Monday, March 2, 2009

Welcome to Denmark and Sweden

Summer travelers to Denmark and Sweden enjoy long evenings, where the sun shines almost round the clock in late June. Winter is another story.

Those enamored of their summer vacation in the two countries might consider living for a year or two as residents, working and paying taxes as do Danes and Swedes. Statistics published by the Organization for Economic Co-operation and Development (OECD) in Paris, France, show total tax revenue in Denmark and Sweden in 2007 at 48.9% and 48.2% of gross domestic product respectively. Combined federal, state, and local government tax revenue in the United States was 30.3%.

A broader measure of government is spending, the share of national resources consumed by government. Budget deficits require borrowing which ultimately leads to higher taxes to repay principal and interest. Total U.S. government spending was 33.3% of GDP in the second quarter of 2008.

President Obama’s first budget for fiscal year 2010 (October 1, 2009 - September 30, 2010), if enacted in full and if the budget’s economic assumptions materialize, shows a deficit of 12.3% of GDP for FY 2009, raising projected expenditure to 27.7% of GDP (revenue of 15.4% plus deficit of 12.3%). Including state and local government raises the figure to around 40%. Government spending in both Denmark and Sweden in 2008 was 52% of GDP. In a few short years, if the FY 2010 budget is enacted largely unchanged, Obama will have cut in half the large difference in taxation and the size of the government between the U.S. (all levels) and the two Scandinavian countries.

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