate of 63% encourages Danes to pursue a high overall quality of life for all of its citizens, rather than the pursuit of money for its own sake by a greedy few."

In actuality, the 63% tax rate doesn't discourage "work" -- what it does is discourage wage inflation among the higher income brackets. Danish businesses look at the tax structure, and realize that its a far better use of their money to reinvest in their companies and maintain an overall high-quality workforce than give massive amounts of money to its top executives. Denmark has figured out that "top executives" is a sellers market -- that there will always be more people capable of doing a good job running businesses than there are positions for "top executives"... and "top executives" have figured out that the best way to serve stockholders is not to pay themselves huge sums of cash, but to use that money more productively.

Justin, just to be clear, this guy you're quoting is a lobbyist, right? Or am I wrong in guessing that the "Confederation of Danish Industries" is a group that lobbies for various business interests including reducing top tax rates? Not that this necessarily invalidates his arguments (and in all honesty a 63% top marginal tax rate seems awfully high to me), but it seems worth clarifying.

Yes, the Confederation of Danish Industries is the main business lobbying group in Denmark. It does tend to be less partisan than similar groups in the U.S., mainly because it plays such a central role in the Danish economy. And interestingly, at least one of the big private sector unions, Dansk Metal, is on the same side in this tax debate. Meanwhile, the political party generally seen as the country's most right wing, the Danish People's Party, is against tax cuts for high earners. Isn't Denmark fun?

Thanks for the reply Justin. I must confess my ignorance of Danish politics is near total. Sounds like fun indeed.

Not that this necessarily invalidates his arguments (and in all honesty a 63% top marginal tax rate seems awfully high to me), but it seems worth clarifying.

it must be emphasized, however, that that is ALL taxes (including local, and also includes stuff like an 8% levy on income dedicated to health care.) And that local tax is quite high -- 24.5% across the board on everyone's wages.

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Justin... what is the average annual salary of members of the Dansk Metal union. And when you say they are on "the same side of the tax debate", are you saying that they want the top rate cut --- or do they want to see something like the 24.5% local rate cut?

Thanks for the interesting clarification, p_luk. So Denmark has a national local tax. Sounds like an oxymoron, but I suppose it isn't. Denmark is fun.

crust...

here's the Danish tax rate tables for the last three years...

http://www.skm.dk/foreign/facts_and_figures/1602.html

and here are the deductions tables...

see http://www.skm.dk/foreign/facts_and_figures/1600.html