Who would have thought that marginal tax rates of 63% for people making around $70,000 would encourage people to move to another country?

Denmark is the home of “flexicurity,” the catchy name given to a system that pays ample unemployment and welfare benefits but, unusually in Europe, imposes almost no restrictions on hiring and firing by employers. The mixture has served Denmark well, and its economy barreled ahead in 2006 by 3.5 percent, one of the best performances in western Europe. The country is effectively at full employment.

But success has given rise to an anxious search for talent among Danish companies, and focused attention on émigrés like Sorensen. The Organization for Economic Cooperation and Development, which is based in Paris, projects that Denmark’s growth rate will fall to an annual rate of slightly more than 1 percent for the five years beginning in 2009, reflecting a dwindling supply of a vital input for any economy: labor.

The problem, employers and economists believe, has a lot to do with the 63 percent marginal tax rate paid by top earners in Denmark - a level that hits anyone making more than 360,000 Danish kroner, or about $70,000. That same tax rate underpins such effective income redistribution that Denmark is the most nearly equal society in the world, in that wealth is more evenly spread than anywhere else.

Aren’t “just” societies where resources are distributed not primarily on the fruits of your labor, but on your mere existence just grand?

The Danish model is the living proof of why socialism doesn’t work.  The capable will eschew the system and try to find ways around it - like moving - while the remainder loaf about enjoying the free ride bankrolled by the hard workers who foolishly stay.

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This entry was posted by Brian on Thursday, December 6th, 2007 at 8:26 pm and is filed under Communism/Socialism, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.