The International Herald Tribune does a great job describing tax competition in action in the European labor market.

Young Danes, often schooled abroad and inevitably fluent in English, are primed to quit Denmark for greener pastures. One reason is the income tax rate, which can reach 63 percent.

Denmark has fairly pro-market economic policies, ranking 15 in Economic Freedom of the World, and is enjoying solid economic growth. However, “success has given rise to an anxious search for talent among Danish companies, and focused attention on émigrés like Sorensen…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.”

The high taxes are driving out young and skilled Danes, many to London.

Danish taxes also contrast sharply with those in nearby London, often jokingly referred to among Danes as a Danish town, because so many of them live there. Lower taxes on high earners have been a centerpiece of the policy mix that has fed the rise of London as a global financial center since the 1980s.