Denmark’s Meager Tax-Cut Package

The good news is that Danish politicians have announced that taxes will be reduced. This is welcome news in a nation with the world’s highest income tax rate. Indeed, the tax burden is so onerous that even the OECD suggested it might not be a good idea to subject 40 percent of workers to marginal tax rates of more than 70 percent. Unfortunately, the tax cuts that have been proposed are akin to putting a band-aid on a compound fracture. Instead of reducing the top tax rate, the government merely intends to adjust the income level where the top bracket takes effect. While this surely is better than nothing, the government also is raising taxes on energy and increasing an already bloated welfare system. Tax-news.com reports on Denmark’s less-than-exciting reforms:

The Danish government has announced its intention to cut taxes by DKK10 billion (EUR1.34 billion) per year in 2008 and 2009 in a bid to stimulate the labour market, and improve incentives to work. Under the proposed reforms, announced by the government on Tuesday, the income ceiling for the middle and top income tax brackets will be raised to DKK353,000 per year from DKK304,100, and to DKK381,300 per year from DKK365,000, respectively. …In the same announcement, the Danish government also promised that a broad economic plan for the next eight years would not raise any taxes between now and 2015. The economic package also promises DKK50 billion in extra spending to improve Denmark’s welfare system between 2009 and 2018. …To help offset the tax cuts, the government also announced that green taxes on energy consumption would increase from 2008 to match inflation. This would increase taxes on heating, water and electricity.