Moderate, not conservative

Ray: The Scandinavian countries have been classified as relatively free capitalistic enterprise nations by greater economists than me, however, somewhat “socialized” to take better care of the needy and the elderly, resulting in lower poverty, lower crime, and overall more satisfied people all together. Still, some people become filthy rich, with no higher income tax rates than here. Among my numerous friends “over there”, I never hear anyone complaining about taxes! The “65% tax rate” than one on this site keeps referring to, is pure nonsense!

Hello again, Jorg

I was hoping our colleagues better versed in economics would have chimed in by now... I still think you cannot smush the words socialism and capitalism together quite so easily. Scandinavian countries provide a wide range of social programs and they operate largely as free market economies... however, that doesn't mean they have "socialized capitalistic" systems.

Re: our Scandinavian friends, you wrote, "... some people become filthy rich, with no higher income tax rates than here." Becoming filthy rich in Scandinavia is an accomplishment because of the overall income tax rates are higher. My hat is off to them.

Then, "Among my numerous friends 'over there,' I never hear anyone complaining about taxes!" Skrrrrip! Jorg... I feel if you widen your circle of friends, you will hear plenty of complaints about taxes. The average value-added/sales tax in the US is about 5%. You will find value-added/sales taxes "over there" around 25%. That particular tax is a regressive tax with a huge impact on lower income folks. I'm guessing those folks have some complaints about taxes.

Ah... back to the "65% tax rate” issue. I have watched you and Ed Kahl go back and forth on this topic. I know you keep saying one cannot simply add up all the taxes levied in Scandinavia and come up with a 65% tax rate. From your perspective, such a calculation is "pure nonsense!"

OK. But when you look at Scandinavian taxes and see income taxes as high as 55%, sales taxes as high as 25%, and payroll taxes as high as another 10%... if the overall Scandinavian tax rate is not 65%... then what is it? And... how would the overall tax rate in Scandinavia compare to the tax rate in the US?

Ray: No so-called free enterprise capitalistic system is totally unregulated. They all are, more or less, and have to be in an organized society. In the Scandinavian countries somewhat more regulated than most, to protect people, resources, and the environment, which people “over there” are quite satisfied with, to protect the society they all are a part of. That’s where the word “socialized” comes in. Anything wrong with that?

Good morning, Jorg

As I said earlier, you will find a lot of social programs in Scandinavia... and if the folks "over there" like what those programs offer... good for them. I feel we can agree that the establishment of social programs in Scandinavia does not mean Scandinavians have embraced socialism.

I have heard it described this way... You cannot attach the label of socialism to Scandinavia but they sure soak Scandinavian taxpayers.

Which brings us back to the very high taxes in Scandinavia... I'm sorry but I find it difficult to accept that Scandinavians are happy with their high taxes and that no one "over there" complains about the high tax-to-GDP ratios.

Which brings us back to the "65% tax rate” issue, and the question that has not been answered...

When you look at Scandinavian taxes and see income taxes as high as 55%, sales taxes as high as 25%, and payroll taxes as high as another 10%... if the overall Scandinavian tax rate is not 65%... then what is it? And... how would the overall tax rate in Scandinavia compare to the tax rate in the US?

Ray: OK, I’ll give it another try. First of all, there is no applicable “overall tax rate”. Income taxes are progressive, meaning that they increase by income level, but the higher tax rate only applies to income over a certain level, not to the total income. Higher tax rates only affect the very high incomes, but even high income earners do not pay a higher total rate than here. Taxes are public, so every year the highest income earners are listed in the local papers, where you rarely see anyone with higher total income tax than some 40%. After various deductibles, like here, the national tax rate is 22% up to $200k and 38.2% >$1 million

Exchange tax, or VAT, is higher than here, but cannot be added to income tax rate for obvious reasons. This added sales tax becomes a part of the cost of items purchased, like here, but doesn’t apply to food and most necessities, and of course depends upon individual purchasing pattern. No one spends all the income for VAT-affected items!

Then, of course, we have free universal health care and free school tuition, while certain higher studies, like medicine, dentistry, pharmaceutical, and engineering, are what we call “closed”, meaning that you have to compete on your gymnasium grades to be accepted, - no matter how much parents make! How math challenged does someone have to be to add income tax and VAT to come up with 65%?

Hello, Jorg… sorry I didn’t get back to you earlier but I’ve been out taking care of errands.

Ed Kahl must be chuckling while sipping his afternoon coffee...

Jorg, I get it. You reject the term “overall tax rate” apparently because analysts comparing tax rates for different countries don’t use that exact term. However, comparisons using tax-to-GDP ratios for different countries can give us an idea about overall tax rates as those comparisons include income, VAT (sales), social security (payroll), and property taxes. The tax-to-GDP ratios are significantly higher in Scandinavian countries when compared to the US.

You wrote, “Higher tax rates only affect the very high incomes, but even high income earners do not pay a higher total rate than here.” I disagree. Here’s why… average salary in Sweden is about $60,000 (USD), and the average salary here is about $54,000 (USD). Sweden’s top personal income tax rate of 53% is applied to earners making more than 1.5 times the average salary in Sweden. That means if you make more than $90,000 in Sweden, you are taxed at the highest rate. In the US, persons making 9 times the average will be charged the top personal income tax rate of 37%. So, when an American’s earnings top $486,000, he or she will be assessed the top income tax rate. Thus, higher tax rates affect a lot of (upper) middle-class Scandinavian folks as well as high income earners.

As for the claim that high income earning Scandinavians pay a lower rate in taxes compared to US citizens… look at the example above… 53% > 37%. The higher rates are in Scandinavia. Yes, I agree there are quite a number of variables when you try to compare the whole of Scandinavia to the US, but overall… there’s that word again… Scandinavians pay a lot more in taxes.

Ray: While my numbers mainly refer to Norway, I don’t think your comment helped the understanding of the difference between average tax rate and the bracket rates. There is no income tax up to a certain income level. Between that level and the next higher bracket, a certain tax rate applies, usually about 22%, but only for the part of the income between those two brackets. Between that income level and the next bracket, a slightly higher tax rate applies, but only for the part of the income between those two brackets. For the highest bracket, the highest tax rate applies, but only for the part of the income over that bracket, not for the income below that level. Hope that helps.

But why this strange obsession with the small Scandinavian countries? That’s hard to understand.

Jorg...

As I said, there are a lot of variables to consider when comparing tax rates, but when you compare taxes paid by everyday Scandinavians to taxes paid by everyday Americans... Scandinavians pay significantly more. How else could those countries provide all the "free" stuff you mentioned earlier today?

You asked about the strange obsession with smaller Scandinavian countries... ahem... you introduced Scandinavia into the conversation when you wrote yesterday morning, "... socialized capitalism as practiced in the Scandinavian countries, seem [sic] to work quite well for everybody."

BTW... I won't tell any Swedes you think they come from a small Scandinavian country.