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Most Danish voters oppose government plans to cut the top rate of income tax

bloomberg.com

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Re: Most Danish voters oppose government plans to cut the top rate of income tax

#151
post #90

Earlier quoted context omitted.

Sweden is #8 in terms of total tax wedge in the OECD. Norway is the 18th highest and just barely above the OECD average, compared to e.g. US at #25, Belgium at #1, Germany #2. Sweden is high, but still 6-8 percentage points below Germany, Italy, Austria, Hungary, France, and about twice that beow Belgium, which is an extreme outlier.

...but the structure of the tax wedge is quite different. In Denmark, almost all of it comes from income tax while in other countries it's usually 40% paid by the employer...

That's a good point. I'm generally opposed to including payroll taxes when talking about tax for that reason, because what people tend to compare when talking about income, tends to be their contracted salary excluding anything paid by employers. If you then include payroll taxes when comparing tax, you should compared it income + payroll taxes as your "actual" gross income.

But when you discuss with people who want to quote high tax rates, they almost always include everything in order to try to get shockingly high numbers, which is why I now tend to use the OECD numbers because they too favour that, and their numbers still tend to come out far below what certain people like to think they pay (I was shocked at first to find out that there is a huge number of people out there that have no idea what their actual tax rates are, but just blindly go by the marginal rates and assume that's what they're paying...)

But of course that comparison also goes the other way if you try to compare against countries where the relative split is wildly different.

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#152
post #84

Earlier quoted context omitted.

In Norway, the tax authority will send you a summary telling you what you owe or what they owe, and if you don't have corrections you don't need to do anything. (all bank accounts in Norway are keyed to a national ID number assigned at birth, and the banks report all interest income and loss (as interest on debt can be subtracted from your taxable income), and your employer(s) reports your income) There are some exce…

I'm not sure why they don't do that in New Zealand, the numbers are all provided, you just have to type them in. Perhaps it's a privacy thing? One of the advantages is that you can check if you're owing money before filing a Personal Tax Summary (they have a tool to check if you'd owe money or be paid money), and you don't have to file for one if you owe money, and as long as it's less than a certain amount ($500?) t…

My guess is it's just a matter of slowly changing policy. In Norway it went paper return => online return => online summary that you had to confirm => summary that you only needed to act on if you had corrections. That process took many years, I'm assuming as they wanted to iron out any issues with one step before taking the next.

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#153
post #125
post #83

Earlier quoted context omitted.

> It is around 50% No, it isn't. The total tax wedge under OECD definitions, which includes employer payroll taxes, the Danish income tax burden is on average around 38%. Excluding employers payroll taxes it's around 36%. For comparison, the "all in" number for the US is around 31%. The OECD average is 36%. The only OECD country that crosses the 50% mark is Belgium, which consistently is one of the highest tax countr…

If you fully load the per-capita US healthcare costs to that 31% and make it a closer comparison based on services received, I would guess the US percentage will go much higher than the Danish tax burden.

Absolutely. The difference for most Europen countries vs. the US, other than the top 5-6, is low enough to get eaten up by healthcare and similar very quickly.

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#154
post #83

Earlier quoted context omitted.

> It is around 50% No, it isn't. The total tax wedge under OECD definitions, which includes employer payroll taxes, the Danish income tax burden is on average around 38%. Excluding employers payroll taxes it's around 36%. For comparison, the "all in" number for the US is around 31%. The OECD average is 36%. The only OECD country that crosses the 50% mark is Belgium, which consistently is one of the highest tax countr…

I think low tax wedge in Denmark is caused by relatively low cost of an employee to the employer (who pays relatively small amounts over their salary) vs in other Western countries.

Yes, it's more transparent. It does also mean, though, that it feels like you're taxed more, because e.g. in the UK, most people aren't aware that their employer pays 12.8% or whatever the current rate is, in employers national insurance contributions.

This does complicate cross-border comparisons in that if you're including payroll taxes when talking about the tax, you also need to add them to salaries to get comparable numbers.

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#155
post #134
post #83

Earlier quoted context omitted.

> It is around 50% No, it isn't. The total tax wedge under OECD definitions, which includes employer payroll taxes, the Danish income tax burden is on average around 38%. Excluding employers payroll taxes it's around 36%. For comparison, the "all in" number for the US is around 31%. The OECD average is 36%. The only OECD country that crosses the 50% mark is Belgium, which consistently is one of the highest tax countr…

Why wouldn't you take into account the VAT which taxes all consumption?

It's a good question. It's pretty arbitrary, to be honest - with all of these things, despite the reasons I set out below - it's about what you want to highlight, and for what you want to use the data.

But there are two specific main arguments for presenting the data this way:

All prices in most countries that has VAT or GST or equivalent tends to be given tax inclusive. E.g. in most of Europe, a consumer can legally demand to pay the stated price if a price is advertised directed at consumers even if it is not specified that the price was meant to be VAT exclusive, or in some countries even if it is explicitly stated that the price is VAT exclusive.

So the first answer: Because when we otherwise compare price levels we compare the sticker price. If we otherwise treat the VAT separate from the goods, then that makes no sense. It's part of the complexity of trying to compare cost-of-living.

The other reason is that while the tax wedge on income is relatively stable across large parts of the population, VAT varies massively from person to person on the same income. A tax wedge excluding VAT tells us a lot about what proportion large swathes of the population will be taxed, and can't avoid paying.

But for VAT, a large proportion of it comes down to personal consumption choices.

To illustrate, let's assume 30% income tax (and lets forget about payroll taxes). This person has 70% left. Now, if I were to pay 10 percentage points of the gross to rent somewhere small, I have 60% left to spend. If I'm not bothered about a pension (stupid, yes), most of that might get towards VAT'able consumption (though some will e.g. be VAT-exempt goods like basic food stuffs). At a 25% VAT rate, that means 15% of my gross salary goes to VAT. If, on the other hand I earn exactly the same, but live in an expensive place that takes 30% of my gross salary, and I pay 10% of my gross towards pensions, I now have only 30% left to spend, and if make the same assumptions about what I buy I'd end up paying 7.5% of my gross in VAT, all through my own choices.

In reality, in the latter case you'd pay even less, as a larger proportion of the remaining cash would go towards exempt/zero-rated products like food (your total tax wedge would also be far lower, as in most countries those pension contributions would result in reduced tax).

1%-5% of the gross towards VAT is relatively typical even in countries with 25% VAT headline VAT rates. For someone with a low salary in a low VAT country it may very well end up being well below 1% (because low salary tends to mean a larger proportion goes to housing and food, leaving less for consumption affected by VAT)

So the second answer is that the VAT part is to a large extend under individual control, and so varies within the same income tax bracket, and so confuses the issue or a lot of the things you'd use the total tax wedge to get an indication of.

That doesn't mean that totals including VAT/GST or equivalent would be wrong/bad/misleading any more than excluding them is. They just show different things, and you need to be aware of different things when trying to use them in comparisons.

A lot of reports on taxation will include a variety of different breakdowns like this to give a fuller picture.

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#156
post #23

Earlier quoted context omitted.

Had the same feeling about Australia vs France. In Australia I'd pay $120 for a tax agent (~1% of my income tax), it would be over and I'd be happy about it. In France I feel like I'm being chased, because it's such a socialist country: I earn €2000 per month after tax, I feel like I'm being told by the tax administration that I'm a thieve because I'm rich, even though they're the ones who attempted to double-tax me…

This is very disingenuous, it would be more transparent if you led with the fact you've got a (very) complicated tax situation. VAT is also not your contribution, it's a client's, you collect it because you can offset it. So that 63% figure is pure and utter nonsense.

You can't just compare the after-net salary income tax when you compare countries. How would you then compare a country with high income tax but low VAT? You need to take the whole cycle.

As a software programmer, I receive money from people I sell the software to, pay VAT, pay social charges, pay income tax and I'm left with 37% of the money given by the clients, even though I have a very lean company (no office, no advertising costs in this calculation, no cloud costs, etc). That makes 63% of my revenue taken by the government.

What did you mean with "pure and utter nonsense", apart from not wanting to acknowledge the tax pressure in France because you've never created a company and, therefore, don't know what you are talking about?

How is creating a company "disinginuous because your tax situation is complicated"? What about we make it simple so we can focus on delivering a product for the customers (like, doing our job)?

As said, I don't even mind the 63%, even though it's impoverishing everyone. I mind the paperwork.

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#157
post #155
post #134

Earlier quoted context omitted.

Why wouldn't you take into account the VAT which taxes all consumption?

It's a good question. It's pretty arbitrary, to be honest - with all of these things, despite the reasons I set out below - it's about what you want to highlight, and for what you want to use the data. But there are two specific main arguments for presenting the data this way: All prices in most countries that has VAT or GST or equivalent tends to be given tax inclusive. E.g. in most of Europe, a consumer can legally…

Thanks for your thorough explanations, it was an interesting read.

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#158
post #33

Earlier quoted context omitted.

> One other point: what suits the Danes wouldn't necessarily suit the Brits or others. National characteristics are certainly different even we try sometimes to ignore this probably because it's tacitly interpreted as some hint of mild racism. Quite right... see https://en.wikipedia.org/wiki/Law_of_Jante

Or not: https://en.wikipedia.org/wiki/Tall_poppy_syndrome

Just because something is called a syndrome doesn't mean it permeats a culture in which it was identified

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#159
post #149

Earlier quoted context omitted.

This would suggest that 70% of danish people would welcome tax and public sector cut downs, which is a false assumption.

To be fair, we should probably also take into account the a much higher percentage of the population have a family member or a close friend that works in the public sector.

Considering that "only" 30% work in the public sector, the will even have more family members or close friends which do NOT work in the public sector.

But I don't get your logic anyway. Because a friend of yours work for BMW you wouldn't buy a Tesla?

Re: Most Danish voters oppose government plans to cut the top rate of income tax

#160
post #35

I'm not in Denmark but in a very similar European country. I don't want the high taxes. The current taxes and mandatory payments feel unfair. The generations before us worked during the greatest economic boom in history, were mostly employed in safe and high paying government jobs (still are), bought houses before their values tripled, and are now receiving monthly pension payments that are almost twice what most you…

> In the end, I get around 1.5k euro out of the 7k I cost my company (employers also have to pay additional social and pension payments). Is your pension program a personal pension program or is it like Social Security taxes like in America? Also, one of the biggest reason why there is no real right wing in Europe because people who might think that way (low taxes, personal responsibility) all move to America (so sho…

Are you serious?

Most governments in Europe right now are right-leaning.

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