The other day, unionist letter writer Alan Sutherland had a letter published in the Herald. A cynic might imagine that he has a regular column! But I digress.
Ed: Alan Sutherland is a member of the covert Scotland in Union letter-writing team exposed in this leaked email from July 2020 (top-left, second):
In his letter Sutherland comments that of the 10 countries cited in an SNP leaflet that they claim are “wealthier, happier and fairer” than Scotland, eight of them “collect an average of 41% of GDP in taxes, not 34% like the UK”. Indeed, Denmark’s rate is an eye-watering 46%.
In other words, the hypothesis is that those countries regularly cited as “wealthier, happier and fairer” than Scotland, have higher tax rates. As Sutherland goes on to argue, how would a “vote Yes for a a 20% tax rise” go in the next referendum. And put like that, he probably has a point. However, this is to consider the problem from the point of view of the UK. Would this still be so if we considered the issue from the point of view of the Danes?
Denmark, as Sutherland points out, collects an average of 46% of their GDP in tax. There are two points from this.
First, this isn’t just about income tax. It is about the amount of GDP that the government takes in tax from its economy, and there are very many ways of doing this other than income tax alone. The ordinary tax scheme in Denmark has a lower rate of 12.1% and a higher rate of 15%, though this only applies for incomes exceeding DKK 552,500.
However, the tax man isn’t done with you as the average Municipal tax rate is almost 25%, and the Labour Market tax is 8%. Share taxes go up from 27% for income of less than 57200 DKK or 42% above this. The top marginal tax rate for any individual cannot be more than 52.07%, though the labour market tax, share tax, property value tax, and church tax are not included in this. Therefore, the tax system in Scotland and Denmark are not really comparable.
So, the comparison is not really appropriate.
But more importantly – and it’s where Sutherland’s case not only falls apart, but actually contradicts itself. Put simply – and perhaps a little pejoratively – what he is saying is that in Scotland we just wouldn’t pay tax at those sorts of rates. In the present context, he might be right. But perhaps it would pay some dividends to ask why it is that Danes are happy to pay tax at those sorts of rates without getting out of the country, going to such as Norway, Sweden or even Germany?
Of course, this brings us hard up against fairer” and perhaps even “happier”, since “Danish people are consistently among the most satisfied with public services in OECD countries. In 2018, 88% and 84% of the population reported to be satisfied with the health and education systems, respectively. Since 2007 and for both services these values have improved, by four and 3 percentage points respectively” as OECD reported in 2019. (https://www.oecd.org/gov/gov-at-a-glance-2019-denmark.pdf)
To take a more objective measure, the Gini Coefficient of equality in Denmark is 27.7 (putting them at 30th in Europe), while the UK is at a much higher (higher is less good) at 35.1, and number 6.
Therefore, the implication of Sutherland’s data is not necessarily as he argues, but quite the reverse. Asking whether people in the UK would accept these tax rates tomorrow is a no brainer. Of course they wouldn’t. But posing this question this way screens off that people living in other countries – and successful ones – are happy to pay these tax rates for high quality public services (especially health and education, according to OECD).
In a piece back in October (Really Angry https://talkingupscotlandtwo.com/2022/10/28/really-angry/) I argued that a debate is needed to reconcile how much tax we pay with what we can expect from the state. Since Thatcher’s time we have increasingly paid less tax, but still expected high quality public services. The current explosion of the NHS is perhaps testament to that. Clearly, for practical purposes that can hardly continue, but for political or even ethical purposes it cannot go on.
However, also needed is a reframing of the debate from one that demonises any increase in income tax rates, to one that poses the question of when we are provided with first class public services (and they must be first class) how much are we prepared to pay.