Steve Forbes doesn’t get it – or why having the world’s highest taxes is a good thing

Taxes

Steve Forbes was in Denmark this week on a European tour, meeting with political and business leaders. His main message was that while Denmark has arguably the strongest economy in Europe right now, the high danish taxes are limiting our economic growth.

And danish taxes are very high: The highest tax bracket kicks in after only 40.000$ earned, and you pay 60% taxes on everything you earn over that. This money is used to finance a very high level of public services, including free health care, schools and universities for everybody.

The high tax level also finances what is called the danish flex-security model: In Denmark it’s relatively easy to fire employess (flexibility) but unemployed danes enjoy great benefits (security). Compare this to Sweden where it’s very, very difficult to lay employees off because the unions have enormous influence or to the US where unemployment benefits are not as generous.

Forbes argues that the economic success Denmark is currently enjoying comes in spite of the high tax levels, and said “just imagine what you could achieve with lower taxes.” His argument goes something like this:

  1. Because taxes are so high, working more doesn’t pay much, therefore people work less
  2. If taxes were lower (say 40% in the top bracket instead of 60%) people would work more
  3. People would also make more money, meaning the state would take in the same amount of money in taxes
  4. People working harder would result in increased economic growth

I think he’s wrong, wrong, wrong, and I’ll tell you why!

It follows from Forbes’ argument that danish employees and businesses must be supernaturally talented, able to create great results even when they’re shackled by the world’s highest taxes. And that consequently lowering those taxes would turn Denmark into a true monster of economic growth.

While this view is certainly flattering, it’s probably more reasonable to assume, that danish businesses and employees are on par with those found in other countries, and that the economy is doing so well not in spite of but because of those high danish taxes.

In fact, Forbes’ argument is representative of an old-skool view of work and economy that I feel sorely tempted to add to my list of vampire ideas. Here’s my rebuttal to each step:

1: Because taxes are so high, working more doesn’t pay much, therefore people work less

When taxes are very high, working simply for the pay-check is a bad bet. But let me tell you, danes still work their butt off when they enjoy their jobs. People working long hours only for the money are not good to have around. People who love their jobs are much more productive.

2: If taxes were lower people would work more

It’s true, people would work more. But would they achieve more? This story argues that it’s a little more complicated than that, and that more time at work does not necessarily mean that more work is being done.

Also, when people work too hard, they become less happy at work. Being less happy at work means that you’re less creative and more resistant to change. And if there’s one thing businesses need today it’s innovation and change-ability.

3: People would also make more money, meaning the state would take in the same amount of money in taxes

However, when people work more they also become more prone to stress, disease and depression, which increases public health expenses and costs businesses time and money.

4: People working harder would result in increased economic growth

When people work more, productivity plummets. You may have GDP growth in terms of people working more – but are they actually producing more? Here’s an alternate view.

Conclusion: It’s about the happiness, stupid!

The danish model, rather than hindering economic growth is more likely to be the source of it, for one simple reason: It promotes happiness at work. Working only for the pay doesn’t pay and unemployment benefits are pretty good, so why should you stick with a job you don’t like. And let me say this again: People are very rarely productive in jobs they don’t like. This frees employees to find a different job they DO like – and no-one is more productive than an employee who truly loves her job.

This also combines with a long-standing danish tradition of focusing on happiness at work as well as a modern, egalitarian leadership style to make the danes the happiest people at work according to a recent study. And in my opinion, that is the most imporant factor.

And on a more fundamental level: Why is economic growth a goal in itself? Why should this one parameter be a nation’s most important success factor?

British economist Richard Layard in his book Happiness, lessons from a new science argues that this approach is wrong and that it would be better to govern a nation in a way that maximizes its people’s happiness rather than GDP growth.

Layard’s book also clearly shows that the more people work (beyond a certain point), the less happy they are. Working more hours and earning more money makes people less happy – good health and spending time with friends and family makes people more happy.

This also consistently informs negotiations between unions and employees in Denmark. The consistent trend these last 10-15 years has been that employees have held out for more vacation time rather then raises.

Forbes’ plan would probably make more people work more. And they would make more money. They would also be less happy and more prone to stress, heart disease and depression. Which would cost society a lot of money.

Whereas people working sensible hours (as many Danes are today) tend to be happy, creative and innovative. Exactly the qualities a nation needs to succeed.

45 thoughts on “Steve Forbes doesn’t get it – or why having the world’s highest taxes is a good thing”

  1. You are saying that the Prime Minister of Denmark knows what is best for everybody… well, I can tell you that is impossible, because I am sure he does not know what is best for me (although he may think he knows). Why not let people choose what to do with their paycheck? Freedom to do with my earnings what I want to do is happiness too (I can make mistakes sometimes, but it is really good when I get it right because of my own decisons). And the freedom I am talking about is the freedom to do what I want without depending on anyone, even the state. I would never be really happy knowing that someone (the state, for example) pays my bills every month…

  2. cityzenjane, yes, I live in a ‘social-democratic’ country called Brazil. Maybe it is no known, but ‘social-democratic’ parties owns the political scene since 1994 here, and the only thing I see is that they have too much power (that they get from the ever increasing tax) and are doing things completely wrong (well, my view, but everybody here knows that this is a huge problem)

  3. I, for one, find this an amazing viewpoint and I have added Denmark to the places I might live when I finish getting my PhD. Your analysis seems dead on.

    To Alvaro, I have seen this sort of fear of government buisnesses before, mainly in the US where it is well founded. There is a saying in the US: “Good enough for government.” which is to imply that the work done is horrible but passable. This comes from the idea that it is extremely difficult to lay off someone working in the government (due to unions, descriminiation lawsuits, etc) and the people who make bad decisions tend to stick around anyway. In an environment like that I would hate to think of anyone taking control of things I need like health insurance.

    Now think for a minute of a world where people could be held accountable. Not only that, but the people who are making these decisions are doing it because they enjoy helping people and because they enjoy solving problems. I get visions of blue skies and birds singing just thinking about it.

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  5. Well, I live in the US, and we’ve now had 25 years of this supply-side nonsense. It really makes me angry to see this still being peddled, by Steve Forbes of all people (who ran for president here hawking a highly regressive flat tax-those who evaluated his plans were quite clear that his numbers didn’t add up). I’ve seen him speak, I don’t think he’s terribly bright, it’s just “cut taxes and manna will fall from the heavens”.
    Above and apart from the greater happiness argument (which I like), the supply-side argument fails in so many logical ways that its continued existance can only be explained as a ruse to get masses of people behind a regressive tax repeal. After 25 years of this crap our national deficit has grown something like 8-fold from the size it had been from the founding of our country until Saint Reagan got into office. A few basic reasons
    -Nobody really wanted to cut spending, so they just cut taxes and borrowed the difference. Some spending was cut for the poor, enough to cause misery but not enough to put a dent in the deficit
    -To the extent that the federal gov’t had less money to give to the states, the states had to raise taxes to compensate, offsetting any cut to any but the wealthiest. Especially under Bush, the states laid many people off to economize. Unemployed people do not cause the economy to grow as Mr Forbes wishes.
    -Regressive tax cuts do not help the economy. A dollar tax cut in the hands of a poorer person will be spent, in the hands of a wealthier person it will less likely be. This means that the governments “expense” (or rather the income it forgoes due to the tax cut) is less likely to be offset by economic growth the more regressive the tax cut becomes. Note that the economic swill that Forbes pushed when he ran for president was among the most regressive systems proposed.
    I still can’t figure out how people buy this rubbish. When Reagan first began peddling this stuff in 1980, people openly called it nonsense. Now it seems to be respected economic theory. Repeat something often enough, …

  6. Alvaro: Nah, I don’t really think the danish prime minister knows what’s good for Brazil… Sometimes I doubt if he knows what’s good for Denmark :o)

    But your comment goes straight to the core of the matter: Freedom to choose! This is the central dilemma at the core of all government: How much should the state decide for people, how much do we let them decide. And I agree: Letting people choose for themselves is a good thing.

    I don’t claim to have resolved this paradox, but I think that Denmark has found a different and more positive way to economic growth than the one espoused by traditional economists like Steve Forbes.

    Nik: Thank you for the kind words. And please DO move here, you’ll be welcome :o)

  7. Steve: Your comment reminded me of Fermi who had three classifications for bad thinking: Wrong, completely wrong and “Not even wrong”, the last one being reserved for ideas that are extremely badly thought out.

    The whole supply-side approach is “not even wrong” in my opinion.

  8. Steve,

    so let us increase tax and then the government could hire everyone.

    The fact that nobody wants to cut spending is just an excuse. Do not let them borrow anything, and work with what they got, like every worker does with his or her income.

    Do you know what free will is? Everyone decides what to do with what they have got… I do not want to let someone that I do not know decide what is best for me…

    well, your comments… I call it: nonsense. And more: Repeat something often enough,

  9. Hrm this is the first time I have ever really though of something like this, so I guess “enough” is just once…neat!

    As for the “I know best for myself” is complete bull. Tell me Alvaro, when was the last time you went to the doctor, or the dentist, or tested a new medicine, or built a car from scratch, or took water from a stream, or made a new recepie etc. All of these things are you allowing someone else to tell you what is best for you, and it is perfectly fine because in these cases other people DO know better than you. If you spent your entire life learning about all the details of modern medicine, and car mechanics and safety, water treatment, and cooking, then yeah, you might be the first to know what is best for you, but you would also have wasted 40 years of your life (unless you WANT to become a medical doctor mechanic water treatment facility manager chef).

    Goverment, in theory, consults hundreds of experts in every field that the decisions they are making involve. Sure, the Prime Minister does not know everything (or maybe not even anything) about economics, but you can sure bet that he has consulted several experts who have made it their life to understand those issues. And those experts probably have no idea how to implement their ideas, so more experts are consulted, etc, etc.

    None of this takes away from free will. You have the right to vote for a completely different person in office (and you actually also have the right to RUN for office if you really don’t agree with things). You have the right to move to a different country. You have the right to protest. And yes, you have the right to complain…but really…what is that going to do? The thing that annoys me MOST with politics is people who complain but do not do anything.

  10. Nik,

    well, I am in the process to move to another country, because I cannot see any further development here. Yes, I try to do my best, to pay the high tax that is on my shoulder and do not get anything back. I cannot stand anymore.

    OK, but I want to go to different doctors and decide which one is best for me. I want to choose the recepie, and not someone at a office do that… And in the end, they make decisions that end up not being the best for everyone, but what they think is best… that’s a huge difference…

    my question is: why create such a complex machine that runs everything when we can have simples ones that does the job better? Divide and conquer…

  11. Alvaro,
    A few things-
    The gov’t does not decide what doctor you go to, that’s probably your private insurance or HMO. It’s actually a single payer system that would take private health corporations out of medical decisions.
    The reason you can’t have a simple system to run everything (i.e. why is the “invisible hand” insufficient in itself) is because we live in a complex society and are interdependant. The libertarian ideal of “a man in his cabin with no gummit interference” is as fake as Ozzie and Harriet. Look up the Tragedy of the Commons.

  12. Brazil — doesn’t work well — but it sounds like Denmark does… in the US 40 million people have NO health insurance. They clog up the emergency rooms, the cannot get preventative care, they spread disease like TB in condensed urban areas through no fault of their own….

    Does Denmark have these issues?

    Yes the US has the ‘best’ medical care — IF you can afford it — very few can.
    Medical problems are the #1 cause of bankruptcy in the US and that’s WITH health insurance…

    Anyway… this perhaps is not the forum for the old communitarian vs. individualist debate…

    But one thing. When the US governement stops socializing corporate risk – talk to me about freedom of choice. Because we have an extreme deficit, China hold the IOUs –and I had NO SAY in running up that bill.

  13. I think Alvaro and many others who repeat similar rhetoric are victims of one of the worst diseases of the 20th and 21th centuries: The Idiocy of the Idealogue. It’s something shared by many religious cults. It’s where rational thought and attention to the real issues and facts gets replaced by a pie-in-the-sky-one-solution-for-everybody attitude. Pick your fanatic ideal such as “Capitalism (or Facism or Socialism or Communism) is Good” or “Free Trade” or “No Free Trade” or “No Taxes” etc, completely ignore any other way to look at the issue or even what those issues *mean*, and dismiss any factual realities about the consequences of those beliefs.

    Alvaro says “it’s my money and I should be able to choose what to do with it”. Well, at a critical level it’s NOT his money. The money he made is intimately tied to the social environment he lives in – the streets to get to work, the availability of health care and the quality of education which results in a more effective population to help him earn that money. Society decides how best to organize itself, and if circulating that money in ways Alvaro doesn’t care about then he can find another society he likes better. Maybe Russia where people who have money are even better at keeping all of it then they are even in the US.

    Some influential people have discovered that if they promote that rhetoric, less-intelligent types will swallow it whole, repeat it and and vote for its policies, and the original influential types will get richer – and more able to promote the Rhetoric of the Idealogue. I may be wrong, but I don’t count Alvaro with “influential” group.

  14. Stefan,
    I see what you mean about ideology, I suppose the modern republican party looks to appeal to people to whom a black/white understanding of life is more comfortable. I’d think that psychologically, the need for clear right and wrong all the time is closer to a paranoid personality, closer to the need to control and illegitimize difference
    But there’s something more nasty in libertarianism, I think, in that the deceptive rhetoric that leads all it’s believers to see themselves as modern day Davy Crocketts fighting off the evil encroachment of Liberal Government elites contains within it a kind of “I got mine, piss off” kind of ideal, maybe the ultimate expression of the dark side of American individualism taken to a malignant extreme.
    I think it’s no accident that modern american conservatism and Reagan both got their starts in the California Suburbs, the suburbs seem to me to be where people moved to basically not have to live among people different from themselves, “Just give me my 1/4 acre and the hell with everyone else”.

  15. Freedom of Choice – one aspect that seems missing in this debate is around the level of competence of who gets to choose where my money is spent. I think there may be a middle ground in all of this. I live in Canada, and in the most socialist province in the country (the place where tax supported medical care was invented). I work for a government owned and operated monopoly utility and am occasionally uncomfortable with the level of “expertise” that is inherent among the people who are making all these major decisions for the population. We sometimes think that “the government” is full of perfectly altruistic people who are never selfish or short sighted. So we willingly give them all this money and ask them to make major decisions on our behalf. In a jurisdiction like ours, personally, I have very little faith in the average civil-servant bureaucrat to even know as much as many other individual citizens and business people. I am more inclined to say I’d rather have less taxation and make my personal decisions on where my money is spent. If I want art and culture, then I should be willing to invest my money into that. If I want sport and entertainment, I should be willing to invest my money into that. I know this will rub many others the wrong way, but many things that taxes are collected and spent on should be user-pay. I agree that there are many things that are definitely in the best interests of society and our money should support, but there are many other gray areas to which my money goes that I disagree with. I’d rather have lower taxes so I can spend my money on the things that I believe are most important. I don’t have a lot of faith in the people in government to make the best decisions. Unfortunately, they are driven by their party philosophies and personal needs to get re-elected.

  16. I completely agree with you, Garry.

    Stefan and Steve: “blame them on what you have done. Call them what you are”. Lenin.

  17. Oh, for god’s sake already. Yes the government f*cks up. So what?The choice is not the false choice of whether the government spends your money or you spend it. The question is whether you believe you live in a society where you acknowledge that some part of your energy/effort/money must go towards maintaining the common good.
    A few obvious points:
    -The government seems to be far more incompetant when staffed by people who believe that government is incompetant and an unfair burden. Exhibit A here is of course FEMA’s performance in New Orleans, FEMA having been staffed by political hacks by the Bush administration. At the time it was universally commented that FEMA was competant and usefull under Bill Clinton, who did believe in government.
    -Many things simply can’t be done properly by private enterprise. Health care is a good example here, for many reasons too often repeated to go into.
    -Suppose you get to spend “your” money. How much do you want to bet that you’ll buy the new large-screen TV before putting money into the water treatment plant? Which one do you think someone will die without?

  18. People: I really enjoy hosting this discussion. It’s not at all what I had in mind when I wrote the original post, but it’s great stuff.

    You may not know that my other major project (apart from making people happy at work) is rethinking the way we do democracy. To transform politics from a game for the elite few to a fun activity that allows many more people to actively participate and make a positive difference. I’ve written about it here:
    https://positivesharing.com/2006/03/take-back-politics

    Discussions like the one going on here are the foundation of this movement. And they will work best if we follow 2 simple rules:
    1) Be nice
    2) Don’t seek to convince others, seek to understand them and be understood

    We don’t need to reach concensus, we just need to have a passionate, open, honest discussion where everybody has contributed their knowledge, wisdom and ideas.

    The whole issue of big vs. small government (or no government) is old and way too complex for us to resolve here anyway. What we can do is get to understand each others viewpoints.

    In my opinion the whole issue goes one step deeper: The problem is partly that we view government or the state as something separate from ourselves. It shouldn’t be. Louis XIV (I think) said “L’

  19. I was amused by Garry’s post – the implication is that I’m for “Big Government” and he’s for Something Else. Frankly, I’m NOT for “Big Government”, and I don’t think there’s a single person in the world who thinks Big Government is a worthy goal in itself. It’s become this straw/bogey man to help avoid honest discussion, and means nothing in itself.

    I totally agree that incompentence is a bad thing, but it’s the system we have – especially in the past few years – and right now our only option is to try to make it better. Simply trying to sink it is ridiculous – just look at what the Bush Administration has done following that course; vastly increasing the size of government with the purpose of doing far less for the population as a whole. Does “less government” make you richer? Certainly in this case it absolutely does not. You can’t feed your kids rhetoric for dinner.

    If I had a choice I’d like a tightly effective and well-organized government that does as much as possible with as little intrusion and oversight as possible. I’m sure Garry would agree – right? The problem isn’t what we want, the problem is how we get there.

    Saying “It’s my money and I can do what I want with it” is nice rhetoric but it completely ignores the real foundations of wealth – even one’s own – and the function of money in a society. It’s a nice bit of rhetoric that unthinking people repeat over and over insteading of considering what it means. And it sets up this artificial dichotomy, where someone who doesn’t agree must be trying to take “your” money away from you.

    BTW, when I bring up the importance of Society I’m NOT claiming therefore that Society rules over everybody’s actions and choice goes away. All I’m saying is that if you live in any social group you have to make choices – rules – that help the individual AND the group function best. Why not make the best choices possible?

    Alvaro – I have NO idea what the quote means. Can you explain please?

    Stefan

  20. I don’t think I suggested anywhere that I was calling for the “sinking” of government. In fact, I think I actually said there are “many things that are definitely in the best interest of society and our money should be used to support”. I’m really asking for wisdom in government. And when there appears to be a serious lack of wisdom, I’d rather not have governments having more control of my money. I’d rather have less.

    Just because your Bush administration has been a failure, doesn’t mean the concept of smaller government is a bad idea (it worked quite effectively for many many years). From the outside, the current American government seems to have other things on its agenda than just small government. One could just as effectively argue that the Bush Administration proves that Texans make lousy governments, or anyone who has had business in oil make lousy governments, or anyone who knows Saudi Arabians make lousy government, or anyone associated with baseball teams make lousy governments. The Bush government’s actions (as a single point of reference) don’t necessarily prove any of those theories.

    Stefan, we certainly do agree that a tightly effective and well-organized government that does as much as possible with as little intrusion and oversight as possible is a preference. Of course, like most things in life, there is a balance to be found in all of this. And where that balance is found, if ultimately the question.

    When I said I believe that there are some things for which government bureaucrates should not be in charge, it isn’t a logical corollary that I don’t think there is a role for government or that I want all my money back to spend it as I like. While I understand that it’s a classic form of debate to restate your opponents statements at an extreme position and then try to debate the extreme instead of what he has actually said (politicians do this all the time), I didn’t realize we were in a debate or attempting to win an argument. As Alexander suggests, I thought this forum was a means to broaden and deepen our understanding of a very complex topic. It’s important to remember that a comment that asks for adjustment in something shouldn’t be taken to its most extreme interpretation.

    And pardon me if I make some invalid assumptions. If I have incorrectly assumed that many of these writers are Americans, when in fact they are not, I apologize. But it is incredibly amusing to me when Americans (who live in the one of the most free-enterprize based societies on earth) comment on the philosophical foundations of more socialistic societies. You have no idea what buffonery can happen when governments stick their fingers into things they should never be doing. A number of years ago our government (as I stated earlier, our government is the most socialist provincial government of a country that is naturally very socialistic) decided to take over the potato growing business. And as governments tend to do, instead of hiring experts who know that business, they appointed philosophically aligned people to run the business. It was a fiasco. The wasted millions it cost the taxpayers of this province! But that is where socialist tax dollars tend to go when there is a political philosophy in place that says that more government control is good. That is only one example. I could go on and on.

    (Perhaps at another time we could have a discussion about the impact of four year terms on the long term thinking of government – that also played a huge role)

    And Alexander, thanks for your suggestions about the ways in which this forum should be operated. We don’t need the vulgarity or the indirect insults (“unthinking people”) in an intelligent discussion. It’s also a classic political tactic to label people into generalized categories and then demonize them based on the label rather than what they actually said or did.

  21. Garry,
    You make me think there actually might be another side to this issue. Well spoken.
    Be aware of the context in which these remarks are made, however. Here in the US the private/public resources debate is a proxy for a whole host of other issues – it’s not really an option to talk about them in a pure, academic sense, as the arguments get misunderstood and misused.
    I have not had the (mis)fortune of witnessing the excesses of government from the left, and my suspicion is that that left/right division is too crude, and too general, to be something that can meaningfully be talked about outside of national politics – “left” probably means something very different here, and sadly at the moment it’s most closely associated with the idea that it might, occasionally, once in a while, be a kinda nice idea to look at a fact or two before making policy, instead of “going with your gut” (actual presidential quote). There’s actually a quasi-famous quote from a few years back, where a white-house staffer smugly dismissed the left as the “reality-based community”.
    In any case, I’d be, at the moment, pretty happy having discussions among policy wonks about left/right proposals on health-care reform, or what have you. Unfortunately at the moment “left” or “liberal” or whatever the label of the day is is at the moment a synonym for “anti-Bush”, and at the moment, for me, I just can’t see how a thinking person could be otherwise. I’d just can’t see it.
    You seem to be saying that you’re arguing about some of these issues in a larger context. I don’t exactly disagree with you, just saying that at the moment what’s going on with our government is so terribly wrong that we can’t have an objective discussion about political philosophy, at least not with those who don’t believe you have to live in the reality-based world. Don’t think that’s you, just too pissed to be objective.

  22. Steve,

    Unfortunately, I am not knowledgeable enough to be able to comment on the work of the Bush administration. We only get bits and pieces in our media. I could watch CNN or Fox News but generally don’t. My knowledge of American politics is probably more based on Jay Leno or Dave Letterman!!!

    I do agree with your assessment that the definition of “left” would vary based on where you sit on the continuum. Compared to most American situations, I’d say we are very left. Personally, I’d like to pull things farther to the right. If I said that in your context, it would be grossly misunderstood (based on your comments).

    And a thought: if I said “reality-based community” around here, they’d probably think I was talking about television programming.

    G.

  23. Steve,

    Well I certainly didn’t want or intend to “restate your opponents’ statements at an extreme position then try to debate the extreme instead of what he has actuallly said”. However, it seems it’s very easy to think that one has done this when the positions are (or even might be) only slightly different. Not to encourage rancor at all, but may I suggest that even your statement “it’s a classic form of… etc” is a probably unintentional attempt to do exactly that? I certainly didn’t think I was using your comments as an extreme straw man, and hope you won’t use mine that way either.

    I don’t know your exact beliefs or philosophies or life story, and nor do you know mine. So it would be impossible for me or any of us to make a perfectly tuned argument that doesn’t make some assumptions and generalizations. I’m certainly guilty of generalizing your comments, but I think that’s not a problem as long as any of us continue to listen to the other. Said another way, in the absence of a lot of information, comments will be taken as representing general principles, awaiting refinement.

    It’s like sharing a big pie: first you make big cuts, then smaller cuts, then slices, then mouthfulls. The first cuts are very generalized, the next more the outline of the issue (how the pie will be eaten), and finally to the detail of the mouthfuls. It’s only then that you REALLY know what the pie is like.

    (Please excuse the food analogy; I had some fantastic apple pie – my favorite – last night, with caramel and whipped cream on top, so I’ve still got pie on the mind!)

    Rather than framing this as a “your probable beliefs against mine”, I’ll just offer what I’d really like to see: I’d like to have a system/government/society where the core value is *pragmatism”. i.e., if taking over the potato industry doesn’t work then don’t do it. And if it DOES work then do it. If high taxes really do work, then do it in a way that is fair for everybody. If low taxes work then do that. The circumstances may change; in one state (I’m thinking U.S.) perhaps having the government take over the potate industry makes sense but in another it doesn’t. And I don’t mean that an elite cadre define “what works” and impose it on everybody else. I mean that disagreements are honestly included and help shape the outcome.

    This, of course, isn’t going to happen. Instead everything will be distilled into jargon and political positions and one-upmanship, reality-be-damned. It requires a level of complexity (as opposed to complicated) and honesty many people are not comfortable with.

    I have very little idea how to get there or even it makes any real sense at all. All I know is that I’m very tired of political jargon, and that includes the classic “it’s my money and I can do what I want with it”. I probably get unreasonable when I hear rhetorical jargon like that, and apologize if I go overboard in response. That particular one is especially exasperating for me because it seems so simple and reasonable but at the same time excludes any rational conversation. From what I’ve seen (yes, in the US), the people who quote it are being duped more than anything.

    Well, I’ve got to go now and make some money so I can do what I want with it…:)

    Stefan

  24. I was recently talking to a dear friend (my sensei, when I practiced kempo) and asked about why some countries seem to grow even if they were devastated (like Germany or Japan). His answer puzzled me at first, and then I realized the truth in his words:

    “The difference is the ability to identify, to think in the others, to feel united. People that has suffered as a country tend to think in the others, to talk to their neighbors and work side by side with them. We as a country lost that ability.”

    It is such a shock that what will make you succesful is to forget about your personal success. People in my country (citizens and governors alike) forgot this. I think in the US is the same, and many other countries. But this theory is not new… it even won a Nobel prize.

    And it seems to work, for what I’ve been reaeding (perhaps Alexander can clarify if it’s the case in Denmark). It’s a shame that we’ve become so egoists to even consider this. But there’s hope. I have hope.

  25. “a person who doesn’t listen to others, the person who would rather do things an inefficient way as long as it’s “my way,” is not being an “individualist”—he’s being closed minded”

  26. It’s fortuitous that these past two remarks have shown up in my email weeks after the original discussion, not incidentally after I’ve just returned from some intensive buddhist practice.
    I especially want to respond to Alvaro’s last post in the context of Jach’s here, as I think he (Alvaro) has got it all wrong.
    It’s not that there’s anything particularly and obviously wrong with his statment, it’s more, I think, that this sort of blanket pronouncement obscures more than it illuminates- Should a person always listen, even when he recognizes behavior that is close-minded and/or destructive? Should one always listen, even to destructive voices/behaior?A blanket open-mindedness is as much rampant individualism as its other extreme, an unwillingness to preclude anothers response even when that response is clearly erroneous or even dangerous. In reponse to the obvious “dangerous by whose standards” answer, I’d say dangerous or harmfull to themselves or the community.
    Do we respect the depressives right to commit suicide? The thief’s right to steal? An ignoramuses views on science?
    In the US we have scientific illerates making science and education policy. We have people who don’t respect or value community or environment making economic and environmental policy to serve themselves and their friends.
    Open-mindedness in the abstract is an absolute virtue. But open mindedness without consideration or evaluation is simply a willingness to become a victim to whoever has the loudest voice.

  27. Steve,

    You’re right. What you have defined is discernment.

    I liked your last sentence. As a society we have become victim to the loudest lobbyists.

    Here in Canada we have made a virtue out of “tolerance”, where nothing can be questioned nor rejected.

    Your assessment is absolutely true. Tolerance (or open-mindedness) without evaluation is folly.

    Discernment is applied wisdom.

    GT

  28. Hello Steve,

    I’m not sure to understand your answer. Maybe I’m wrong, but I thought Alvaro’s answer was not directed to me, since I didn’t try to side to anyone in this discussion… just trying to put a new idea in the table.

    I don’t agree with Alvaro’s attitude, since I think that the quote was intended as an attack instead of a new idea, but I do understand his point (of the previous posts), since in Latinamerica there are a lot of issues with the goverment’s “administration” policy (they steal people’s money, build a personal castle in some european country -no kidding here- and then leave).

    My point, to ble clear, is that it doesn’t matter if you give 60% or 30% or 0% of taxes. What makes a country grow is that people (including the goverment) care about people. Of course, if you’re willing to pay 60% of taxes, then you care about others because you know that money may be used to help unemployed people instead of your pocket. But that scheme wouldn’t apply to other countries, where people mistrust their goverment. Still, when you have people who only care for theirselves, you have people who don’t care about their environment (at all levels), underpaid workers (to be “profitable”), thievery, kidnapping, etc.

    I don’t want to go to the implications of it, but with it is clear to me that when people think only in their progress, there’s no real progress!

    A really silly example: People speed up because they are late (ignoring that all the others may be late too), then, one of those persons crashes, making a lot of persons really late! (not to mention that he might kill someone). If everybody speeds up, the probability of being late because of an accident increases dramatically, so everybody will get late most of the time.

    The Nobel prize I refer is Nash’s, by the way.

  29. Unfortunately, it seems inherent in human nature to care more for yourself than for others. There are more populations with unrest and poverty than not.

  30. You’ve got some good points. I’ve seen both sides of this living half my life in the U.S. and currently a few years in Sweden (I’m Swedish as well). The Danish and Swedish model are very similar and I also hate the fact that firing useless people in Sweden is so difficult. I like that employees have good basic protection at work but there must be some kind limits.

    Sooner or later contries like U.S will be forced to hike taxes to make changes to their healthcare system and be able to pay Social Security. I would rather pay less taxes since my income is extreme but I really appreciate that the whole country looks nice, is clean, works well, and that 99.999% of the population has a nice life with healthcare, education, childcare, and many other things paid for. It gives the country a good balance and a great place to raise a family.

    AD

  31. I have thoroghly enjoyed reading this discussion, for it made me think, and I like the feeling. The problem of having too much, too little, or too nasty of a government seems to be so complex and cumbersome that noone is capable to offer an easy and applicable solution to it. I am not sure that Danish society is doing well in general because their goverment is running things to a larger extent than elsewhere. I suspect that the reason Danes are doing so well is because they seem to be reasonable people in general. That’s the way I prefer to look at it. Reasonable would imply that your average Dane is the kind of person that would be willing to forfeit a certain amount of fruit of his/her labours so that a society in general can benefit (clean street, whatever). The problem with Republican leadership here in the states seems to lie in the fact that Republican leaders ( and plenty of Democratic ones) are extremely unreasonable in the amounts of benefit they want to secure for themselves personally and for their associates. Is this part of the overall human tendency to accumulate relentlessly and without limit? Who knows. But when I feed my dog meat, he will eat all of it, and the more I give, the more it would eat, then barf it all out once the stomach can extend no more, then eat again. I have to stop feeding for it to stop eating.

  32. It might be possible that reasonable societies are reasonable due to the people not the government?

    Unfortunately, governments do change the way their people think, even if it’s very slowly over time. We’ve seen that in Canada.

  33. Hey, on that note, why stop at 60% tax? If people love their jobs, they’d do it for only 10% of their income, right? Or maybe even 5%? Oh hell, why not tax them 100% of their income and then you will surely know that they love what they do!!! I mean, what is the limit? At what point would even “job lovers” stop and say “wait” that’s um, a bit much? Or would they even care frolicking in jobs they adore!

    I’d like your response to that. What level is enough? Should the happy working people actually work…for, well, 10% of their income?

  34. A few answers –
    Firstly, I don’t think anyone is happy working for 10%. But that’s a straw man argument, I think.Your argument seems based on a sense of resentment, an assertion that excessive tax is simply unfair. A literal answer would be an attempt to come up with a “fair” percentage.

    I think trying to come up with a specific percentage, eg. is answering the wrong question. The question should be, how much money do we need? What do we consider to be important, and how do we do it/pay for it? (understanding that some of it will surely be wasted, and the more that’s available the more that’s likely to be wasted).

    There are a number of comments above from people living under more socialist governments than the U.S, where their problem is excessive interference. I’d argue that in the U.S we have a different problem, which is a sustained political movement which pushes people towards denying their obligations to society as a whole, and to resent any form of taxation.

    You know what? 60% is probably too much (but see U.S. historical marginal tax rates). But this isn’t merely a question of you vs. the gov’t, which leads you down the road to the black-and-white question “how much are they taking from me“? Intertwined with that is the question of your part in the society. Is it good to have 10% rates if there are more homeless people on the streets? What if you knew that if you paid an extra 10% there’d be comprehensive health care, or better schools, not necessarily better schools for you or your kids, but for someone elses kids? Is that worth it? Is it worth 5%? Is it worth 10% if you know that the schools will get better but half of it will be wasted?

    For my part I’d rather pay for a healthier society, mindful of the waste in gov’t, but noticing that the politicians that complain the loudest about government taxation have lately been the ones wasting the most.

    Questions –
    What country are you writing from? I’m responding to your argument as if you’rein the U.S, as I am, reflexive, I know, but it does sound like common republican arguments.

    What tax rate are you paying now?

    Do you consider it to be fair? What rate would you consider to be fair?

  35. I moved to live in Denmark about a year and a half ago with my partner as the USA does not recognize same sex marriages (yes, I am gay, shock to the system) and they do recognize that here in Denmark (which I love, but the taxes are really excessive) and I pay 62% in income tax, plus 25% tax on all items I pay for at the store, this includes all food items – at the same 25% tax, plus a enforced TV tax which I don’t even own (but the govenment-run Radio station, wiht the governments’ blessing) has endorsed this forced tax of around 250 euro (1875 DKK)) per year. Don’t get me started on the car tax (highest taxes in the world on cars, which forces people to buy old, higher polluting cars).

    Basically I make more money now than ever before in my life, yet I take home less money than I did when I was working in the states years ago.

    I have the opportunity to get free health care, but I have to wait almost an eternity to get it.

    There are lots of homeless people here. Just take a walk down the main Stroget street in Copenhagen. you will see them.

    Who gets all the money? The old people (even if you never worked a day in yoru life, you get full retirement) and the unemployed.

    It is a vicious cycle – the population is getting older and therefore, the voting rolls are filled with the elderly – and the politicians keep making more and more promises to the seniors and the seniors only vote (it’s a human thing) where they see the money come in. Sadly, all the political ads you see on the streets (billboards) are pandering to the seniors.

    We just had a major riot about a month ago, where we couldn’t leave our house. I call them the “child riots” as these children forcibly, years ago, took over a building. The owner wanted it back and asked for help from the governement for her property back. the kids went wild, and this “conservative” governement (which in the states would be more liberal than even Ralph Naders wettest dream) didn’t do much until they finally had to call in police from all over the country and even Sweden to help stop the kids from destroying the street. And these “kids” are the most coddled and protected on earth. Some of the parents here couldn’t believe their children were goinng to jail for two weeks (“I mean, officer, he only tried to throw a small stone at the police officer).

    If you want some good stuff on the opposite of the nirvana which you speak (and which I am, ahem, living), maybe you should come and live here in copenhagen and work 8 months out of the year for the govenement. Have fun. I think I might just stop working and go on unemployment (if I, as a foreigner, am allowed). See, I am a foreginer here, with the right to work, but I can’t vote here, and the only way that would happen is if I give up my US citizenship (they don’t recognize dula citizenship), which is not going to happen . I would then have my free time and still get paid. Perfect world.

    I liked this article.

    http://haxor.dk/articles/dksucks.html

    BTW – I have voted Democratic in every election I have ever participated, before I moved to the good old world, as the Republican party scares the living crap out of me in the USA ( the religious ties and all that other crap).

    Why was Denmark rated the most happy? I think it is like a drug or an addiction and they are all sleep walking – Jim Jones got everyone to drink the coolaid and lots of people here just pay these enormous taxes without really questioning (“well, we have always paid this tax, etc”).

    Anyway, enough of my ranting. There is no perfect society, but before you go on a line of tilting the tax in favor of the “society” remember, from the outside it all looks great, but when you live here, when you live it, there is a difference.

  36. Alex, i couldn’t agree more with you.
    I can see Alvaro’s point of view, but i guess he is younger and without kids (could be i am wrong, but i thought the same when i was up to 25).
    I live in Macedonia. We have flat taxes, meaning you can earn $1bil/day (if you can o/c) and you’ll have to pay same percantage as someone who is earning $1/day – 10%. But, also your kids will go to the same miserable schools as those of poor ones, you’ll get the same service in the public hospitals… In one word, let’s not be smart and let’s see the results:

    1. Denmark: 5.5 mil people.
    Unimplyment rate – 3.5%
    GDP Growth: 1.7%
    “The Danish taxation system is progressive. This means that the last Danish krone you earn is taxed at a higher rate than the first krone earned” (Source http://www.skm.dk/foreign/english/taxindenmark2007)
    The result: GDP (PPP): $37,400, plus all the benefits for everyone Alex explained.

    2. Brasil: 190 mil people.
    Unimplyment rate – 10-11%
    GDP Growth: 4.9%
    Taxes: can’t find info.
    The result: GDP (PPP): $9,700 (https://www.cia.gov/library/publications/the-world-factbook/geos/br.html#Econ)

    3. Macedonia: 2.2 mil people.
    Unimplyment rate – 10-11%
    GDP Growth: 35%
    Taxes: 10% flat rate
    The result: GDP (PPP): $8,400

    Can you see that the lower the taxes the lower the GDP and emplyment rate?

    My point is this:
    I wont mid the government to take me 40-60% of my income if they provide good schools for my kids, good health care for me and my family and made conditions everyone arround i know to be employed.

    Think again Alvaro.

  37. Once again, why stop at 60% income tax? Why not go all the way. If people are so happy doing what they are doing, then they should do it for FREE. 100% tax on everyone now! You will be happier than ever knowing that your happy work just goes to the happiness of everyone. People who love to collect garbage at 4:00am every morning and people who police the wild streets of violent Norrebro in Copenhagen during the often violent clashes will love doing it for FREE! Isn’t freedom to live in a great socialist society GREAT! Let is roll on – 100% taxes for ALL! Yeay!

    Take the carrot away and many jobs will end up just, well, undone.

    Tell me Alex, why stop at 60%? I live in Denmark where they have 60% for most earners and for everyone there is a 25% VAT tax on EVERYTHING – and lets not forget the automobile taxes are some of the highest, if not THE highest on earth, thereby punishing the happy country people who don’t live in the transportation-dense cities. Or, should everyone live in the cities? Hmmm.

  38. James, have you ever heard of sustainable growth?
    I see your frustration from 60% tax, but tell me this:

    What you think who is happier? Dannish with 60% tax and 25% VAT or Macedonians with 10% tax and 18/5% VAT?

  39. Comparing Denmark and Macedonia is like comparing Japan to East Timor.

    You have to consider the historical parallels of time. Macedonia does not have the development and infrastructure that Denmark currently has partly due to the its recent emergence for the former Soviet Bloc (rememeber – it was only 20+ years ago that the Soviet grip fell (- and Tito in the former Yugoslavia which ruled Macedonia).

    Let’s ask all the people in “Little Denmark” – London, UK – who are voting with their feet and leaving their “happy” land that educated them. They are EU citizens and have voted (and are voting) to work ‘happier’ in the UK, where the tax on upper earners is much, much less. Sustainable? Not for long… http://www.iht.com/articles/2007/12/05/business/labor.php

  40. James, I know what you are saying, but putting former Yugoslavia and Soviet Union into same basket is completelly wrong. To illustrate you that look at Slovenia, we were under same roof.
    Yes, Slovenia was more developed then Macedonia, but GDP difference was not so big as now (325% atm). The reasons for that are many – from happenings in our surrounding to incompetence of our politicians, but the issue was the hight of taxes, right?
    I know it hurts a lot when the government’s takes more then you from what you’ve produced (if i am calculating good Dannish budget for 2007 is something between 50 and 65% of their GDP which is a damn lot). On the other hand Denmark is lowering taxes. It’s just a matter of time when they’ll drop the tax burdain under 50% of the GDP.
    If you ask me, country budget should be something between 25% and 35% of the GDP. That way you’ll repay your country for what it has invested in you (schools, roads, hospitals, police…) without the feeling of being robbed by your own country.

  41. Goran,

    Where have you read that Denmark is lowering taxes? Do you live in Denmark as I do? They have something called a “tax stop” which just means the goverment is not going to increase taxes, that’s all. There are no plans to lower taxes. If there is a socialist party elected (which they are gaining in popularity here, along with a Danish People’s Party which likes taxes to help the older generation) the “tax stop” will most likely be removed and taxes will be increased, not decreased.

    Once you give government money from taxes, the government becomes addicted to the money/income and rarely, if ever wants to “cut programs” which become the manna of politicians (“Look what I am doing for you…”) that have been newly created by this tax money which they would have to cut if the taxes were reduced. So, in Scandinavia, the tax burden will most likely continue to rise and the exodus to lower tax havens will continue. You can’t make people work 8 months out of 12 for the government without many thinking they are being cheated and exploited.

  42. Getting very late to this debate. I’m a great fan of Alexander’s blog, and find his insights of great value.

    This post, however, only shows that it’s possible to have high taxes and a strong economy, with happiness at work. But doesn’t show this is any better than lower taxes. Alexander only speculates that lower taxes would lead to more work and decreased happiness. I don’t think this is true, and I don’t think for one reason I read here: people would rather work less, given that option (cult of overwork again).

    So, I do think that lower taxes would let me work less and live by the same standards and, thus, be happier! James’ shows it clearly when he asks: if this leads to happiness, why not tax 100% on everyone?

    I live in Brazil, as Alvaro does, and I feel the heavy burden of taxes everyday. When I get my salary, I get about 20% less, since I am source taxed (IRS and compulsory retirement plan). Then I get my money, and will pay my bills. About 40% of their value is tax. And it’s not hard to see the snowball effect this has: higher taxes lead to higher prices which lead to a high cost to do anything. Logistics, workforce, living, everything is expensive in Brazil. And this hinders economic growth and generates unemployment and poverty.

    The bottom line is: ok, we can have taxes, for some government service is necessary. In extremis, the government must help the extremely poor. But the more taxes, the worse for people in general.

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