Do Countries with Higher Tax Fare Better?

Finnish grizzly bear! (Melanie Mikecz)

One mystifying concept in British politics is why both sides of the major parties are absolutely obsessed with tax. The Conservatives want everyone to pay less, Labour want rich people to pay more. Tax, tax, tax. It’s all they ever talk about. Jesus paid his taxes, and so should we all, if we want to keep the NHS and invest in public services. But neither side’s policy is really correct. Here’s why.

You can’t have a society where people pay no or little tax if they are rich (as happens with some big corporations, that use clever accountants – so they use our NHS but don’t pay towards it). Trickledown economics (where the rich pay less tax to provide ‘jobs for the great unwashed’) never works, it just makes the rich richer and the poor poorer.

If you feed the horse enough oats, some will pass through the road for the sparrows. John Kenneth Galbraith

But likewise (and here’s the key), if you create a society where richer people pay more tax (or a flat tax), both will only work – if the government is competent! And not being competent leads to a lack of trust.

Most of us if we were millionaires would all happily pay more tax – if we knew for certain that the money was going to be used well. But we all have suspicions that the money would be going on other things, and that’s the reason why people don’t pay more tax, not because of selfishness (as a rule).

Case Studies in ‘Happy Scandinavia’

In world happiness indexes, nearly all the main countries that come out top are in Scandinavia (Finland, Sweden, Norway etc). And what’s interesting is that in most cases, people trust their governments, even if they didn’t vote for them. You don’t have expense scandals and the like, the leaders just get on with their jobs.

Interestingly, the world’s happiest country of Finland also pays the world’s highest rate of income tax at around 57.3% (time of writing). So why in a freezing cold winter country that’s dark during the day and a country that takes a lot of their money, are people happier than in England?

Because they pay their taxes, which are used to create a cradle to grave protection for everyone. Finland is the first country about to hit ‘zero homelessness’, due to non-profit landlords and good public policies.

There is no monarchy in Finland (it was tried once, but the King was prevented from taking the throne, before he came to power!) The Finnish President’s annual salary is around 160,000 Euros (he also gets to live in a palace!)

Other benefits from paying high taxes in Finland are universal health care, free higher education, and good leave for children and eldercare. When taxes are fair and well-spent, people don’t mind paying them.

As an example, Finnish speeding fines are linked to income. So if a premier footballer in Finland is found breaking the law by driving 200mph in a fast car, he will likely get fined some stupid amount linked to his stupidly high salary.

Most UK footballers who have been caught speeding usually get fines of around £6,000 (in Finland, it’s nearer to £150,000).