Political pundits often refer to tax systems in Scandinavian countries like #Denmark and #Sweden.

But how do Scandinavian countries really pay for their government spending?

https://tax.foundation/scandinavian 

THREAD

If the U.S. were to raise taxes in a way that mirrors Scandinavian countries, taxes—especially on the middle class—would increase through a new VAT and higher social security contributions and personal income taxes. /2

If the U.S. were to raise taxes in a way that mirrors Scandinavian countries, business and capital taxes would not necessarily need to be increased.

In fact, the corporate income tax rate would decline. /3

Business taxes are a less reliable source of revenue (unless your country is situated on top of oil).

Scandinavian countries don't place above-average tax burdens on capital income and focus taxation on labor and consumption. /4

Scandinavian countries tend to levy top personal income tax rates on (upper) middle-class earners.

Denmark, Norway and Sweden have relatively flat income tax systems. /5

If the U.S. taxed personal income in the same way that Denmark does, all income over $65,000 would be taxed at 55.9 percent. /6

It’s no surprise that taxes in Scandinavian countries are structured this way.

In order to raise a significant amount of revenue, the tax base needs to be broad:

Higher consumption taxes (VAT)
Higher taxes on middle-income taxpayers via social security contributions. /7

The US relies much less on consumption taxes than other OECD countries.

All OECD countries, except the US, levy value-added taxes (VAT) at relatively high rates: https://tax.foundation/2VbGkwm  /8

The US relies much less on consumption taxes than other OECD countries.

All OECD countries, except the US, levy value-added taxes (VAT) at relatively high rates: https://tax.foundation/2VbGkwm  /end