So one way the Nordics raise money is by taxing poor people more.
I’ve mentioned this to people several times, and the freakout is rather amazing. A couple of points from my own research:
- In the US, as Mitt Romney made famous, 47% of the folks pay no income taxes. That number is accurate, although students and retirees ought to be removed from the number. That leaves about 30% who not only pay NO taxes, they pay a NEGATIVE tax rate between 1 and 10% (we are the only developed nation to my knowledge that uses it’s tax system as a welfare scheme.) In Denmark, only 10% escape the taxman, and there are no negative rates. So, bottom line, we are substantially more generous with our poor than any other nation vis a vis the tax system.
- In Canada, the effective tax rate of the middle third of the wage earners (the people that there are the most of) is about 22%. In the US, it’s 11%. So, Canada taxes the middle class at double the rate of the US.
This makes sense, when you think about it. When Obama and Boehner cut their deal which raised taxes on the upper quintile by 3.6%, that tax increases took in about 60B to Treasury, which is about the size of the bill passed to repair the damage after Superstorm Sandy. It’s not very much money in a 3.5 trillion dollar budget.
I haven’t done the math, but raising taxes on the middle third of US wage earners by 3.6% would bring in what, like 15X that amount?
You can’t balance the US budget by raising taxes on the rich. It can only be done by raising taxes on the middle class. But no politician would ever try that, because it’s suicide.