100,000 Finnish children live below the poverty line
Your welfare state at work - One in ten Finnish children live below the poverty line…
Poverty in the family can reflect on the child’s future, for example, through the child missing out on upper secondary education simply because the parents cannot afford the textbooks. The children are also divided into groups through their hobbies.
Today, 100,000 Finnish children live below the poverty line. The situation for families dependent on subsistence support has worsened in the past ten years. A person on subsistence support has to get by with 11 euros per day.
Ok, I was already wondering what they have done with real Phil - the posts have been unusually interesting lately. This is then back to drearier normalcy…
Comment by mjr — Wed, Mar 29th, 2006 @ 12:47 pm
Sorry that poor children in Finland have become dreary normalcy
Comment by Phil — Wed, Mar 29th, 2006 @ 12:53 pm
I am sure that by gettting rid of all the evil little benefits for the poor would solve the promblem. Right Phil?
Comment by Lauri — Wed, Mar 29th, 2006 @ 1:03 pm
I don’t understand this logic. If you take away sharing -> more poor people.
Comment by dude — Wed, Mar 29th, 2006 @ 1:45 pm
So you guys think that this is the best Finland can do? 100,000 poor children is just something we’ll have to accept?
Comment by Phil — Wed, Mar 29th, 2006 @ 1:54 pm
“While Denmark and Finland led the 26 participating OECD (Organization for Economic Cooperation and Development) countries with child poverty rates below 3 percent last year, Mexico and the United States were at the other end of the spectrum, both with child poverty rates of more than 20 percent”
http://www.wsws.org/articles/2005/jun2005/pove-j01.shtml
Well, at least it not as bad as in some other places.
Comment by press — Wed, Mar 29th, 2006 @ 2:05 pm
The argument that this is the “welfare state at work” as Phil writes, is absurd. It is clearly a case of the welfare state not being strong enough.
The argument of the article is that if you are a single parent with no job or who is studying, your kids will live in poverty (unless you get money from elsewhere). The answer, of course, is to tax the wealthy and raise the level of welfare for these vulnerable groups.
As the article points out, this situation is unacceptable but it is one of the best child poverty rates in the world.
As an addendum, I would say that Phil is right to post this. What he might try not to do, is add his silly tag-line commentary.
Comment by finnsense — Wed, Mar 29th, 2006 @ 2:07 pm
More self responibility would solve the problem in at least half of the cases.
Typical Finns already buy an apartment during or just after study or school. With no capital and some securitis given by parents or others. Once they get married and have kids and bigger apartment or house is needed. They take loan as much the bank gives them.
Then a car is needed which is again finaced by loans. Usually the car is bigger and newer than needed and more than the financial situation alowes.
By any small uregularity of the income or job situation big problems and dependence on the social support systems start.
Usually the financial problems or tightness continues. Once people have more relaxed situation with housing loans after 10-20 years they buy a kesämökki and the big new Volvo they always were dreaming about.
This way the financial trouble contiues until retirement. Then people recognize that all the life has been tight and limited, they haven’t had much freedom and haven’t seen much of the world.
After all frustration and mental problems often destroy the rest of life.
==> That is life for about 85% of Finns!
Some people say that rich people are gready. It seems to be the oposite in Finland.
If ordenary people would not be be so greedy and do not always spend and buy more than they can afford we do not need such extensive support system. And there would not be so many children living under the poverty line.
rgds Tom
Comment by Tom — Wed, Mar 29th, 2006 @ 2:16 pm
I would suggest a different tag line:
Your failing Finnish economy at work -etc…
If only there would be enough jobs, poverty would be less. I think it’s complete idiocy that even without having children, some couples are not able to pay the bills if there’s only one income.
Comment by majava — Wed, Mar 29th, 2006 @ 2:18 pm
I don’t agree that 2 people can not live with one salary (at least in 99,9%).
I don’t think that mobile phones TV, PC with fast data connection, cas, holiday, restaurant visits, smoking, drinking should be financed by support money.
Self responsibility, education and activeness to improve the situation would solve 99,9% of Majava’s example.
High taxation for all kind of suports and therefore big salary costs for companies together with low purchasing power does not help the Finnish economy.
rgds Tom
Comment by Tom — Wed, Mar 29th, 2006 @ 2:38 pm
Tom,
Finns have comparatively low rates of personal debt. Compared to Anglo countries (US, UK, Canada, Australia) Finns are very careful.
Majava,
How do you argue that one of the best performing economies in Europe is a failing economy? Indeed, Finland projected growth over the next couple of years according to OECD figures is higher than the US. Finland does it while retaining a government surplus while the US economy is financed by massive levels of personal and public debt. Additionally, child poverty is far far worse in the US and actually in pretty much every other country on the planet.
Phil would do well to reject your suggestion. It’s perhaps even marginally more wrongheaded than his.
Comment by finnsense — Wed, Mar 29th, 2006 @ 2:39 pm
20% in the US? I must say I have always been sceptical of these measurements. Obviously in the low-tax, non-welfare state economy there would be considerably more child poverty, but it really seems absurd to claim that one in 5 children would live in actual poverty in the richest country in the world (well, bar Luxemburg, Monaco or what you have).
Comment by mjr — Wed, Mar 29th, 2006 @ 2:42 pm
Tom,
How do you get from high taxation for support to high salaries? Firstly, high salaries are the result of low unemployment and thus increased demand, not high taxes. Secondly, Finland has some of the lowest salaries in Europe.
Comment by finnsense — Wed, Mar 29th, 2006 @ 2:42 pm
Oh please. Where should I start?
1. In Europe, the poverty line is defined in relative terms, i.e. a person/household whose income is 60 percent or less of the median is poor. In the US, for example, poverty is defined in terms of absolute income, which IMHO makes more sense. Furthermore, the wildly varying cost of living (especially housing) is not taken into account at all. 60 per cent of median income will buy you a fucking mansion in many parts of the country. Being in the top 10 percent income bracket doesn’t help in Helsinki. You need to be in the top 1 pct to live nicely. All in all, the number of “poor” people in the statistics reflects the economic hardships suffered very poorly.
2. The dismantling of the welfare state has been going on for 15 years. If anything, this is the lack of a welfare state at work. If Phil whines about the terrible nanny state now, I wonder what he’d said of the 70s-80s Kekkoslovakia.
3. While the textbook industry is certainly robbing upper secondary students blind, you can buy used books and at least my school had a library where you could borrow them. I spent maybe 150-200€ on school books altogether way back when. Spread over three years, I’d say most families can manage this. Then again, the problem is mostly with languages. Instead of three-four languages, save some money and improve your future employment prospects by taking advanced math, physics and chemistry (+ psychology, philosophy and biology if you’re me).
Comment by Anonymous — Wed, Mar 29th, 2006 @ 2:43 pm
Anonymous,
Relative poverty is about not having enough money to have a decent quality of life all things considered. If no-one has mobile phones then it’s no big issue if you don’t either. If everyone does but you don’t, you are at a considerable disadvantage. The question is whether it is acceptable or not for some children to grow up with these non life-threatening but still very unpleasant disadvantages.
In my opinion it is not as big a problem to have relative poverty as it is to be in absolute poverty but it is still bad enough for it to be something the state should try to eliminate.
Comment by finnsense — Wed, Mar 29th, 2006 @ 2:58 pm
mjr,
It depends what you mean by “actual” poverty. I suspect it doesn’t mean they have nothing to eat or no shelter. In Finland no-one need go without food or shelter either. Poverty is probably defined as a certain percentage of the median income (probably 50%).
BTW, though the US is rich as a whole and even your average American is very well off, the bottom 20% are poorer than in most other OECD countries.
Comment by finnsense — Wed, Mar 29th, 2006 @ 3:02 pm
Finnsense,
I did not tell high salaries, I told high salary costs for copmanies. This is a big difference. Salary costs are about 1,6 times the salary.And if people work over time or on weekend then there are BIG extra payments. More than anywhere else in Europe except Sweden perhaps.
It is true that salaries are quite low in Finland. For that reason the personal depth can not be as big as in high salary countries.
But even salary level is low, Finns spend record sums in PC, mobile phones, flat TV, cars, housing, drinking…
So don’t be so greedy and tere will be less poor people and kids.
That is surely not the only solution but it would help in more than half ot the cases.
rgds Tom
Comment by Tom — Wed, Mar 29th, 2006 @ 3:02 pm
comment 15, Finnsense,
Did you mean that if 99% of people have a mobile phone, the last 1 % must get it for free from the state?
We have already quite many cars in Finland. Perhaps the state should buy a few Volvos in order to ditribute them for free. Otherwise someone might have a real disadvantage.
rgds Tom
Comment by Tom — Wed, Mar 29th, 2006 @ 3:11 pm
Phil is in denial about the fact that powerty is a hole lot of a bigger problem in the US, than in Finland.
Comment by Markku — Wed, Mar 29th, 2006 @ 3:14 pm
This system gave me a note
“Sorry, you can only post a new comment once every 15 seconds. Slow down cowboy.”
when I posted that earlier post above. Well, I posted my earlier post more than 15 hours ago, not 15 seconds ago. It seems this forum is becomin a typical anti-liberal nanny-big brother policing site.
Comment by Markku — Wed, Mar 29th, 2006 @ 3:20 pm
@Finnsense:
Yes, I know about how well the Finnish economy performs and in near future also keeps doing so, but I really wonder how that all translates to the ‘man on the street’. Look for instance at how the national government is doing extremely well with their budget and already for a couple of years creating a budget surplus. Well done! But now the municipalities: Many are struggling (because of less government contributions?), especially recently and their answer is to raise taxes! That just doesn’t add up and also doesn’t show up in the economic surveys! A growing economy means for the man on street higher taxes in 2006…
@Tom:
I agree with you that people should live according to what they earn adn not spend it on stuff they actually can’t afford, but you can’t simply assume that people always spend too much. There are those (with a full time job) that need to go the the social office to have some bills paid for them and first of all you can’t show up with an invoice of your high speed 8 mbps internet connection and secondly, they check if you live above your standard and if so refuse to pay you!
The high cost of labour in Finland is somewhat of a myth and excuse (for employers). In many other European countries the level is about the same. Also there they are complaining, btw
Comment by majava — Wed, Mar 29th, 2006 @ 3:28 pm
Relative poverty is about not having enough money to have a decent quality of life all things considered.
Yes, well, “decent quality of life” and the things to consider vary quite a bit subjectively.
If no-one has mobile phones then it’s no big issue if you don’t either. If everyone does but you don’t, you are at a considerable disadvantage.
How very Finnish. I’ve been at a considerable disadvantage compared to Paris Hilton in my childhood, and still am. Would you all feel sorry for me now? You can pick up used phones in ditches and call prices motivate people to use mobile phones as baby alarm systems. If having a mobile phone is really that important, everyone can afford one.
In my opinion it is not as big a problem to have relative poverty as it is to be in absolute poverty but it is still bad enough for it to be something the state should try to eliminate.
How do you propose that relative poverty be eliminated? Even distribution of income and a ban on private ownership (+ an obligation to spend so that your bank account is zero at the end of each month)?
Comment by Anonymous — Wed, Mar 29th, 2006 @ 3:33 pm
Tom,
Salary costs aren’t much different across Europe. All employers have to pay holiday pay, pension insurance and so on. Sometimes the pension insurance is less (for example in Britain where people have private pensions). As far as I’m aware, the toal costs to the employer are only 1.2 times the cost of the salary. If you include vacation pay it’s 1.285. It’s certainly nowhere near 1.6.
As for comment 18 of course I don’t care much about adults but there is an issue there to do with children. Kids are kids and if one child is handicapped at school because he comes from a poor family it’s unfair.
Comment by finnsense — Wed, Mar 29th, 2006 @ 3:33 pm
Majava,
Municicpal taxes show up in economic figures. The percentage of tax taken as a percentage of GDP figures for example. Finland stays pretty level at around 45% there.
Anonymous,
Of course you can’t eliminate wealth differences entirely but there is a baseline level of wealth required to participate fully in any given society. That’s the level you should ensure.Relative poverty, technically speaking, can be guaranteed by making sure no-one has less than 50% of the median income - so about €1000 a month.
Comment by finnsense — Wed, Mar 29th, 2006 @ 3:41 pm
Finnsense,
I think there are clear differences of salary costs in Europe.
The company I am workin for has project deliveries all around Europe. Deliveries always include a lot of work on site.
If I have a delivery e.g. to France, I can select if I use workforce from Finland, Germany, Austria, Spain, Italy…
For some strange reason the Finnish work force is almost always most expensive. I can get people from Austria in this example for 20-30% lower costs.
rgds Tom
Comment by Tom — Wed, Mar 29th, 2006 @ 3:50 pm
In the article the researcher had defined poverty as having to live on 11 euros/day. The article didn’t specify how the researcher had calculated poverty for a household, say a single parent with two children. If one counts the poverty level for each, that household would be poor if they had to live on 3×30x11=990 euros/month.
I was surprised to read in the same article that:
“On the European scale the Finnish poverty situation is still relatively good. For example in Portugal and Spain most children live below the poverty line.â€Â
Most (= over half) of the Portuguese and Spanish children in poverty? I wonder what the poverty percentage of children is in other EU countries measured with this 11 euros/day.
Comment by Mara — Wed, Mar 29th, 2006 @ 4:02 pm
finnsense (#23),
you should update your information, for ordinary worker its more than 1.6, see, e.g., here.
Comment by Anonymous — Wed, Mar 29th, 2006 @ 4:05 pm
comment 23 /Finnsense,
I got a statistics which shows salary and salary costs in Europe.
Unfortunately Finland was not included.
But the range is salary x 1,25% = salary costs for employer in Portugal up to 1,77% in France and Germany.
I don’t believe Finland to be at the lower end of the scale.
The 1,6% for Finland is a number I have seen a long time ago, but I believe it has not got so much lower recently.
rgds Tom
Comment by Tom — Wed, Mar 29th, 2006 @ 4:14 pm
The avarage cost for one worked hour (for employers) in 2003 was in in Finland in 2003 around Eur 25. That is lower than in Sweden, Denmark, Germany, France, the Netherlands and Luxembourg and the same as in the UK. an excuse, like I said!
Comment by majava — Wed, Mar 29th, 2006 @ 4:19 pm
re #29: It’s no excuse, as you see it one of the highest in EU. You combine that with low net saliries for the worker, and you see the welfare state in action. Enjoy!
Comment by pikkupoika — Wed, Mar 29th, 2006 @ 4:38 pm
16, finnsense: And others I guess. Point taken about the relative poverty. I have to say I’m not so worried about the upper income groups, they seem to be doing all right even in Finland even if their purchase power isn’t as good as somewhere else. Relative poverty is a worry especially if it also leads to limited access to good education. I suppose this in Finland is still in relatively good shape, though the cultural factors with inherited poverty will be an increasing problem. The US situation seems appalling to put it bluntly. Strange that the “ineffective” welfare state is able to keep better care than the US economy with all those lovely minimum wage jobs around - sometimes you even have two of them, ain’t that nice. Children should never be held responsible for imagined or real economical shortcomings of their parents. That would be my personal limit as far tolerating the market forces goes. Shocking as it is of course. We are not a pretty sight are we… (The humanity I mean, not any particular country or system.)
Comment by mjr — Wed, Mar 29th, 2006 @ 4:39 pm
Anonymous,
That link proves my point not yours. Read it again carefully and tell me you really think employer contributions are 1.6 times basic salary.
Comment by finnsense — Wed, Mar 29th, 2006 @ 4:39 pm
re #32: From the link:
Välillisten työvoima-kulujen keskimääräinen kokonaisvaikutus on siis noin 60 % (1,2299*1,3=1,59). Yritys joutuu siten maksamaan noin 60 % ennakonpidätyksenalaisten palkkojen määrästä nk. henkilösivukuluina.
That is, if a gross salery (=”ennakonpidätyksenalainen palkka”) is X then a company pays total 1.6X. I don’t understand how you made up your conclusions.
Comment by Anonymous — Wed, Mar 29th, 2006 @ 4:49 pm
For some strange reason the Finnish work force is almost always most expensive. I can get people from Austria in this example for 20-30% lower costs.
This is because that money is not going to the worker, but there’s a greedy Finnish middle man billing ya. He needs to drive an S-class Mercedes, and that ain’t cheap in Finland!
Comment by Anonymous — Wed, Mar 29th, 2006 @ 5:03 pm
Because look at what’s involved. That includes overtime, Pekka’s days, holidays and so on. The actual taxes the employer pays amount to 21.665% of the income. In other words the figure you’re quoting includes additional salary and taxes.
Look at the box at the bottom. It shows the gross salary to be €1,000. Then the employer pays 16.92% pension insurance (TEL), 2.964% social security and then 1.8% of these other little taxes. The figure they arrive at is €1,638.97. Clearly that doesn’t add up. So where does the extra come from?
What they appear to have done is added the taxes the employer pays to the taxes the employee pays out of his own salary. So the employer does pay 61.465% of the gross salary in taxation but not on top of the salary. Half of that is tax paid on behalf of the employee as income tax, their own pension contribution etc.
So the employer doesn’t pay €1,600, he pays €1,250 of which €250 are additional from his own pocket and €350 are the employees own taxes that come out of his €1,000.
Comment by finnsense — Wed, Mar 29th, 2006 @ 5:18 pm
There’s beginning to be more re-runs in this blog than in Finnish TV!
But:
Statistically there are now more poor, because some are getting rich and some are not. I thought libertarians love that? In the libertarian utopia, income differences would be astronomical! And naturally the new Phil’s Minarchist State would also rob poor people’s right to pick berries. With force.
Comment by Vihtor — Wed, Mar 29th, 2006 @ 5:31 pm
“On the European scale the Finnish poverty situation is still relatively good. For example in Portugal and Spain most children live below the poverty line. In Finland only one out of ten children shares the same fate.”
Despite the continuos evil liberalization and cut down of benefits, some of the great Nordic model is still left and saves the children!
Comment by Vihtor — Wed, Mar 29th, 2006 @ 6:36 pm
Phil is in denial about the fact that powerty is a hole lot of a bigger problem in the US, than in Finland.
No way, US definitely has more poverty.
Comment by Phil — Wed, Mar 29th, 2006 @ 7:29 pm
Re #35 (finnsense): The calculations in the link are admittably poorly done (it was the only one I could quickly find), but the main idea holds. Lets rewrite the example calculation in the link with the numbers provided (the missmatch in not the way you said, I think someone has just poorly updated an old text).
First, I remind you that we are talking (with your own words) the total costs to the employer given that the gross salery of a worker is X (euros per month, year etc). Now to the example.
The DIRECT costs to the employer:
1) Basic salery: X=1000
2) TEL (employer): 0.1692*X= 169.2
3) sotu: 0.02964*X= 29.64
4) other insurencies (0.6+1.1+0.081)/100*X= 17.81
——–
Y=1221.67
Yes, this gives only 22.17%, but this is NOT the TOTAL cost to the
employer. Workers have benefits required by laws and contracts, and
they add to the total cost (e.g., paid holidays, Pekkanen’s, “lomarahat”,etc…). You have to notice that the employers pay
all of the above (1-4) even when the worker is not producing
anything (e.g., in on vacation) and someone else is doing his job (extra cost). If you don’t agree, I’m happy to work for you with 30E/month and 260 paid free days (addition to the weekends, of course) a year. The estimate, which of course depends from the industry, was given in the link that the extra is about 30% of the total direct costs (It is commonly used and I agree on it).
So the TOTAL COST TO THE EMPLOYER is 1.3*Y= 1588.82E=1.6X
Does this make (finn)sense to you now?
Comment by Anonymous — Wed, Mar 29th, 2006 @ 8:06 pm
I think the textbooks should be free up through the end of their years at lukio (or wherever they are going at that age). At least the kids may get a little further with that boost. I know I had a difficult time paying for the books.
Comment by Mo — Wed, Mar 29th, 2006 @ 8:12 pm
Anonymous,
Well we don’t really disagree about the amount. If I am paid €1,000 per month as standard then my employer pays 22% extra. We agree on that. What you are saying is that the 2 days a month holiday I get should be deducted from my salary when we are discussing this since I am not actually at work.
As an employer it doesn’t make much sense to think like this though. You think that you pay employee X €2,000 per month to work for 20 days in the month and in addition pay 22% extra in taxes.
Pekka’s days, overtime and public holidays are not really the same at all either. Pekka’s days are earned as is overtime and public holidays are days when the business is closed. It makes no sense to say you pay employees for public holidays because you pay employees per month not per day.
If you take this to the level of freelancers, they are paid only 8.5% extra for holidays, which is a lot less than the 30% you have come up with.
If the purpose is to make meaningful comparisons between countries of how hard it is to employ people, then talking about pubic holidays and the other things you mention is moot. There is no country where people are not paid for overtime, public holidays, get holiday pay and so on. Some countries may have less public holidays but actually Finland is quite tight in that department. In the UK all public holidays are moved to a weekday so you don’t lose out if it falls at a weekend.
Do you see my point?
Comment by finnsense — Wed, Mar 29th, 2006 @ 9:16 pm
re 41: I see you point, but the thing that really matters is how expensive it is to hire a person. Although there are things that exist in all countries (e.g., paid holidays), it does matter how many of those (and other benefits) there are. So they need to be included in the calculations. I think this is the factor what was meant in Tom’s original comment (#17, see also #28).
I didn’t come up with 30%, it was given in the link. And factors around 1.5-1.6 are commonly used in Finnish companies when making budgets, which you should have known if you were ever involved in such a thing. So disputing the number 30% requires a lot more than just your “intuitive” feeling. I don’t think this is a right forum for doing that, but you seem to have blog. So if you feel giving the “correct” estimate for economists, at least I’m interested to see you calculations.
Comment by Anonymous — Wed, Mar 29th, 2006 @ 9:39 pm
I have an idea. Lets Tax the wealthy, and fix this problem.
Then when the wealthy let more folks go, we can tax them again.
and again
and again, until there are none left to pay any taxes.
Then and only then, will we have to come up with a real solution, like less taxes and more economic growth.
Comment by winter — Wed, Mar 29th, 2006 @ 10:11 pm
There are so few wealthy people and they already have a flat tax of 28% on their major incomes, so its actually the spit bowl of the both left and right, us middle class people who pay this whole circus. The rich and poor are OK.
Comment by Antti (the redneck one) — Wed, Mar 29th, 2006 @ 10:34 pm
The employment costs for us in Finland are approximately 1.36 times the salaries. This includes the vacation time salary, “lomaraha”, and the employer paid medical care. In the US the minimum is around 1.13. In practice, most US employers pay about the same as in Finland.
Comment by Oregon — Wed, Mar 29th, 2006 @ 10:48 pm
Great point, Oregon. This makes me think of US citizens, and how they tend to think that the implementation of social programs (such as health care for all (so that when cancer inevitably strikes, they won’t use their life savings to pay for it and then die anyway) would make taxes unbearably high. Most middle American income taxes can be fairly high, fairly comparable to that of Western/Northern Europe, but without the benefits, without the health care for all.
Comment by sherewin — Thu, Mar 30th, 2006 @ 12:07 am
Hei Phil, I’ve been reading for awhile. I came for the Conan clips, I stayed for the discussion.
Comment by sherewin — Thu, Mar 30th, 2006 @ 12:09 am
sherewin
sure i can pay for the cancer and use up my life savings, or go up to Canada and wait a year to get a MRI.
Or go to the UK and find out I am to old for the operation, so I can’t get it.
Or go to Finland and find out they called me on the phone, and met their response time of 6 months.
Humm… I think I want the ability to get medical care, not some government policy that places me at the back of some line.
Comment by winter — Thu, Mar 30th, 2006 @ 4:16 am
Well, winter then I’m sure the national health statistics of the US are just fine and dandy. Just beating hands down our Nordic societies… Like average lifespan, like child mortality. It is always interesting to see theory beat actual facts, go and have a look at this link for example:
http://angrybear.blogspot.com/2005/04/performance-of-us-health-care-system.html
Comment by mjr — Thu, Mar 30th, 2006 @ 6:41 am
It’s sort of depressing to read all the bickering about taxation and how the US surely must have more poverty ( no shit, the US has almost 300 million people compared to the shrinking population of 5 million in Finland…just by numbers alone). Almost as useful as the Swedish speakers vs. the Finns bitching about whether Swedish should still be a required language in school.
Perhaps the point was that, at the rate of taxation and the amount of aid the Finnish government seems to give, how is it possible that children live in poverty in Finland? Isn’t any number greater than zero an unacceptable percentage?
Comment by hfb — Thu, Mar 30th, 2006 @ 8:08 am
hfb,
the US has more poverty as a percentage of the population. I don’t think anyone was talking about real numbers.
As has been mentioned above, given the definition of poverty we are given, poverty is inevitable unless there is more redistribution of wealth.
Anonymous,
Okay I’ll continue this on my blog.
Comment by finnsense — Thu, Mar 30th, 2006 @ 8:21 am
#44 redneck Antti,
28% flat rate for the rich ones sounds perceptually low but is still far too much for the service we get.
If the rich one pays 100.000 EUR/year tax for a couple of school books and a few normal doctor visits he pays about 90.000 more than he gets service in return.
The average guy pays 33% income tax which means abou1 10.000 EUR/year. All what he pays he gets back in services.
Now the rich one is already paying 10 times more than he gets in return, just to support the poor and people are still complaining that he pays too less.
What do you want?
Perhaps you should look it this way:
-The rich one knows how to grow capital efficiently. If government takes less tax from him he can grow his capital more and pay tax from the additional growth. As a final result tax revenue is bigger.
- The rich one invests his capital. With that capital companies’ liquidity is improved and more working places are generated.
- If we have better economy by companies and therefore higher employment we need less support money for the poor. This will decrease the tax rates for everybody and purchasing power is increasing which again results in better economy.
This also improves the changes for the poor, as he has better changes to find a job.
Unfortunately most people are so jealous to the rich that they prevent economic grows and their own benefit.
Jealousness seems to be a relatively big problem in Finland.
If the rich one is taxed too high he can not make the desired profit (don’t complain about it, profit making is his job) he will look for other opportunities to do his job. He will move his capital out of Finland and companies are moving work intensive production out as well.
As you see, if tax rates are moderate, especially for the rich, it will be beneficial for everybody and most or the poor.
OK, the difference between poor and rich is growing but if the support for the poor one will be secured there is no problem, except jealousness.
rgds
Tom
Comment by Tom — Thu, Mar 30th, 2006 @ 8:44 am
If we don’t have significant levelling of income, the social differences will ossify: poverty and wealth will be inherited and there would not be money for high class public education and health care. The playing field would stop being level and social mobility and competition would be increasingly limited. It is natural for humanity to build closed elites and cartels of power. That’s why we should keep constant guard on income differences and the quality and access to high class education and health care for ALL citizens. The children must always be able to compete based on abilities and not on parents’ or foreparents economic successes or failures (as we know in the unpredictable market conditions these can be quite random). Any economic theory that discounts human nature should be regarded as deeply irrational. For economics of reason, see below:
http://stockholmslender.blogspot.com/2006/03/economics-of-reason.html
Comment by mjr — Thu, Mar 30th, 2006 @ 8:57 am
maybe Finland needs to wage a War on Jealousy…
Comment by sherewin — Thu, Mar 30th, 2006 @ 9:01 am
mjr,
By suporting a strong economy we ensure good basic education and health system for everybody. And we also have the money for that.
Levelling the income does not help anything there! See my previous post.
By leveling the income we will reach the opposite! We will harm the economy, reduce employment rate and will not have money for good quality basic services for everybody.
Income differences do not absolutely need to lead to extreme social differences and closed elite groups.
e.g., compared to many other countries a Finish woker can discuss to the boss of a 1000 people company if he has an important issue.
rgds Tom
Comment by Tom — Thu, Mar 30th, 2006 @ 9:38 am
Well, I think it is a question of trust: if we create a powerful upper class and divide the wide middle class into different upward or downward trending sections, for how long can be sure that we also maintain high quality public education and healthcare? They cost tax money and there will be very powerful groups shouting against any taxation. I think the US is a warning example here: there public health system is not universal and basic education of very varying quality basically from a 3rd world like conditions in the worst slums upwards to very high quality indeed. College education is getting very challenging even for the middle class to pay for etc. etc. Mostly all this is the political result of not aiming to control unequal income distribution very seriously, resulting steadily more uneven playing field for social competition. This in not what I would like to see in Finland.
Comment by mjr — Thu, Mar 30th, 2006 @ 9:48 am
It’s correct that we are not aiming for as system like in the US where the upper class is too powerful and the lower class has nothing more than basic human rights.
But I think that we should prevent politically such differences in power. High tax and killing of all property income does not help to my opinion.
Social differences are not possible to eliminate by tax or by money.
Compare an uneducated guy from a small village in middle or north Finalnd to an highly educated guy in Helsinki.
The uneducated is living from support money, his fiends are similar guys, having a party after each pay day and getting heavily drunk.
The friend of the educated guy are typically well educated as well, the group has contacts to many comanies or universities ina nd outside Finland.
These two example guys are in totally different social groups. These groups are unlikely to mix and no tax or parents can influence this.
I asume they simly ended up in different groups because they have different talents.
People are different and we have to accept this!
Typically high educated parents cam motivate kids better to be industrias at school and understand the importance of education than parents from lower middle class. We can’t avoid this by tax or suport money. We have to accept such differences.
rgds Tom
Comment by Tom — Thu, Mar 30th, 2006 @ 10:26 am
No, of course I accept income differences - in the current situation they are unavoidable. As long as we’ll have scarcity we’ll have meaningful differences in income and status. The question is only that we have to keep them in control. Once you let go it’s very difficult to restore the balance (given the human nature). So that’s why I would be very wary of laxing the levelling structures, it’s a very slippery slope.
Comment by mjr — Thu, Mar 30th, 2006 @ 10:30 am
Tom,
I disagree with a couple of things you said. Firstly, you imply that taxation is about getting value for money. In other words, the rich should only pay for the services they use. This isn’t actually the purpose of taxation. In general, it is simply to redistribute some of the benefits of the market distribution on income according to overarching goals of improving quality of life.
The idea that taxation is money taken from you that you deserve is an error. We have a system in which we use markets to distribute wealth. Since their doing this is not in the interests of everyone we redistribute some of it so we get better outcomes.
Secondly, the argument that the rich make the pie bigger for everyone is not true. Growth requires money to be used and the needy cannot save money so they use it all up. The rich, by contrast, tend to put lots of money under the bed or into banks rather than investing it. Banks invest money but the process is much less direct and much less efficient than people people spending money on day to day items in their own neighbourhood, like housing, clothes and food.
Comment by finnsense — Thu, Mar 30th, 2006 @ 10:49 am
Finnsense,
I don’t mean that the rich only pays as much (tax) money as he uses in services. But this what he pays should stay reasonable.
It should be looked at how much more he pays than average rather than his tax percentage.
If one pays 20 times more than he receives in services it is definately unreasonablen, no matter if his tax is 5% or 80%.
Of course it can be argued what is a reasonable limit for the rich. Is it 2 times more than he gets in services or 10 times more.
Of course some rich save the money under the bed. That that is never real big money. Most of them invest in shares, fonds or real estate (real estate is almost like shares in Finland). This is money what the economy is using and creating working places.
It so far has always been more efficient when money has been in the hands of private industry and not in gouvernment pocket.
rgds Tom
Comment by Tom — Thu, Mar 30th, 2006 @ 11:19 am
Tom,
What I’m saying is that the amount of tax you pay should be totally unrelated to what you get from the “state”. Of course we need to make sure the wealthy have an incentive to use their skills but beyond that what is a fair distribution of income is a matter for negotiation. Simply assuming market distributions are a good guideline is a mistake. For the market to work requires everyone to be involved and to accept the system. It is a means to an end, not an end in itself.
I also diagree about the evidence for the efficiency of low taxes on the rich. All Anglophone countries have much lower top rates of tax than the Nordic countries, yet they are a)not generally richer and b)where they are richer (US) the average person does not benefit from the increase in the size of the pie. Average incomes for the median American have risen by an average of 1% a year in the last 25 years and have not risen at all for the poorest.
Comment by finnsense — Thu, Mar 30th, 2006 @ 11:28 am
“sure i can pay for the cancer and use up my life savings, or go up to Canada and wait a year to get a MRI.
Or go to the UK and find out I am to old for the operation, so I can’t get it.
Or go to Finland and find out they called me on the phone, and met their response time of 6 months.
Humm… I think I want the ability to get medical care, not some government policy that places me at the back of some line.”
Winter, you don´t seem to know what you are talking about. Just this month a friend was diagnosed with cancer. He got one week to get used to the idea, and another week he waited in this famous line. Two weeks from the diagnose he was operated. I suppose he payed the horrendous 22 euros.
Comment by press — Thu, Mar 30th, 2006 @ 11:52 am
On #52. Oh no, I have no problem with people getting rich. I was just pointing out, before we make the wealthy our heroes, that the middle class is putting more money in because of their huge number compared to the few tax-millionaires. The average guy surely gets something back in services, but in relative terms, he has paid a bigger percentage of his income to get the same services as the rich guy.
Besides, one does not get rich, if there are none of these middle class suckers letting the company vacuum the best ideas out of their heads for the monthly salary. It is absolutely hilarious to see, what happens to the value of a small electronic circuit, when it leaves the designers head and lands on a Nokia phone. But in science and engineering, the first thing you learn is how to cope with non-ideal systems.
Comment by antti (the redneck one) — Thu, Mar 30th, 2006 @ 11:54 am
Finnsense,
You disagree that the tax should be related to the service one receives.
Perhaps during your next business travel to Russia you will enjoy a dinner in a good restaurant.
The price for locals is 20 EUR. This good restaurant is quite expensive for locals and for the poor average Russian it is 1 week salary. Because it is so unfair and the poor need to be supported you also need to pay 1 week salary, e.g. 1000 Eur.
I think there is no relation between prive and service and this case would not be aceptable.
An other example
You drink a beer in the Russian pub and pay 2 Eur for it. The locel guy pays only 1 Eur.
That is not too bad and can be acepted.
There MUST be a relation between price to pay and service to receive. Ther MUST be support of the poor by the rich but it must stay inside reasonable limits.
If you guys move back to US as a rich man you will not be forced any more to support the poor.
If you make 20.000Eur/month netto back in the US, would you then distribute every month 15.000EUR to the poor guys in the neighbourhood?
Perhaps if a friend is in finacial trouble you may help him with some money, but surely not 15.000,- per month.
rgds Tom
Comment by Tom — Thu, Mar 30th, 2006 @ 12:24 pm
Tom,
I’m not talking about fairness. Systems can only be fair or unfair within an agreed system of rules and there are no agreed systems of rules about the distribution of wealth within a society. We are playing Monopoly but we don’t know the rules. Therefore, the rules have to be negotiated or no-one will play. That’s democracy.
You are right that the well-off will become more and more annoyed if they feel they are not getting value for their money but they have no choice but to play the game. No rich person is rich due only to the product of ther own labour. Generally people get rich by getting some of the proceeds of the labour of others. There’s nothing wrong with that if the others don’t mind but it is a question of negatiation how much of those proceeds they can keep. I would argue it is not in the interests of the majority of people for the rich to pay low tax but it is in their interests to keep the rich playing the game. So the negotiation is about where this line is. I think Finland has it about right at about 50% of income.
Comment by finnsense — Thu, Mar 30th, 2006 @ 12:52 pm
USA in work:
http://www.wsws.org/articles/2001/mar2001/pov-m14.shtml
“US has highest childhood poverty rate of industrialized countries”
“The United States, with more than one in five children living in poverty, has the highest rate of childhood poverty among the nations that comprise the Organization for Economic Cooperation and Development (OECD). Twelve million American children live in poverty.”
Reality check time, Phil.
Comment by Anonymous — Thu, Mar 30th, 2006 @ 12:58 pm
This is a bit off-topic from the original post, but since the discussion is back at the distributional effects of taxation, I’ll give my tuppence:
Remember the Talouselämä article about tax evasion in Finland? The discussion on their web page about that topic seems to have a consensus that tax evasion is so prevalent that if the officials would crack down on it, the whole sector of house building would severely slow down or stop. Some people see benefits in the tax evasion, saying that without it there would be less productive work done in Finland. None of the discussants seemed surprised or morally upset.
A related piece of news was the court decision that even a three year job in Olkiluoto can be considered temporary in the sense that it allows the employee to receive tax free per diem (=päiväraha) throughout those three years.
And a third interesting tax policy development is the foreign expert tax law, which gives well-paid foreign persons and their family members a 35% income tax ceiling.
Maybe these practices are the Finnish way of taking part in the tax competition. = Let those whose skills have been politically deemed to be of great demand evade taxes partially, fully, or receive tax free per diems. While the not-so-important pay the full tax.
I would not call this a very just, equitable, or economically efficient policy.
Comment by Mara — Thu, Mar 30th, 2006 @ 1:01 pm
“The Luxembourg study found that several European countries have child poverty rates rivaling US levels. Italy has the second-highest rate in the OECD, 19.5 percent, the United Kingdom, 16.2 percent, and Poland, 12.7 percent. In Sweden, Finland and Norway fewer than 4 percent of children live in poverty, according to the study. These countries offer some form of health insurance, child care support, paid parental leave, and tax cuts or child allowances for parents. However, European governments are coming under increasing pressure to carry out cuts in these social programs along the lines of the US.”
Comment by Anonymous — Thu, Mar 30th, 2006 @ 1:13 pm
#65 finnsense,
opinions actually do not differ completely. We are just negotiating here about the rules you described in your post #65.
Negotiators just have a bit different opinions if 50% max. tax is OK or if it should be defined a bit different.
As long not everybody is working in his own one man company there will always be people working for bigger companies owned by one or more share holders. Some companies are running well and make the share holders/owners rich and others do not so well and owners loose money. That is quite normal.
If someone does not like the risk to loos money in bad times, he just workes in somebody elses company.
Almost everybody can do a combination of that. He can work in his normal job and pay a small sum of money regularly into a fond. This way he is company owner with all benefits and disadvantages as well.
When his savings are growing and the strategy of selecting shares and funds was good, his main income is as company owner.
It is not so black and white.
rgds
Tom
Comment by Tom — Thu, Mar 30th, 2006 @ 1:49 pm
All of the US-Finland comparisons fail when we note
that the Finnish economy, as well as that of most of
Europe, ultimately freerides on the backs of the
American worker-consumer.
It is this freeride that permits Europe to indulge in
expensive, state-funded social programs that in many
ways does raise the quality of life. However, the
question that is rarely asked in Europe is can a
welfare state survive without exports to markets that
do not have a welfare state?
The obvious reason this question is not asked is that
it cannot. So the more apt question to ask in
comparing quality of life issues is how can America
have a comparable standard of living, yet with lesser
costs than Europe?
The straighforward answer is that it can have those
standards because of liberal labor and capital
markets. Such markets not only ensure the
pre-eminence of American political and economic power,
but the lack of those markets - through excessive
labor laws, “social market” policies, and
dirigisme - ensures that European power will be
continuously marginalized on the world stage.
Which is a good thing, obviously, considering the
penchant for Europeans to make a mess of things,
historically speaking.
Comment by Finnpundit — Thu, Mar 30th, 2006 @ 9:29 pm
Hey Finnpundit. Now try to explain what you just stated to average Finnish person.
Somehow a lot of them think that all this wellfare comes from within Finland, completely ignoring the fact that no, our wellfare actually does come from those countries that buy our products at high prices.
Now the question is, how would you explain the above to your average voter? I guess you can not. You just have to let the economic recession come and foreign money to exit Finland. Then it will be painfully clear, once again.
Comment by Just a dude — Thu, Mar 30th, 2006 @ 11:00 pm
Now the question is, how would you explain the above to your average voter? I guess you can not.
More accurately, it is in the interests of the Finnish welfare state to never acknowledge that the welfare state cannot be self-sustaining, and that it needs to exploit cash-flush, non-welfare state markets overseas. So there will never even be an attempt to explain such things to the average voters.
Comment by Finnpundit — Thu, Mar 30th, 2006 @ 11:36 pm
Finnpundit: “…considering the
penchant for Europeans to make a mess of things,
historically speaking.”
Indeed. Just look at that (previously) perfectly nice continent a bit west of Europe.
Comment by Drakon — Fri, Mar 31st, 2006 @ 12:46 am
from the BRUSSELS JOURNAL
The Europe of today has “19 million unemployed, and an overall youth unemployment rate of 18%. ”
Drakon…. I think you have made a mess of things….
like “Europe with gigantic problems: an unsurmountable public debt,”
snd
“Europe’s production is failing because of bureaucracy and a paralytic tax burden.”
Comment by winter — Fri, Mar 31st, 2006 @ 5:46 am
Well, considering that the US is borrowing like mad I would not really throw stones in glass houses. Evil little Finnpundit always forget to mentions that not only Europeans are freeriding on the economic mad, sorry powerhouse of the US but also the Asian bankers. They would be out of job without the American deficit financing! And in the meanwhile child poverty and dismal slum schooling prohibits millions of young talented people to compete fairly on a level playing field, their chances are destroyed before they are born… And the crazily borrowed money goes to finance imperial adventure and out of control private consumption. And then he comes and lectures Europeans of responsibility. A sad spectacle, though, I admit, also comic.
Comment by mjr — Fri, Mar 31st, 2006 @ 9:09 am
Finnpundit,
I cannot believe you are still spouting the same old nonsense. Let’s take it piece by piece.
1) Any small country will gain large amounts of its money through exports. Specialisation is a result of globalisation and no country can be competitive in all areas. Thus Finland specialises in phones and paper products and in those it’s the best in the world.
Your argument is the same as saying Maine freerides on the rest of the US.
2) The american consumer does buy a lot of foreign stuff but not with its own money. The american consumer and the american government are massively in debt. If we should thank anyone for the size of american exports it is the Chinese, for lending their savings to reckless americans.
It’s almost impossible to find an economist who thinks private or public debt in the US is sustainable. Fortunately for Europe, most trade is within Europe and Asia. The US, in comparative terms, is not such a big deal.
You really should try undestanding what you talk about.
Winter,
Well if it says so in Brussels Journal it must be true! I’m sure I could find a quote from the Democratic Underground to refute what it says there. It wouldn’t prove anything.
In general there seems to be reluctance here to differentiate between Europe, the EU, the EEA, the Franco-Gemran economic model, the eastern European econmic model, the Anglo-American economic model and the Nordic model. Parts of Europe may have problems but many parts do not really. The Nordic countries, in terms of quality of life, offer their people the most competitive economies in the world with the lowest levels of poverty. If that’s failure I’d love to see success.
Comment by finnsense — Fri, Mar 31st, 2006 @ 9:11 am
Finnpundit,
What a bullshit.
Do you really believe that the US has has no wellfare only that the European can have one?
The US has no wellfare because they want to have it so and Europens want more wellfare because they select this way.
Of course we have discussion here and there how much or how less wellfare is needed and affordable.
In Europe they have done historically a mess 60 years ago.
The US is still doing it!
And don’t believe that Europeans need the US more than opposite.
It just happens to be that North Americe is split in only 2 countries and Europe in some more. For that reason a single country in NA is bigger in size and has bigger mouth.
Naturally if you have to unite many countries in Europe there will be more bureaucracy and hassle. But therefore we can enjoy a wide range of different culures und better understand and accept different cultures.
Sorry, I had to react a bit stronger after so much arrogance.
rgds Tom
Comment by Tom — Fri, Mar 31st, 2006 @ 9:16 am
Why not confiscate these poverty striken children and then auction them off to unpoor families?
Comment by John Swift — Fri, Mar 31st, 2006 @ 11:14 am
Look at Finnpundit’s blogger page.
It’f full of extreme anty European comments, discussions and propaganda.
What is he doing here in Finland? He seems not to understand and laern anything about Europe.
I guess we do not need such persons anywhere in Europe.
Comment by The European — Fri, Mar 31st, 2006 @ 12:30 pm
“for example, through the child missing out on upper secondary education simply because the parents cannot afford the textbooks”
Bullshit.
Some families can’t afford the textbooks because they don’t know how to use money. It’s a shame we let stupid people reproduce!
Comment by Mikko Sandt — Fri, Mar 31st, 2006 @ 6:08 pm
The problem, Mikko, is that children often are different from their parents: look at the old European hereditary monarchies, the resourceful founder of the dynasty invariably produced utter idiots. Seems that nurture has some effect as well…
Comment by mjr — Fri, Mar 31st, 2006 @ 6:46 pm
European wrote:
“Look at Finnpundit’s blogger page.
It’f full of extreme anty European comments, discussions and propaganda.
What is he doing here in Finland? He seems not to understand and laern anything about Europe.”
Propaganda? He is right on the money on most things he writes about.
Ofcourse it pisses you socialists off because you are enjoying the moment. But one of these days you will understand what he was talking about. Ie, when the next European recession comes.
Comment by Just a dude — Fri, Mar 31st, 2006 @ 8:36 pm
Finnish goverment should wind down the support system. It is simply too good and people abuse it. For example Vantaa, entire city basically abusing the system. Socialism is a good thing, it is just taken way too far in Finland. For example, if you are an alcoholic, the goverment will pay for you drinks, you don’t have to get job, just be listed as job applicant. Goverment will pay for you living, curtains, newspaper, bed etc.. and basically you can party till you liver gives up…. It is time to take an american approach, if you cannot re-establish yourself within a year, then goverment would provide you a used shopping cart to push around in the arctic environments…
Comment by Juha — Sat, Apr 1st, 2006 @ 9:04 am
How do the rich pay 28% flat rate ? Is this dividend income ?
Comment by BloatedBubba — Sat, Apr 1st, 2006 @ 12:58 pm
hfb:
Perhaps the point was that, at the rate of taxation and the amount of aid the Finnish government seems to give, how is it possible that children live in poverty in Finland?
I think a lot of has to do how poverty is defined. In a society where a Rolls-Royce Phantom is a typical family car, 60% of the median income means that you’re quite well off, don’t you agree?
About poverty in Finland… One night the MTV3 news was reporting about the new poverty. A single mom with three kids was complaining (in the kitchen of her most likely at least 75 sqm apartment) that things are so tight that she might have to consider going to work. Holy smoke. Stop the press.
Another magazine article interviewed three women: a “poor” one with a net income of about 1000€, one with median income and a “rich” one making about 4000 €/month. The “poor” one was complaining that she doesn’t have the money to hire a repairman at her summer cottage.
Finnish poverty is just killing me.
Comment by Freeridin' Franklin — Sat, Apr 1st, 2006 @ 1:56 pm
How do the rich pay 28% flat rate ? Is this dividend income ?
Exactly. Unfortunately it is not possible for everyone to start a company, work as a subcontractor and pay him/herself in dividends. This is one policy that favours the rich.
If you look at the list of people making over a million of “granny money” a year (my boss is on that list), you will see wildly differing correlations of income and tax rates. Those whose income is in the 7-8 figure range almost invariably pay 28%.
Comment by Freeridin' Franklin — Sat, Apr 1st, 2006 @ 2:09 pm
Unfortunately it is not possible for everyone to start a company, work as a subcontractor and pay him/herself in dividends.
Well, it is indeed possible but the tax authorities will consider it normal income and will tax it accordingly.
Comment by Freeridin' Franklin — Sat, Apr 1st, 2006 @ 2:11 pm
Finnpundit:
It is this freeride that permits Europe to indulge in
expensive, state-funded social programs that in many
ways does raise the quality of life.
I always thought that we were suffering terribly under this communism but don’t realise it because the evil welfare-statist media has brainwashed us and blocks our access to the internet so that we could tap into an infallible source of eternal truth like Fox News.
Please, try to make up your mind.
Comment by Freeridin' Franklin — Sat, Apr 1st, 2006 @ 2:16 pm
Is that 28% net of all things (healthcare etc)? Surely though they would claim it is not investment income if it is your “family” company ? But wouldnt the company profit get taxed first to get the dividend?
Comment by BloatedBubba — Sat, Apr 1st, 2006 @ 2:18 pm
28% is the capital gains tax. So money you earn not as salary but as the profit made by assets. If you own a company (or part of a company) which is limited and you do not pay yourself a salary but pay yourself dividends or sell a bit of the company every year or something, you will pay capital gains tax at 28%.
It’s pretty rare for people to do this. Jorma Ollilla makes plenty from investments and assets but still has a salary of several million a year, on which he pays normal tax rates.
Comment by finnsense — Sat, Apr 1st, 2006 @ 5:09 pm
look, i read through at least 30 of these comments (i couldn’t spend an hour and read them all, apologies if this has been mentioned), and none of them yet noted that the data (that came from a unicef article) provides this definition of relative poverty:
“Child poverty does not mean the same in wealthy countries as in the developing world, where half of all children do not have access to basic health care or schooling. The figures refer to relative poverty, which is defined as having an income below 50 per cent of the national median”
listen to me people: relative poverty does not equal poverty! if france’s median income was 500,000 euros a year, any family earning less than 250,000 euros a year would be considered poor. “relative poverty” is the stupidest calculation of poverty imaginable. what it really measures is income disparity, which is fine, if they called it that. if they added perchase power parity, it might be more relevant (a person in mexico can buy a pound of grapes for .65 cents, while for a dane it would cost 2.25 euros, etc.) but it doesn’t, and therefor, is spectacularly useless!
Comment by jimmmy — Sun, Apr 2nd, 2006 @ 8:12 am
@ Jimmy
I agree on your point.
Only the number of anual median income has one zero too much.
It is about 50.000,- EUR.
28% flat tax for dividend of own company….
Yes, I also pay 28% for dividend of my own company.
But if my company would make 50.000 profit/year, the company pays 27% tax from that. Remaining only 36.500 EUR to pay dividend to me.
From this I need to pay 28% tax. Finally it remains only 26.289 EUR in my hands.
This is nearly 48% tax for 50.000 Eur profit of my company paid to me as dividend!
Is there still anybody telling people with own company getting dividend are paying too less tax?
rgds
Tom
Comment by Tom — Mon, Apr 3rd, 2006 @ 8:28 am
76. It’s almost impossible to find an economist who thinks private or public debt in the US is sustainable.
Finnsense, obviously you have limited understanding of economics. To assert that there are no economists who think debt in the US is sustainable is a sign of ignorance, at best. Not only that, millions of investors throughout the world continue to give a vote of confidence in the US economy, and they have a greater vested interest in the subject than any politically-motivated economist in academia.
As it happens, The Wall Street Journal ran an interesting editorial on the subject (subscr. required):
The economy is growing smartly, more Americans are working, wages are rising, capital spending is robust and federal tax revenues are rising at a double-digit year-over-year pace. This must mean it’s time for everyone to worry about the trade deficit as the latest sign that all this prosperity is an illusion.
[…]
Here we go again. For at least the past 30 years protectionists have warned that the trade deficit will lead to ruin, but it’s closer to the truth to say this has it exactly backward: Since the mid-1980s the trade deficit has risen when the economy has grown and receded when the economy has faltered. The lowest annual U.S. trade deficit in recent times was recorded in 1991, a recession year. Dan Griswold of the Cato Institute recently ran the numbers and discovered that “there is a strong correlation between rising trade deficits and falling unemployment.”
Part of the problem here is simply one of accounting definition. In the national income accounts, the mirror image of a merchandise trade deficit is a capital-import surplus. When the U.S. investment climate improves — through such policies as reducing the tax rate on capital gains — global investment dollars flow into the U.S. Foreigners in turn earn the dollars to pay for those investments by selling Americans more goods and
services than they buy from us. This global exchange process has been a formula for U.S. success: American workers get the auto, technology and financial services jobs that come with foreign investment here; American consumers get the benefit of low-priced products from China and elsewhere, which raises workers’ standard of living.
[…]
Senators might also consult a new study by Ricardo Hausmann and Federico Sturzenegger, of Harvard’s Kennedy School, who argue that these current-account deficits are in reality a statistical illusion. They found that the net return on the U.S. financial position in 2004 was roughly a positive $30 billion and not much different than it had been in 1982, despite 22 years of deficits.
How can that be? “A correct descriptive explanation of this puzzle is that the rates of return of U.S. liabilities is significantly smaller than the return on its assets,” Mr. Hausmann writes. Foreigners are willing to accept a lower rate of return on their U.S. investments, such as Treasury bills, because they are partly buying dollar currency stability, liquidity, and a safe haven against political and economic risk. Foreigners, for
example, hold hundreds of billions of dollars of U.S. currency, which is the equivalent of a zero interest loan to Americans. By contrast, American assets abroad earn higher than normal rates of return because of noncounted factors such as insurance, know-how, and
the value of universally recognized brand names like McDonald’s and Disney. When taking these into account, the authors conclude that America is a net creditor, not a net debtor, nation. Even more surprising, correctly measured, China is a net debtor to the U.S.
Ironically, those who are most alarmist about a fire-sale on U.S. assets are promoting policies that would encourage that capital flight. Raising the U.S. capital gains tax rate back to 20% from 15%, or the dividend rate to 35% from 15%, would reduce the after-tax return on capital invested here and contribute to the very investment sell-off that the critics fret about. Capital also flees nations with protectionist trade policies, so the Graham-Schumer tariff bill would be economically self-defeating.
There are things Congress could do to raise net national U.S. saving — notably, spend less money. This means we wouldn’t borrow so much from abroad. But in a global capital market, the key to growth is providing the opportunities to invest, not whether your national accounts balance. The time to worry about the trade deficit is when Congress tries to do something about it.
As to your other comment, Finland is not comparable to Maine, considering that Maine is subject to the Interstate Commerce Act (and Europe still is struggling with that). Finland belongs to that group of welfare statess which burns up wealth in easy, cushy living (thus contributing to Third World poverty), while the US tries to spread the wealth through a more open, robust system of exchange.
Comment by Finnpundit — Mon, Apr 3rd, 2006 @ 5:55 pm
Finnpundit,
1) If you drew up two lists of the Economists who are worried about the twin deficits and those who aren’t, you would find that one is about 1000 times longer than the other. Moreover, if you drew up a list of the economists from the top 10 Economics departments in the US and did the same thing, you’d would be hard pressed to find any who don’t think the twin deficits are a worry. Additionally, Alan greenspan thought the deficits are a problem and so does Ben Bernanke.
Your post, by the way, is about the trade deficit. That’s not the same thing as the federal budget deficit and it’s not the same thing as private debt, which were very relevant to my comments.
Criticising my understanding of economics because you found some editorial from the Wall St Journal that confirms your prejudices isn’t convincing anyone. Criticising it in light of your gallery of non sequiters and freakonomics just makes you look like an imbecile. I pray that you make these comments as some kind of freshman prank to wind up Europeans because if you actually believe you’re making sense it’s an absolute tragedy of self-deception.
2) Your comment about Maine suggests you didn’t understand my point. The point was that all small nations operating in huge markets will get most of their revenue from exports. What the ICA has to do with that I have no idea. The rest of your paragraph doesn’t even make sense.
Comment by finnsense — Mon, Apr 3rd, 2006 @ 6:52 pm
Finnsense, it’s obvious your reading comprehension levels are not up to par. Please try to educate yourself in the matter, instead of spouting inanities about which you know very little about.
The twin deficits are sustainable at the moment. Thousands of economists employed by financial institutions around the world have deemed it sustainable, through their dollar votes of confidence. I dare say you may be right that most economists in academia would differ, as academia, - both in Europe and in the US - tends to draw the more left-wing economists. Those that can’t do, teach.
This is not to say that deficits can be a problem, but if you’d read more closely, you’ll notice that the article makes clear that growth trumps deficits all the time.
Your comparison of Maine to Finland is still completely mistaken. Maine cannot be a freerider, since its economy is wholly subsumed within a competitive market. Finland, however, is a freerider, since its protectionist barriers prevent the free distribution of the wealth created within. Finland simply does not re-distribute the wealth it creates to the rest of the world, preferring to hoard it (and burn it) within its own borders. It enjoys a freeride, incommensurable with its own economic potential.
That’s all fine and dandy, but it invalidates any claim that 1.) Finland’s welfare state is a self-sustaining model that can be exported to other countries, and 2.) that Finland (and, by extension, most of the European continent) is a benign country of goodwill to the rest of the world (especially the developing world), as it simply doesn’t believe in the sharing and redistribution of wealth, which only happens efficiently through open trade and open borders.
Comment by Finnpundit — Mon, Apr 3rd, 2006 @ 9:35 pm
Perhaps some trade limitations must be accepted.
For example if Europeans do not like to eat food with modifies genes, they do not like to drink whine with added chemicals.
Moslems do not like to eat food with pork meat and Americans do not like to eat stakes from cats and dogs.
Evenso researches show no health risks.
International trade has to accept local habits and culture.
rgds Tom
Comment by Tom — Tue, Apr 4th, 2006 @ 9:16 am
“Thousands of economists employed by financial institutions around the world have deemed it sustainable, through their dollar votes of confidence.”
finnpundit is right on this. every yen,yuan,rupie, etc invested in the dollar is exactly that- a foreign economist telling his/her government that the u.s. dollar, and, by extension, the u.s. eoonomy is a safe bet for investment (or, at least, against inflation). furthermore, despite the yelps of so many alarmists, it is in the best interest of all of the dollars biggest investors that the dollar remains stable (including china, japan, and the myriad countries that have their currencies pegged to the dollar).
OT- the thing about economists, is that you have to give them a value, as a reader (or a business person). “the economist”, london’s “financial times”, “the wall street journal”, are read by international ceo’s, cfo’s, and coo’s. the nytimes’s paul krugman and his london gaurdionistas are read by…. people who where tin foil hats. the choice is yours.
Comment by jimmmy — Tue, Apr 4th, 2006 @ 9:31 am
Finnpundit & Jimmmy,
Your lauding of the market over professional economists is odd. If the implication were true that the people on the ground know best there would never be any crashes. But there are. All the time. Greenspan predicted the last stock market crash. Loads of people predicted the crash before that etc etc. Markets and central banks behave irrationally and often politically.
Finnpundit, your comment about academic economists being left-wing is both untrue and moot. The are all radically pro-trade and pro-market. Still, that’s got nothing to do with the current issue. Bush is not behaving in a very right-wing way. The problem is that his public spending has sky-rocketed and that’s a concern to economists of all stripes.
I don’t understand your point about Finland being a freerider at all. Maine is subsumed within the US economy the same way that Finland is in the EU. Both the US and the EU are heavily protectionist in global terms. What on earth are you talking about. Also freerider does not equal free trade. They are different issues.
Comment by finnsense — Tue, Apr 4th, 2006 @ 10:10 am
Tom, the dividends received by the owners of unlisted companies are exempt of tax up to 9% of net assets. The maximum exemption is €90k per year, while 70% of the excess is taxable ascapital income and 30% of the excess is exempt.”
Comment by Oregon — Tue, Apr 4th, 2006 @ 3:59 pm
as [Finland] simply doesn’t believe in the sharing and redistribution of wealth, which only happens efficiently through open trade and open borders.
I don’t quite see the rationale behind claiming that the US has “open borders” while Finland has not. The issue touches me personally, as I find excellent employment opportunities in New York, for instance, which are not available to me without a Green Card. Some employers offer H1B sponsorship but they are few and far in between, especially after 9/11.
Please explain to me how protectionistic immigration policies exhibit a policy of “open borders”. I’m anxiously waiting, since you are not one to be caught being short of explanations.
Comment by Freeridin' Franklin — Tue, Apr 4th, 2006 @ 8:09 pm
OT- the thing about economists, is that you have to give them a value, as a reader (or a business person). “the economistâ€Â, london’s “financial timesâ€Â, “the wall street journalâ€Â, are read by international ceo’s, cfo’s, and coo’s.
All the more reason to avoid these rags like the plague: they’re read by a bunch of morons.
Seriously, low intelligence, as well as low moral standards, are a prerequisite for upper management nowadays.
Comment by Freeridin' Franklin — Tue, Apr 4th, 2006 @ 10:47 pm
My last visit to Finland (August 2006) surprised me - so many people seemed to be living from welfare, who would never qualify in the USA! Able-bodied people with higher degrees, who’d do very well in other countries, were CHOOSING to be jobless in FInland, since it was so comfortable! One woman with a college degree, wtih no husband, decided to adopt a Chinese/Mongolian child to get a free ride for the first five years of that girl’s life - so here’s a Finn raising OTHER PEOPLE’S KIDS on Finnish workers’ backs for FIVE YEARS! She dreaded returning to work. I suggested cynically that she adopt some more - how about Africans? She said she was too old to qualify by the adopting agency, unless she had a husband. I said, “Hey, who cares about the rules, find a fellow who doesn’t want to work, and do the ‘get married’ thing on paper, then adopt a child, then have him divorce you, and you get support as a single divorced mother!”
She looked at me and said, “It might work!” She looked happy, hadn’t thought of that solution!
I could not believe that the famous sisu-filled Finns could sink so low as to live off others well into their 40’s, with no intent to ever get a job, no matter that their university diplomas came free of charge on the same taxpayers’ backs.
As an outsider, I thought that it was not only sad for these individuals, losing their prime time in life to low-welfare-payment free rides and the best chance to ever become anything, but also for the whole society: gifted and trained people are being encouraged to drop out. There was no shame at all in being parasites, as there would be amongst educated people here. There was no shame in their self-induced failures, since the society deemed it fine to loaf.
On top of this, because of their educations, they looked down on the less-educated and employed Finns - e.g. clerks, post office workers, transport workers, cleaners, cooks, factory workers, etc. etc. The snobbery was unbelievable - from total parasites!
Unbelievable - a fine nation will be brought to its knees by this infectious, cynical, anti-Protestant, Anti-Finnish attitude.
Their last and feeble defense when they admitted to me (as a visiting American) was: “Well, the government gives the money to Somalians and other immigrants, and it’s our money, so why can’t we take it!????”
Yes, Finland, go ahead and destroy yourself. The world will weep, if they have heard of you at all.
Mary Mekko
Comment by Mary Mekko — Wed, Aug 8th, 2007 @ 6:38 am