There is a tax debate going on in Denmark at the moment. I say tax debate, it’s actually more that a number of political groups are making statements to the effect that they have the best tax plan. The groups are cut into two big camps:
- Those who believe the tax should be lowered, especially in the top end, to give a bigger incentive for people to work more.
- Those who believe the money is better spent on welfare, hiring more people to work with elders, children and so on.
I know enough about taxes and public administration to know that in theory, both of these things work. However, in practice – I find that there’s a few problems.
Sure, lowering taxes, especially for those who’ve hit the high marginal tax rate, is an effective means of incentive. But when a very large part of the society isn’t ready to accept people working more than the standard working week of 37(Â½) hours, it isn’t really going to do much. In particular, public employees are hired on very inflexible terms, even though this is among the areas where more people would make a difference.
The other suggestion, spending more money on welfare, is really a good idea too. Hiring more people, sure – but where are you going to get them? Denmark is the country in the EU-15 with the lowest unemployment – and I guess the same is true of the entire EU. Sure, they’ll find some way to spend the money – but it isn’t going to provide more employees. Again, flexibility is needed – if people were actually allowed to work more, it might be possible.
My suggestion is a compromise – and a focus on flexibility. Let’s cut the tax somewhat, provide some more money for paying public employees – and most importantly, find a way to open up for working more than the standard working week if you so desire. Why not?