Denmark proves high taxes can mean happiness

On a recent visit to Denmark, I was amazed by the number of Danes who spoke so passionately about their tax system. This, despite it claiming on average more than a third of their income. In fact, Danes are frequently touted as some of the happiest people on the planet. How is this possible given that the Danish government requisitions such a large portion of the population’s earnings?

My inclination is that these two facts are actually linked. While it obviously does not directly make people happy to pay high taxes, a high tax system as a whole can provide those it encompasses with a very good quality of life. From my limited personal experience of Denmark, it seemed a very pleasant place to live – with good transport links and well-kept public facilities. I would attribute this to the high levels of government spending and the decentralised manner in which it is carried out.

Government spending relieves many of the anxieties of modern life for Danes.

The equivalent of British local councils have much larger remits in Denmark and can therefore spend money in ways that they know will benefit the community. Almost everyone benefits in some way from the large amount of money the government invests in its population. All have access to free healthcare and education, even at university level. A government scheme known as ‘Flexicurity’ provides income security to both business owners and employees. It allows employers to lay off workers easily in times of hardship to retain profits, but also provides the newly unemployed with considerable help in finding a new job. Generally, it seems government spending relieves many of the anxieties of modern life for Danes. They need not worry excessively about suddenly needing expensive surgery, funding their children’s education or finding a new job should they lose one.

High taxes and extensive welfare provision by the Danish government means that it has one of the narrowest wealth gaps in the world. Of the 34 countries in the Organisation for Economic Co-operation and Development, Denmark had the lowest ratio of the earnings of the richest 10% compared to those of the poorest 10% in 2015. There is much less of a visible elite in Denmark, with even the royal family often taking their kids to school by bike. It’s likely that this contributes to the high happiness levels in Denmark as demonstrated in contrast with the strong sense of resentment towards highly-paid business leaders in the UK. This approach – when combined with few instances of corruption – also explains the high levels of trust in the Danish government. Trust means that Danes are happy to hand over their money as tax, safe in the knowledge that it will be spent in ways beneficial to society.

One Danish woman thought that growing up in a country like Denmark involved learning to see “the bigger picture”.

I learned while visiting that the reduced sense of a privileged elite in Denmark is partly a cultural phenomenon. Ambition is not necessarily a positive attribute and can even be considered embarrassing. There is less of a drive for constant promotion and material gains. Rather, an English expat told me that Danes care much more about how they feel on the inside. They do not measure their worth by their house, car or salary, but rather by how happy they are. Recently some work incentives have been introduced by the government to try and stimulate faster growth. These tax reductions are, inevitably, causing the Danish wealth gap to widen, although it still remains far lower than most other developed countries. It remains to be seen whether this political decision will alter the balance between growth, equality and Denmark’s position on global happiness rankings in te future.

Within Danish culture there is a strong sense that paying high taxes is part of your responsibility to society. One Danish woman thought that growing up in a country like Denmark involved learning to see “the bigger picture”. It takes some maturity to understand that if you sacrifice a considerable amount to society now, it will be there to support you in return when you really need it.

Recently, this holistic outlook has been put to the test by the influx of asylum seekers in Denmark. Some Danes find it difficult to extend their feelings of responsibility to include foreigners in need of aid, and therefore resent the money the government spends on providing for them. This partly explains why the anti-immigration Dansk Folkeparti (DF) gained the second largest portion of the vote in the 2015 election meaning it now forms part of the ruling coalition. Many of the policies it has instigated since have involved reducing government aid to refugees and generally trying to dissuade asylum seekers from coming to Denmark in the first place.

It is largely Danish culture that allows the country to balance happiness and high taxes so masterfully. Ingrained feelings of anti-elitism and social responsibility, as well as trust in the government, mean that Danes have the motivation to work despite much of their income never reaching their pockets. Many directly experience the benefits of high levels of government spending, perhaps by being funded through university or given training and help to find a new job when they become unemployed. When Danes first begin paying tax, therefore, most have already seen the advantages of the system and as a result understand that their contribution is worthwhile. It would be much harder to introduce a high tax system to a country than to maintain it. Taxpayers will not instantly see the benefits of their payments and cannot know in advance how much they will really gain from the resulting increase in government expenditure.

In a country like the UK where there is much more a culture of looking out for yourself, your family, and perhaps your business, rather than society as a whole, it seems unlikely that rates of tax comparable to those in Denmark will ever gain considerable support. For us ‘tax’ has very negative connotations and is often considered a burden rather than an investment. This is sad given the convincing evidence that the Nordic model of high taxation, despite reducing people’s monthly income, can lead to a much greater overall satisfaction with life.