I think it is harmless, and sometimes it is nice to buy things made in one’s homemade.

In the case of foodstuffs (I think they have the swan Finnish flag logo (with the text “Gott frÃ¥n Finland / Hyvää suomesta” rather than the key), it is perhaps even better for the enivornment to buy Finnish products, as they haven’t travelled around the world by polluting transport methods to reach the table.

Made in Finland, supports Finnish work.

Finlux TV’s are nowadays made in Turkey or wherever.

it is perhaps even better for the enivornment to buy Finnish products, as they haven’t travelled around the world by polluting transport methods to reach the table.

Word.

I think people in US should try to support their own production as well as we should be doing in here. And chinese people in China, british people in UK etc.. The transportation costs aren’t the thing, the pollution that transportation produces is.

“same goes for all the “Made in the USA” crap in the states. ”

Where do yo fine them?? I’d like to know. ;-D Seems like everything is made in China and bought at Wal-mart these days.
Yeah, as an importer of Finnish items for our online shop and trade shows it’s amazing how people value the made in Finland mark or tag on items. We travel to Finland 2-3 times a year and are always looking for new Finnish Handicraft items. Lots of folks we know leave the “Made in Finland” stickers or hangtangs on their items, especially home decor items. Lets hope Finnish quality never becomes “Wal-martized”.

A few years ago I saw an interview with an economics professor who pointed out that campaigns urging consumers to buy domestically-made products are ultimately bad for the economy: if the people fall for it, manufacturers get used to the idea that people will buy their stuff out of patriotic feeling, they will have less of an incentive to seriously compete with price or quality, which ultimately determinse success in the international marketplace.

if the people fall for it, manufacturers get used to the idea that people will buy their stuff out of patriotic feeling, they will have less of an incentive to seriously compete with price or quality, which ultimately determinse success in the international marketplace.

Sure, but the same could be said of any brand. People will pay extra for certain brands, even if the quality is not significantly better than a competitor.

By the way, referring to a member of the opposite sex as “hyvää suomesta” is not appreciated. I have learned this.

-BM

This logo on products means in many cases that the manufacturer is from/in Finland and uses as cheap as possible, foreign materials to produce the item.

The idea behind buying local products is OK and I have no problem with it. But to me most of the brands that push the “suomalainen” thing most prominantly, are also addding extra Euros to the price… So to me the logo translates to “deliberately overpriced” instead of “made in Finland”

While working at the cell phone section of Stockmann I just had to wonder how important it was for the Japanese tourists that the newest and greatest Nokia phones they bought were made in Finland. I usually had to open up the box and show the little sticker to them before they made the purchase. The more expensive phones are usually assembled in Finland but the batteries always come from China etc. Then you have to explain how it can be an official Nokia battery even though it’s not made in Finland. “See, it’s got the hologram and everything…” usually does the trick.

)))

Don’t buy Nokia – it’s made in China by poor chinese people who get looooooooooooow salary…

A few years ago I saw an interview with an economics professor who pointed out that campaigns urging consumers to buy domestically-made products are ultimately bad for the economy: if the people fall for it, manufacturers get used to the idea that people will buy their stuff out of patriotic feeling, they will have less of an incentive to seriously compete with price or quality, which ultimately determinse success in the international marketplace.

Exactly! Same for #8, too. Ditto Ditto Ditto!!!

Finnish businesses should be concentrating on making products that are truly marketable both here and abroad. Manufacturers of other lands should do the same. To rely on purchasing habits formed by mindless patriotism within one’s own land doesn’t provide a good measure for success, and thereby is inconducive to producing value for society.

I can only add that there are other advantages aside from competition. For example:

+++economies of scale can be achieved. A domestically-oriented producer can only produce small numbers; he needs a broader market to increase production and reduce per-unit costs.

Then, as in Finland’s case, maybe he won’t need to overcharge for those same products here at home

+++Trade also does wonders for product selection, since no single country can produce everything. And,

+++although I’m an environmentalist at heart, I value cheap transit that is generated through bilateral shipment of goods. I’d much rather invest in materials for more energy-efficient homes, etc.—something that is only possible with a good economy that’s fueled by trade.

Plus, with increased profits, maybe the shipping industry can be influenced to invest and become more effient.

I look for that symbol in veggies. If its being grown in Finland, that means it has been transported relative short distance to shop (eg. its more fresh) and theres less poisons in it, thanks to Finland not having as big bug problem as South Europe. And the farms usually arent located next to Highway 1.

Phil,

I don’t think it’s really “nationalism”. It’s important to keep up some industry running within the country too and not to import everything from somewhere else. The other problem is the trade deficit; a country could run out of money if everyone would only buy imported stuff. If everyone would just buy imported stuff, it would mean the country has expensive labor, which again means there won’t be enough exports produced to fix up the imbalance.

Trade deficit is already becoming a serous problem for the USA, because much more money flows out of the country than into the country. USA could already become bankcrupt in short time if USD loses it’s value. Many are saying that USD is overvalued at the moment.

Coincidentally Iran became an axis of evil when they began talks about changing their oil trading currency from USD to Euro. China and many of the middle east oil producers have more dollars than ideas where to stuff it all. A currency will quickly become devalued if it can’t be used equally to it’s value.

There’s few reasons to be a “nationalist” shopper.

“Made with pride in the USA”…

If everyone would just buy imported stuff, it would mean the country has expensive labor, which again means there won’t be enough exports produced to fix up the imbalance.

Or expensive taxes. Our labor actually seems reasonable, but when taxes are added, we need to work extra hard to stay competitive. Some of our industries stay ‘competitive’ by colluding with one another to protect their stake. Keeps prices and, thereby, wages nice and high.

Unfortunately, the worker doesn’t benefit, because his family must pay those same high prices….and suffer from the reduced selection, etc. We’ve been playing this self-defeating game for many decades during Soviet times and many vestiges still remain.

Coincidentally Iran became an axis of evil when they began talks about changing their oil trading currency from USD to Euro.

Of course

I saw a product that said Made in USA, I looked closer to the label and it said “parts made in china, constructed in USA” what a load of hogwash.

it’s like people who pay 2x as much for “brand name” items here in Finland. I can get the ‘off brands’ for usually 50-70 cents less.

I’d rather save money in the long run, I don’t give a flip about reputation. I buy just Xtra or Euroshopper brand (usually made in the other parts of the EU) and the food is just as good.

I buy just Xtra or Euroshopper brand (usually made in the other parts of the EU) and the food is just as good.

I bought a packet of Euroshopper coffee for 0.99e (Kulta Katriina and other brand names cost 2+ euros per package) and it was the most horrible coffee I’ve ever had. The stuff is hardly drinkable. Their food is ok, but the coffee…Stay away from the coffee!

It’s good to know where the product is made.
I’d also like to see who makes the profit out of the products. That would support the poorer nations.

mh – If the product has kulta in the name, it’s guaranteed to be the worst shit ever. I haven’t yet found a product that contradicts this law…..but…one that beats it to the bottom? Now that’s worth trying

Actually, does anyone really know what that mark truly means? We were trying to figure out which Finnish companies were actually still Finnish owned and still produced their product here in Finland…..and there are few outside the realm of local produce. Even Marimekko has most of their stuff made in China these days I think. It might be more of a marketing gimmick playing upon those to whom such things matter than anything of any real substantive value.

The ‘avainlippu’ site ( http://www.avainlippu.fi/ ) does have a lot of info on it, especially in the ‘made by’ / ‘product of’ distinction….still, not quite sure if it means what the people who look for and purchase products with this marking think it means.

I do not purposedly seek out “avainlippu” products, but in some cases the Finnishness of the product may make me choose it over a foreign one.

I don’t see how supporting local businesses could harm them in the long run. In reality, many products are not that different from each other — well-known brands are more popular because they are better known than the others. If domestic origin gives a brand an edge over a foreign one, the local economy will receive a boost, and this will indirectly benefit me, too.

You could of course argue for the “made in Finland” mark in a purely market economics way, thus:

A consumer has free choice to purchase any product which maximises their economic good, which includes such things as personal satisfaction just as much as more concrete, measurable things. Exactly what defines that economic good is up to the individual consumer and their personal preferences.

For someone buying a car, they may get more good from buying a red one than a blue one. For someone buying vegetables, they may get more good from buying organic veggies than non-organic.

And by the same logic, someone may get more economic good from buying “Hyvää Suomesta” marked products than products without that mark. It is not our place or anyone elses’ to deny a consumer that choice.

Market economics is sometimes depressingly like religion, in that for certain things it is possible to argue for opposing positions using exactly the same doctrine. But that’s a whole other discussion.

-BM

Finlux is junk cause its not really finnish product, you dont see “avainnippu” in they products. btw..

Ah, I think EU has forbidden any public institution to propagate and support homeland production. It was different in Kekkoslovakia. YLE was lecturing about how harmful it was to have vacations abroad or buy foreign products, as the imports/exports deficit would increase. Except, if you could buy something from the Soviet Union as with the clearing trade, we could then export there some more by the same amount.

Bank of Finland had even regulations, how much money you could take out of country. If I recall, even 500mk banknotes were not allowed at some time.

Speaking about Nokia phones. For some reason their high-end phones may proudly declare ‘Made in Germany” or something, but the low-end just has “Made by Nokia”. Like it would be much of difference, where the damn Japanese SMD mounting machine is operating.

I don’t go for any scheisse product instead a good one just because it’s Finnish, but going always for the cheapest price and moving all the manufacturing base to China is exactly, what Lenin once said: ” Capitalists are so greedy, they’ll sell us the rope we need to hang them.”

I still dont understand why this fuss is coming up.
Assume, Nokia, makes everything in Finland with ‘pride’ and Finnish people buy it with ‘pride’ (even if it was costly) other companies that are making phones worldwide, would have kicked Nokia out of everywhere and Nokia would have become a truely Finnish company with 1000 people. But now, dut to getting out of Made in Finland mentality, it is now providing jobs to almost 250000 people worldwide, and more than a million more who are in related industry, say making phone components, support services etc etc.
Second, how long finnish people want their people to grow vegetables and fry chips, let poor countries do this routined job, educate and train your people to lead big industries and bring more and more money to Finland.

Agreed, people should buy the best product. The only thing that keeps me ranting about these “I only buy finnish products” people, is the fact that I have noticed to be too much brand orientated myself.

“Or expensive taxes.”

The taxes in Finland are “expensive”. But when you check the figures of OECD, it turns out that the finnish “public sector” (not only the state but the public sector as a whole) does not have any net-debt (that is debt minus FINANCIAL assets – so don’t start talking about the difficulty of selling the national parks or anything like that). In some sense this seems like a good way of conducting economics. Unlike all other OECD countries (except for Norway, Sweden and South-Korea).

The less-expensive taxes in other countries (which tabloids frequently present – in a populistic manner) are simply taxes on future generations.

It’s good to buy domestic products, it supports local work, and thus prevents unemployment. And as said, its greener. If the quality is same, buy local. For groceries, certain level of self sustainability is good to have, just in case of uncertain times.

The less-expensive taxes in other countries (which tabloids frequently present – in a populistic manner) are simply taxes on future generations.

Sounds reasonable, but having debt is not only a function of earning; it is also a function of spending. If other countries spend more than they earn, that’s their unfortunate problem. It doesn’t mean that we should also spend more than we earn.

For us, taxes weight-down our domestic economy. Therefore, in relation to our incomes, we pay higher prices for goods and services than anywhere else in western Europe. If we’d lower our tax percentages, then overall tax revenue would probably increase due to the economic stimulus—that is, due to increased GDP. Then, maybe we’d also be less reliant on low-priced foreign goods.

Hey, Japs buy their PS3 because it’s Japanese, not the X360 which is pretty much a similar device thought cheaper. Some people look for that Finland sign, some don’t, at least it’s nice if you buy chicken, you know it don’t have the bird flu.

Don’t buy products from China.

Their environmental policies and labor policies are — hey, do they have any?

“If we’d lower our tax percentages, then overall tax revenue would probably increase due to the economic stimulus—that is, due to increased GDP.”

Kristian, you sound almost Keynesian. Don’t you know that believing in his teachings is almost blasphemy in libertarian circles?

In any case I don’t think this equation is quite as simple as you propose. And especially if taxes are lowered in the high-income part of the population, then increased CONSUMPTION might not be the effect of the lowered taxes.

And in what sense does lowering the taxes increase the GDP? I mean tax income is spent, right? And the possibility for that income to be spent on domestic production is fairly high, whereas increased consumption probably (at least partly) is spent on imported goods, thus actually lowering OUR GDP. Right?

“For us, taxes weight-down our domestic economy. Therefore, in relation to our incomes, we pay higher prices for goods and services than anywhere else in western Europe.”

First of all, exactly what do you mean when you say that “in relation to our income we pay higher prices”?

There are lots of explanations to the higher (absolute) prices for goods and services. Small economy, long distances, etc. I don’t believe that income taxes have any relation to that. And the absolute prices are the single most important factor affecting the “relative” prices (whatever you mean by that).

VAT of course has an effect, but according to what I’ve read for example due to the high sales taxes on cars, car sellers (in Finland) get their cars from the manufacturers for cheaper prices than they would if the car taxes weren’t there to begin with. So taxes can have strange effects, that are not easy to predict.

If it in fact would be so that lowering taxes – with 100% certainty – had the effect that tax revenue would increase, why do you think that the authorities would not do that (lower taxes)? I mean, they are not complete idiots, despite what you might think about them.

The funniest thing I’ve noticed is that they even sell “Finnish products” when meanwhile the products are wholly made in Estonia.

The Best example is “finnish” clothing company Rockseri (www.r-collection.com). How much more finnish can you be, when you sell Axel Gallen-Kallela and Edelfelt t-shirts. I also like the “Finland” products along the Kalevala products.

This is the main reason why I find it useful that they have the “Key-Flag” trademark. It’s for fanatics that still want to support companies that have guts to keep their manufacturation in Finland – Don’t know how profitable that is.

The other side of the story is that if the products, for example t-shirts, would say it easily where its manufactured consumers would’nt have to guess. And the good people in Estonia would get recognition for their work!

“And especially if taxes are lowered in the high-income part of the population, then increased CONSUMPTION might not be the effect of the lowered taxes.”

Theoretically, a regressive tax structure is most conducive to productivity at all income levels. Despite this, I favor lowering taxes across the entire spectrum.

Aside from creating a disincentive for otherwise energetic entrepreneurs to produce products (honestly, without needing to collude on prices, etc.), I find it equally wrong that our poorest working people lose nearly 1/3 of their income to taxes. Both of these conditions exist now.

The following are interesting points:

“…income (derived from taxes) to be spent on domestic production…”

Sure, but it’s overpriced domestic production. Government suppliers and vendors need to set artificially high prices to cover their tax burdens. It’s not much different from our overpriced private consumer market.

In economic terms, this would normally cause income effect: An incentive to work more to cover the tax burden. But, here in Finland, instead of working more to compensate for the tax burden, they use tactics such as price-collusion. It makes things more expensive for all of us.

I want neither, price collusion nor for the ‘little guy’ to work harder than he already does.

“…increased consumption probably (at least partly) is spent on imported goods, thus actually lowering OUR GDP.”

Ha! Yes, I don’t doubt that’s true, but only within the context of our overpriced and artificially propped-up system. Consider that GDP is not only effected by imports, but ALSO exports and investment. High taxes make our small entrepreneurs less competitive as exporters and leave them less money to invest.

It’s not just the extra thousands of euros each individual pays each year; instead, it’s the overall effect on the economy that should be considered. Among western nations, we’re the world leader in having a simple lifestyle that belies its exorbitantly-expensive cost.

When you ask why our government doesn’t lower taxes if it would help our economy…. Very simple: It’s habit, based on old notions, partly rooted in Marxism/Communism (although we don’t call it that, per se) and our past relationship with the Soviets, etc.

In my opinion, it’s time to stop kidding ourselves that we live so great. In truth, we drive the oldest cars in Europe AND we paid double-price for them. It’s time to become more progressive and modernize certain parts of our system.

Kristian:

“Theoretically, a regressive tax structure is most conducive to productivity at all income levels. Despite this, I favor lowering taxes across the entire spectrum.”

What are you talking about? Which theory (which economic THEORY does have any relevance w.r.t. to the REAL world)?

But in any case lowering taxes at the high-end income level, will not increase the GDP in Finland or anywhere else either, because that increase in income will be SAVED.

“Aside from creating a disincentive for otherwise energetic entrepreneurs to produce products (honestly, without needing to collude on prices, etc.)”

Price collusion has which direct link to the level of income taxes? This is just childish. Why wouldn’t energetic entrepeneurs collude
prices – if that’s what they’re doing today – if income taxes were lower? I mean, that would be lost income, right?

And energetic entrepeneurs are typically not dependant on taxable income, since they can pay themselves capital income that is flat-taxed.

“Sure, but it’s overpriced domestic production.”

Are you talking about the famously overpaid nurses, child-care workers, teachers in Finland?

“But, here in Finland, instead of working more to compensate for the tax burden, they use tactics such as price-collusion. It makes things more expensive for all of us.”

They meaning the GOVERNMENT? The authorities? It seems to me that you are blaming the “energetic entrepeneurs” you seem to like so much. I don’t think you have much of a case if you blame anybody else for “price collusion”.

“High taxes make our small entrepreneurs less competitive as exporters and leave them less money to invest.”

High taxes don’t seem to have made Nokia much less competitive. They get competitive by paying smaller salaries to their engineers, than the would do if they were operating out of the U.S.

“When you ask why our government doesn’t lower taxes if it would help our economy…. Very simple: It’s habit, based on old notions, partly rooted in Marxism/Communism (although we don’t call it that, per se) and our past relationship with the Soviets, etc.”

This is just plain B.S. Do you honestly believe that – as I asked previously – “If it in fact would be so that lowering taxes – with 100% certainty – had the effect that tax revenue would increase, why do you think that the authorities would not do that (lower taxes)?”.

If you truly think that this is the case, I simply cannot believe that the idiots (as you seem to think of them) in this country electing politicians to the representative bodies, could build anything like mobile phones. The truth is, no-one knows whether your ideas about lowering taxes would in fact increase tax revenue. Most likely it wouldn’t. And the evidence – indebtness of the public economy, as compared to taxation level – seems to point right to the opposite. This is when we look at other OECD countries. Sure, many economist will tell you that the theory tells us this and that. The problem is, that the theory talks about an idealised world, which has never existed – and will never exist. Using those theories as a base for policy in the REAL world, is not sensible.

“In my opinion, it’s time to stop kidding ourselves that we live so great. In truth, we drive the oldest cars in Europe AND we paid double-price for them.”

Its childish to measure well-being based on the average age of the cars we drive. Even though I – for different reasons – happen to drive a new (less than one year old) car when I go to the local supermarket, do you really think that it makes me that much happier or feeling more wealthy, as compared to the time I drove a more than 10 years old car? I mean, if I pay 20000 euros for a car it bloody well should stay in business for at least 20 years, if not more. Car sellers would of course like the situation if EVERYBODY switched to new cars every 3 years. But would that be an ideal situation, economically (where would we then dump our old cars?), and environmentally?

“Theoretically, a regressive tax structure is most conducive to productivity at all income levels. Despite this, I favor lowering taxes across the entire spectrum.”

What are you talking about? Which theory (which economic THEORY does have any relevance w.r.t. to the REAL world)?

Are you telling me that I should have a more incentive to work harder and reach a higher income level, when there’s an increased marginal tax rate? What???

Anyway, like I stated, I’m not supporting a regressive tax structure, so any point you are trying to make is really mute.

But in any case lowering taxes at the high-end income level, will not increase the GDP in Finland or anywhere else either, because that increase in income will be SAVED.

Where will it be saved? In the bank? In someone’s closet? No, it will lose value. Therefore it must be invested back into the economy.

Price collusion has which direct link to the level of income taxes? This is just childish. Why wouldn’t energetic entrepeneurs collude prices – if that’s what they’re doing today – if income taxes were lower?

The difference is that there’d be more competition because there’d be a more robust domestic economy to support it. Specifically, the entry barrier for new businesses will be lowered. Overpriced firms will lose their monopolies. Or, at the very least, they’d lower their prices to avoid losing their monopolies. Either way, the consumer wins.

And energetic entrepeneurs are typically not dependant on taxable income, since they can pay themselves capital income that is flat-taxed.

What??? And how much is this flat tax? And on what portion of their income is it applied?

I bet you don’t even know, so I’ll give you an idea: It is based on a business’ net assets. That means it clearly benefits large companies; NOT asset-poor entrepreneurs.

I’ve heard so many stories from non-business types about how entrepreneurs get this and that. The stories all come from those who have no concept nor direct vested interest in starting and running a business. Unfortunately, I do. But, fortunately, I don’t have to do it here in Finland…I’d prefer if for personal reasons, but there’s not much financial incentive at this point—no matter how many times I perform the calculations.

“Sure, but it’s overpriced domestic production.”

Are you talking about the famously overpaid nurses, child-care workers, teachers in Finland?

No, I’m talking about the high price of goods and services in general, which, like I stated, are a direct result of our high taxation. Like 17% VAT for food???

“But, here in Finland, instead of working more to compensate for the tax burden, they use tactics such as price-collusion. It makes things more expensive for all of us.”

They meaning the GOVERNMENT? The authorities?

I am refering to businesses in Finland, not the government. And, I also explained the root cause for it.

High taxes don’t seem to have made Nokia much less competitive. They get competitive by paying smaller salaries to their engineers…

Wonderful! The employee gets shafted with low wages due to high taxes! Aren’t you making my point?

Ok, to be fair and despite the fact that you called me childish, I’ll try to save you on this one. As I stated, companies like Nokia don’t pay high taxes. Our tax structure is well-suited for them and our government knows that big business wouldn’t survive otherwise. But, that doesn’t help anyone else.

“When you ask why our government doesn’t lower taxes if it would help our economy…. Very simple: It’s habit, based on old notions, partly rooted in Marxism/Communism (although we don’t call it that, per se) and our past relationship with the Soviets, etc.”

This is just plain B.S. Do you honestly believe that(?)

Yes, I remember it well. Old thinking doesn’t change quickly. And aside from ideology, whole power structures change when economic systems change.

If you truly think that this is the case, I simply cannot believe that the idiots (as you seem to think of them)

Your words, not mine

Its childish to measure well-being based on the average age of the cars we drive. Even though I – for different reasons – happen to drive a new (less than one year old) car when I go to the local supermarket, do you really think that it makes me that much happier or feeling more wealthy…

Feeling happier and wealthier? Now who’s being childlike???

My point isn’t that we need to drive newer cars. Instead, my point is that we shouldn’t be paying more than everyone else—a lot more! Consider this:

I go to Germany to buy a 10K Volkswagen, perhaps 7-years-old. Part of that price is Germany’s 18% VAT. Non-refundable. Then, at the Finnish border, I pay another 10K! Now my price my used car has doubled!! Why do I need to pay for two cars just so I can have one?!!

This is only in Finland.

“Are you telling me that I should have a more incentive to work harder and reach a higher income level, when there’s an increased marginal tax rate? What???”

I’m not talking about YOU at all. What I asked was which THEORY you base yourself upon. This marginal tax stuff is simply dumb. What is THE marginal tax rate of a – hypothetical – Finnish citizen? This whole marginal tax rate discussion bores me because it’s so completly vague.

“Where will it be saved? In the bank? In someone’s closet? No, it will lose value. Therefore it must be invested back into the economy.”

Have you heard the word SPECULATION? Bying stock on the market doesn’t affect the GDP much. Or if you “invest” in your swiss account. That doesn’t increase the FINNISH GDP much.

“The difference is that there’d be more competition because there’d be a more robust domestic economy to support it. Specifically, the entry barrier for new businesses will be lowered. Overpriced firms will lose their monopolies. Or, at the very least, they’d lower their prices to avoid losing their monopolies. Either way, the consumer wins.”

Do you honestly think that the above rambling answers the following question: “Price collusion has which direct link to the level of income taxes?”.

Didn’t think so.

“What??? And how much is this flat tax? And on what portion of their income is it applied?

I bet you don’t even know, so I’ll give you an idea: It is based on a business’ net assets. That means it clearly benefits large companies; NOT asset-poor entrepreneurs.”

Nope. CAPITAL INCOME is flat taxed. 28% (correct me if I’m wrong). Get it? Capital income, that is: the profit your beloved “energetic entrepeneurs” pay to themselves. Get it?

“No, I’m talking about the high price of goods and services in general, which, like I stated, are a direct result of our high taxation. Like 17% VAT for food???”

So you think TAX-PAYER MONEY IS SPENT ON VAT. Get a clue will you. The tax payer money is spent largely on SALARIES, get it? Low salaries (nurses, child-care poeople, …) mainly. With some exceptions like “medical doctors” (whose salary increase was applauded by the whole right-wing establisment more or less). Unfortunately, due to the increasing privatisation frenzy, more and more go-betweens seem to be getting their part of tax money as well.

“I am refering to businesses in Finland, not the government. And, I also explained the root cause for it.”

I don’t thik you did.

“Wonderful! The employee gets shafted with low wages due to high taxes! Aren’t you making my point?”

No. I talked about gross salaries, not net salaries. If you think Nokia pays high gross salaries to their finnish engineers, then please let us know. Preferably with the comparison to other countries, that is ALWAYS provided when finnish taxes are discussed in the media.

“Yes, I remember it well. Old thinking doesn’t change quickly. And aside from ideology, whole power structures change when economic systems change.”

Sorry. I’m starting to get pissed off. Can you now – please – provide me with the source of your claim that there is a 100% certainty that lowering (apparently regardless of how it’s done) of the income tax in Finland will increase the tax revenue. I WANT THE PROOF.

“Yes, I remember it well. Old thinking doesn’t change quickly. And aside from ideology, whole power structures change when economic systems change.”

Now I’m staring to get REALLY pissed off. Are you actually claiming that the authorities in Finland are KNOWINGLY losing money. Despite 100% sound proof to the opposite. So you claim there is PROOF that lowering income taxes increase the tax revenue. NOW GIVE THE PROOF. Or SHUT THE FUCK UP.

“Feeling happier and wealthier? Now who’s being childlike???

My point isn’t that we need to drive newer cars. Instead, my point is that we shouldn’t be paying more than everyone else—a lot more! Consider this:

I go to Germany to buy a 10K Volkswagen, perhaps 7-years-old. Part of that price is Germany’s 18% VAT. Non-refundable. Then, at the Finnish border, I pay another 10K! Now my price my used car has doubled!! Why do I need to pay for two cars just so I can have one?!!”

What are you. A used-cars salesman? I mean, if it was cheaper to buy the car in Finland, why go to Germany?

“This is only in Finland.”

And I like it.

Well Thomas, judging by your unrestrained choice of language, I can see that you are a very frustrated person. And, regardless of the source, I’m sure you’d like to attribute your frustration to me.

If you read the many posts I have entered in this forum, then you will see that I have always accomodated views of those who disagree with me—that is, without insulting anyone.

But, apparently, you cannot control those urges. So, I will continue to seriously discuss these topics with others. But perhaps not with you

Kristian:

“Well Thomas, judging by your unrestrained choice of language”

What language is that if you may provide me with an example?

“If you read the many posts I have entered in this forum, then you will see that I have always accomodated views of those who disagree with me—that is, without insulting anyone.”

I’m sure you have. Now, if I’ve insulted you somehow, I’m sorry. But I’ve asked you the same (at least partly) direct questions TWO times now. You fail to answer. If you cannot answer a direct question I think it’s either because you don’t have an answer or you do not bother to give me one. Either one of these explanations shows disrespect on your part. If its the first alternative, you shouldn’t have said the things you said in the first place, and admitted it. And it’s ok by that. The second alternative is more problematic, and simply saying “I will not talk with you because you are not nice” is IMHO not enough. But then, if you feel it is, then so be it.

Thomas—

I’m having a difficult time understanding why you are against what I’m saying. Based on what you’ve indicated so far, I would think that my suggestions would seem favorable to you. But maybe I haven’t presented them clearly enough. So, I’ll give it another try….

“This whole marginal tax rate discussion bores me because it’s so completly vague.“

I’m not sure if you understand the concept of marginal tax rates or not. If not, then here is an explanation. I won’t go into discussions as to why it might be a motivator/demotivator for productivity and business investment, etc. You can make-up your own mind on that.

http://en.wikipedia.org/wiki/Marginal_tax_rate

“CAPITAL INCOME is flat taxed. 28% (correct me if I’m wrong). Get it? Capital income, that is: the profit your beloved “energetic entrepeneurs” pay to themselves. Get it?“

Entrepreneurs don’t pay themselves with Capital Income….not exactly. The revenue A business earns is divided between Capital Income and Normal Income based on the total value of assets. In practice, most small entrepreneurs are taxed at the Earned Income rate; not the Capital Income rate. Therefore, tax liability is basically the same as anyone elses. If interested, you can read it here:

http://www.yrityssuomi.fi/liston/portal/page.lsp?r=3723&l=en&menu=3720

By the way, it seems you oppose entrepreneurs and I’m not sure why. More competition lowers prices and increases selection for everyone. Personally, I beleive Finland needs improvement on both counts.

“The tax payer money is spent largely on SALARIES, get it? Low salaries (nurses, child-care people, …) mainly. “

I agree that salaries are low for nurses, child-care people: So, why should they be taxed at 30% to 40% of their income?

state tax + municipal tax + VAT = 40% for a person whos income is 25K.

For someone who earns 12K, the percent is around 30%.

“With some exceptions like “medical doctors” (whose salary increase was applauded by the whole right-wing establisment more or less). Unfortunately, due to the increasing privatisation frenzy, more and more go-betweens seem to be getting their part of tax money as well.“

You might have a good point about the go-between expenses. I don’t have an answer to the privatization debate. I’m sure it’s not good in all cases. But we have a dilemma in Finland. Some people say that if doctors don’t get paid good salaries, then the best ones will leave the country to earn better money. Or maybe they best ones will be concentrated in private practice instead of public.

In my opinion, our healthcare system has problems. I don’t know for sure how to fix them.

“What are you. A used-cars salesman?“

No, but maybe I can’t afford a new car, so their prices are important to me.

“I mean, if it was cheaper to buy the car in Finland, why go to Germany?“

It’s not cheaper to buy in Finland; that’s the problem. But, no matter where you purchase, you pay a ‘registration tax’ that effectively amounts to 100% of a normal purchase price.

That means, a car purchased in Germany for 7K costs about 14K here in Finland—or more. The EU is trying to force Finland to drop the system, since it runs counter to EU principles of free trade….

http://virtual.finland.fi/stt/showarticle.asp?intNWSAID=13060&group=Politics

“I talked about gross salaries, not net salaries. If you think Nokia pays high gross salaries to their finnish engineers, then please let us know.“

I talked about gross salaries too; not net salaries. On a business’ Income Statement, salaries are listed as expenses. And so are taxes. If taxes are high, then the business’ Net Income will be reduced (Note: Net Profit = Revenues – Expenses).

To counter the reduction in Net Income, a business can either increase revenues or cut expenses. Maybe a business can’t increase revenues—-and it definitely can’t cut taxes—so it’ll look for ways to cut expenses, like keeping salaries low. I don’t know if this is Nokia’s case or not, but this has been a problem in Finland for a long time.

In case you’re not familiar with Income Statements, here is an example (sorry I couldn’t find Nokia’s). Notice that General Administrative and Selling expenses represent salaries. Tax Expense is also listed.

http://finance.yahoo.com/q/is?s=SUNW&annual

“So you claim there is PROOF that lowering income taxes increase the tax revenue.“

Obviously, no one claim with absolute certainty that tax revenue would be increased. Maybe that was an overly-optimistic statement on my part; maybe not. For that matter, even if revenues decrease, then lower prices and better value in our economy should be compensation for this.

In any case, from an economic theory perspective, lowering taxes does increase consumption, business investment and aggregate demand (and therefore increased supply, which decreases prices). Just do a quick page-search on the word “Tax” to see the relationships.
http://www.harpercollege.edu/mhealy/eco212i/lectures/asad/asadfr.htm

Of course, there are those—perhaps like yourself—who will say that people will ‘save’ instead of ‘consume.’ I’d say it’s probably a combination of both, depending on surrounding factors. But overall, my hope would be that it would increase our standard of living by lowering taxes and prices and increasing product selection to levels found elsewhere in Europe—and perhaps it’ll raise our salaries too.

Is there a better solution?

Kristian:

“I’m not sure if you understand the concept of marginal tax rates or not”

I do think I understand the concept of marginal taxes, it’s only that I don’t believe in making a whole lot of fuss about THE MARGINAL TAX RATE, since the marginal tax rate is completely individual. Two different persons – unless they are completely identical, i.e. earning the same salary, and working the exact same hours – have different marginal tax rates. Therefore, it is not very sensible to talk about THE MARGINAL TAX RATE, as if it was some kind of unique figure. That is – unfortunately – the case in most discussions that concern the concept. This lowers the level of discussion, and makes it difficult to understand what the discussing parties talk about.

“Entrepreneurs don’t pay themselves with Capital Income….not exactly. The revenue A business earns is divided between Capital Income and Normal Income based on the total value of assets. In practice, most small entrepreneurs are taxed at the Earned Income rate; not the Capital Income rate. Therefore, tax liability is basically the same as anyone elses.”

Yes, I agree that there are certain limitations as to how much “entrepeneurs” may pay themselves in the form of “Capital Income”. Fortunately – may I add. Otherwise we wouldn’t have any entrepeneurs paying themselvelves anything BUT capital income, which would burden ordinary tax paying – salary earners – even more. But the entrepeneur still has many tricks up in his/her sleeve (even if he/she doesn’t have capability to earn all income via the “capital income” flat tax rate) like having your car, your appartment etc., i.e. basically the most costly expenses most normal taxpayers meet, taken care of by the “company”. And so on.

“By the way, it seems you oppose entrepreneurs and I’m not sure why. More competition lowers prices and increases selection for everyone.”

I don’t OPPOSE ENTREPENEURS. I oppose SO CALLED entrepeneurs, whose only entrepeneurship seems to be made up from a set of tricks to avoid paying tax.

“I agree that salaries are low for nurses, child-care people: So, why should they be taxed at 30% to 40% of their income?”

I guess because certain “entrepeneurs” have gotten the whole populace into believing that “capital income earners” cannot pay anything more than 28% of their earnings as tax? The capital income tax rate in Finland is EXTREMELY low (I believe e.g. the U.S. has higher rates). But the public economy has to be financed some way. What are you suggesting. Added progressiveness? Didn’t think so.

“But we have a dilemma in Finland. Some people say that if doctors don’t get paid good salaries, then the best ones will leave the country to earn better money. Or maybe they best ones will be concentrated in private practice instead of public.”

We have a problem in Finland, and that’s the fact that the “doctors union” has been made the official spokespersons in far vider circles than ANY other union. Thus, THEY are able to even affect the number of doctors trained by the finnish universities.

“In my opinion, our healthcare system has problems. I don’t know for sure how to fix them.”

One simple way would be to train more doctors. Then they couldn’t boss everybody else around in any way they please.

But, in general the health-care system EVERYWHERE is in problems. It always is, and always will be. That’s what wins elections.

“It’s not cheaper to buy in Finland; that’s the problem.”

Making it cheaper to buy CARS in Finland, will e.g. definately NOT solve the health-care problems yo seem so concerned about. Since Finland doesn’t manufacture cars, and since cars are the nr. 1 “consumption expence” households meet, then allowing that a larger proportion of that “market” is going into foreign hands, will certainly affect the finnish economy negatively.

“The EU is trying to force Finland to drop the system, since it runs counter to EU principles of free trade….”

Yes, yes. The EU does lots of things. The latest thing the EU seems to be concerned about is the volume of the tetra-paks for e.g. milk (this according to the swedish daily Expressen – don’t know whether this is actually true, it seems so stupid that it simply couldn’t be, but then when we talk about the EU, who knows), and apparantly 1 litre is not a suitable volume for such. No, no, they should be of the – much more suitable, for european consumers – size 0,975 litres.

“I talked about gross salaries too; not net salaries. On a business’ Income Statement, salaries are listed as expenses. And so are taxes. If taxes are high, then the business’ Net Income will be reduced (Note: Net Profit = Revenues – Expenses).”

The taxes the income earners pay are mainly paid by the income earners themselves. Thus, this doesn’t affect the businessesses incomes in any shape or form. And concerning e.g. Nokia, their supply of “cheap” finnish engineers, is the secret of their success. Should they have needed e.g. medical doctors, the story would probably have been different.

“In any case, from an economic theory perspective, lowering taxes does increase consumption, business investment and aggregate demand (and therefore increased supply, which decreases prices).”

Yes yes. That is what economic THEORY says. BUT, there’s another world too. The REALITY. In the real world, if you increase the earnings (e.g. by lowering taxes) of those who earn the most, the increased income will probably NOT be consumed. Furthermore, if it is consumed, the effect of that comsumption will largely go abroad (since it is then spent on foreign luxury goods, like “Lamborghinis”, to use a well known example).

In fact economic theory – even those theories that are commonly used to motivate e.g. increased free trade – bases itself upon assumptions, that are not simply believable if you look at things critically. Many theories e.g. rely upon assumptions of the consumers (that is – the population on earth) preferences being identically homothetic. That may sound innocent, if you express it that way. What it means in practise is, that all consumers use exactly the same percentage of their income on e.g. potatoes. I’m pretty sure that Bill Gates uses a lesser fraction of his income on potatoes, than I do.

But – despite what you might think, given your lengthy answer – I still have not seen HOW you link income tax level to “price collusion” as you have claimed.

“But overall, my hope would be that it would increase our standard of living by lowering taxes and prices”

Increasing net salaries – and thus bussiness owners profits – would also have the same effect. In general, the economy is a VERY complex thing, and there are no SIMPLE solutions. Sometimes, something that seems completly logical may not be the right thing to do.

Lowering taxes – as popular as that may be – is no 100% certain solution to increased well-being and all other nice things you imply. Far from it.

“Is there a better solution?”

There is always one. The problem is that you cannot predict the future. I can’t, you can’t, and – for sure – Nobel price winners of economy can’t. The latest one, has seen many of his greatest – Nobel price winning – theories crumble in recent years.

The economy is far too complex, to be explained by means of simple and commonly understandable theories.

Thanks for your comments. Good points. I don’t want to make you feel obligated to beat this topic to death (although, I don’t mind; in fact, I find the topic rather interesting). But here are some further thoughts if you’re interested…..

“Fortunately – may I add. Otherwise we wouldn’t have any entrepeneurs paying themselvelves anything BUT capital income, which would burden ordinary tax paying – salary earners – even more.[...]But the entrepeneur still has many tricks…“

Interestingly, at low income levels, it’s better for the self-employed to claim Earned Income rather than Capital Income. But, again, how it’s divided isn’t really a choice; rather it’s determined by tax rules.

Generally though, I’m not in favor of “tricks”; if anything, the tax burden should be reduced for everyone, including normal employees at all income levels. I look at this in holistic terms, not just as a way for some to get special treatment.

“But the public economy has to be financed some way. What are you suggesting. Added progressiveness? Didn’t think so.“

Now I see we are using different terms to describe the same concept. You use the term progressiveness, whereas I have been using the term marginal tax rate. Of course, the latter influences the former. But, apparently, we are talking about the same thing.

To clarify my point: I am indeed not in favor of creating regressiveness.

“I’m pretty sure that Bill Gates uses a lesser fraction of his income on potatoes, than I do.“

Good point. Yet, in Finland, you both pay same 17% VAT on food. This creates a regressive condition. If I’m not mistaken, our VAT on food is much higher than the EU average. Interestingly, it’s fairer in Bill Gates’ country. There is no food tax in the US.

“…increased income [...] if it is consumed [...] will largely go abroad [...] spent on foreign luxury goods, like “Lamborghinis”…“

I don’t see that as positive either. I’m not against a luxury car tax. But I don’t see much benefit in making a farmer or other not-so-wealthy person pay double-price for a used Toyota. Seems like lots of these policies we create to ‘help’ our condition actually hurt us instead. In this case, our hypothetical farmer must spend an extra 10K on taxes just so he can drive an old car.

“But – despite what you might think, given your lengthy answer – I still have not seen HOW you link income tax level to “price collusion” as you have claimed.“

Unfortunately, I can’t with any certainty. But, many seem to think that competition would loosen the grip of colluders and monopolists. Naturally, competition can’t exist unless the domestic market can sustain it. I don’t think it’s a big stretch to link the domestic economy’s vibrancy to the level of taxation in most cases. But, as you aptly pointed-out, there are many factors and many possible effects regarding taxation.

The only thing I can state with complete certainty is that our consumer prices in Finland are among the highest in Europe; so are our taxes. Coincidence? I don’t know, but it might be a place to start looking.

I causes me to head southward to Germany for such things as building supplies and other purchases (of course, Estonia would be even smarter). Judging by the number of purchasing ‘scouts’ on the Silja Line ships, it appears that I’m not the only one.

It’s not that I wouldn’t like to buy everything here; but many times it doesn’t make sense. It makes me wonder if all our attempts to ‘protect’ our economy has the opposite effect—and, as in the case of our farmer or poor person, perhaps it even hurts those it theoretically aims to help.

Kristian:

As much as I appreciate your thoughts on the issues we have discussed, there are still a few things left.

“Generally though, I’m not in favor of “tricks”; if anything, the tax burden should be reduced for everyone, including normal employees at all income levels. I look at this in holistic terms, not just as a way for some to get special treatment.”

If “reducing” the tax burden doesn’t cause any improvement, to any of the observable factors of the economy, then why change anything? Even if voters might appreciate it.

“Now I see we are using different terms to describe the same concept. You use the term progressiveness, whereas I have been using the term marginal tax rate. Of course, the latter influences the former. But, apparently, we are talking about the same thing.”

No. I think – being an economics student in my pastime – I understand what the term “marginal tax rate” means. But unlike (?) most people I know, that the “marginal tax rate” is not something you can easily summarise in a figure, like “your marginal tax rate – being a finn – is 56,78%”. So its not a concept you can easilly discuss.

“Good point. Yet, in Finland, you both pay same 17% VAT on food. This creates a regressive condition. If I’m not mistaken, our VAT on food is much higher than the EU average. Interestingly, it’s fairer in Bill Gates’ country. There is no food tax in the US.”

But regardless of the VAT, me and Bill Gates are going to be spending different fractions of what we earn on potatoes, yet that is what some economics – highly credible, in terms of who cite them as if they are generally applicable – theories are based upon.

“But I don’t see much benefit in making a farmer or other not-so-wealthy person pay”

Farmers in Finland – thanks to the keskustapuolue – are very well off in the cars department. So THEY should not complain about the car situation they are in.

“But, many seem to think that competition would loosen the grip of colluders and monopolists”

Sure would. But it would be EVEN better if our own domestic entrepeneurs (sorry to get back on this) would volunteerly give up their “unearned” earnings in favor of the common man. This is – in no way impossible. It’s just a matter of selfishness. The same goes for any entrepeneur.

“It makes me wonder if all our attempts to ‘protect’ our economy has the opposite effect”

This might surely be the case. But don’t ask an economist for help, at least not a Nobel-prize winner. Then you will be in real trouble. Maybe not immediatly, but in the long run.

…that the “marginal tax rate” is not something you can easily summarise in a figure,

I tend to think of it as a curve on a graph, with income level on the horizontal axis and tax percentage on the vertical axis. Here’s a (poor) example of how such a graph looks.

http://www.aei.org/publications/filter.all,pubID.22160/pub_detail.asp

Although the line is rather ‘choppy’, we can see that its approximate slope can be steep or gradual at various levels of income.

So, as “students of economics” it is probably important for us to understand the effects of the shape of such a graph—theoretically, some shapes stimulate output and business investment; other cases hinder it. Some shapes help the rich; others hurt the poor, etc.

But regardless of the VAT, me and Bill Gates are going to be spending different fractions of what we earn on potatoes, yet that is what some economics – highly credible, in terms of who cite them as if they are generally applicable – theories are based upon.

Yes, those economists favor a flat tax. Perhaps it’s ok if the tax is low. But 17% is quite high just for food.

Sure would. But it would be EVEN better if our own domestic entrepreneurs (sorry to get back on this) would volunteerly give up their “unearned” earnings in favor of the common man.

I haven’t researched it, but I suspect that the biggest tax breaks are for the highest earning entrepreneurs: Perhaps those who are established and don’t particularly need tax relief. I’m not sure if this is due to paying Capital vs. Earned income or not. I think they have other ways too—you might have mentioned some of them previously.

By the way, the purpose of Capital vs. Earned income taxation is the following….

+++Capital income tax is based on the value of assets. It is assumed that those assets are at-risk. Therefore, to incentivise investment in business assets, the rate is lower than Earned income.

+++Conversely, Earned income, that an employee receives, isn’t really at-risk. Sure, he might lose his job, but he won’t necessarily lose personal money that he’s invested.

In any case, I don’t benefit from Capital income taxation, so it’s not in my favor to argue for/against it. This is only to explain its purpose.

Farmers in Finland – thanks to the keskustapuolue – are very well off in the cars department. So THEY should not complain about the car situation they are in.

Ha! Yes, that was probably a bad example on my part

But maybe the overall premise of low-income people being subject to an exorbitant used car tax (effectively 100%). is more believable.

Generally, I find it amazing that the poorest workers in Finland—perhaps those who earn 12K/year—pay nearly 1/3 of their income in taxes, when 18% municipal + 17% food VAT are considered.

Kristian:

“I tend to think of it as a curve on a graph, with income level on the horizontal axis and tax percentage on the vertical axis. Here’s a (poor) example of how such a graph looks.”

The marginal tax might be depicted as a graph, in the way you do. But it’s important to keep one thing in mind, if my employer asks me to do some overwork in september. The tax-effect of that overwork will not materialise until after december, when all my earnigs for the whole year are known. And even if the marginal tax rate for e.g. overwork – or salary raises – was 50% (those 100% horror stories probably do not exist), if you are paid double the salary for overtime, you still earn more for every overtime hour, as compared to those normal hours (unless you pay no tax for them). So in my opininion this whole marginal tax rate discussion is WAY OVERRATED.

“So, as “students of economics” it is probably important for us to understand the effects of the shape of such a graph—theoretically, some shapes stimulate output and business investment; other cases hinder it. Some shapes help the rich; others hurt the poor, etc.”

Maybe. But things vary over time. Much like Phelps Nobel Price winning theories seem to have crumbled in recent years. The economy is complex, and I don’t believe there is anything very persistant in e.g. the effects of marginal tax rate curves in the long-run.

Unfortunately, the economic theory also has a tendency to, affect it’s own predictions. If some theory reaches high popularity, actors (also those that reallly affect the measurable properties that might support the theory) start acting in ways that indirectly will make reality look like the theory (because they want to – so to speak – gain advantages from “knowing” the theory), although it might not have been like that before. Ironically – I believe that Phelps theory was based on the idea of “people knowing the previous theory” and acting upon that.

“Yes, those economists favor a flat tax. Perhaps it’s ok if the tax is low. But 17% is quite high just for food.”

You don’t seem to get the POINT. If you have a THEORY, whose assumption is that I and Bill Gates do spend the same fraction of our income on potatoes – is it believable? That is what many economic theories seem to be relying on. And if that assumption is true, I believe Bill Gates uses millions on potatoes on a monthly basis. But somehow I don’t think he does. Or do you?

The economists favor a flat “sales tax” in their examples, because it is easy to use as an example. You introduce your flat tax, and then you can easily examplify “deadweight-losses” and other irrelevant (in the REAL world) effects of taxes. In the real world none of this is true, because the “perfect market” of economics textbooks doesn’t exist. ANYWHERE.

What is the right level of VAT on food? I don’t know. Neither do you, and neither does Phil, although he might say it’s 0%. There is no simple answer. But somehow, if CONSUMPTION is the thing we want to KEEP UP, it would seem more believable to keep the VAT low on such things that low-income takers spend a larger fraction of their income upon.

“Capital income tax is based on the value of assets. It is assumed that those assets are at-risk. Therefore, to incentivise investment in business assets, the rate is lower than Earned income.”

There is something called a “risk-premium” on capital assets. It’s higher on riskier investments. So I do not see a point in taxing capital income flatly. Especially since most of the capital assets in e.g. Finland are not EARNED, but INHERITED or similarly aqcuisited.

Earned income may – as you say – be “riskless” in the sense of investment. But taking a certain job may be a risk in the sense that you may not easily get another job, ONCE the risk you took in taking the job in the first place realises. You may be too old, too sick and so on.

And the interesting thing in this comparison is the tax you completly left out. Inheritance tax. You don’t – personally – have to risk ANYTHING, and you get all benefits, at minimal tax costs. I mean, why do I have to pay more in tax for the daily work I do, than somebody else who receives a good monthly income for the rest of their lives, more or less free, and then only pay a flat 28% tax on interests? In what sense is it more valuable – in the sense that I should be punished more – that someone might just live off inheritance their whole life, while I WORK 40 h. a week?

“Generally, I find it amazing that the poorest workers in Finland—perhaps those who earn 12K/year—pay nearly 1/3 of their income in taxes, when 18% municipal + 17% food VAT are considered.”

But what exactly do you want to do about it. Increase progressiveness? Lower the overall tax income – including the lowering of the service level? Introduce school costs for high income takers? Increase the child-care fees for high income takers? What exactly do you propose as a means to an end?

“But it’s important to keep one thing in mind, if my employer asks me to do some overwork in september. The tax-effect of that overwork will not materialise until after december, when all my
earnigs for the whole year are known.“

Very true. Besides, for white collar professional work, job requirements are usually fulfilled regardless of overtime pay in many cases. So, tax-related motivators aren’t a big
deciding factor. For manual work, it might be a slightly more significant, but, for our discussion, I’m willing to assume that it’s negligible.

Anyway, I’m not suggesting that people need motivation to work more. Labor isn’t the only factor that determines Economic Output. Capital Assets are also a factor, and investment in them is probably more relevant to our discussion.

And, yes, those 100% horror stories are bullshit. Perhaps told by those who don’t understand simple finance concepts. But then again, this is Finland; 100% could be true

“You don’t seem to get the POINT. If you have a THEORY, whose assumption is that I and Bill Gates do spend the same fraction of our income on potatoes – is it believable?“

Ok, I see what you mean. I was looking at it from a different perspective initially. But what you’re saying makes sense; they’re obviously making faulty assumptions.

“What is the right level of VAT on food? I don’t know. Neither do you, and neither does Phil, although he might say it’s 0%. There is no simple answer. “

My simple answer is 0%. It makes no sense to have taxes on food. As far as I know, even the recipients of welfare pay this tax. In my opinion, 17% is bizarre. I’ve tried to think of a reason for it….

+++An easy money grab by politicians? Maybe.

+++It encourages overweight people—those who use more public health benefits—to diet more? Ridiculous. It just causes them to buy cheaper quality food that’s worse for their health.

+++Is it psychological? For example, if poor people are taxed at a high rate, then they’ll DEMAND (!) that rich people also be taxed high. Could this be for built-in class envy purposes? I don’t know the answer, but it’s possible, I suppose.

Here is a listing of countries’ VAT rates. As we can see, Finland seems to be the leader in food (reduced) VAT.
http://en.wikipedia.org/wiki/Value_added_tax#EU_countries

“There is something called a “risk-premium” on capital assets. It’s higher on riskier investments. So I do not see a point in taxing capital income flatly.“

That’s an interesting way to look at it. But, wouldn’t this affect return on investment, and therefore influence people to adjust their investing behavior?

I suppose if it brings a desired effect, then it’s ok. But, I’m not sure if it’s good to encourage people to take more risk (assuming that high-risk investments are taxed lower). Is this what you
mean?

“And the interesting thing in this comparison is the tax you completly left out. Inheritance tax. You don’t – personally – have to risk ANYTHING, and you get all benefits, at minimal tax costs.
I mean, why do I have to pay more in tax for the daily work I do, than somebody else who receives a good monthly income for the rest of their lives, more or less free, and then only pay a flat 28% tax
on interests?“

Aha! Here we encounter the issue of “fairness.” And this is where I think Finland has always made big mistakes in the past, but perhaps those need to be seen in context of the timeperiod. What we do today is more important.

We have discussed our concern about people taking their wealth and investing it outside of the country—I think you previously mentioned Switzerland. Well, what I would like to know is: Why doesn’t someone from Switzerland invest in Finland?

Perhaps the first two sentences will give us an idea…
http://www.switzerland.isyours.com/E/GE/taxes.htm

It might be a bit pretentious to think that we could someday resemble Switzerland—and despite Switzerland’s wealth and modern infrastructure, maybe we wouldn’t want to resemble it entirely—but a few steps in that direction probably wouldn’t hurt. Right now, we are faced with a question: Do we encourage high earners and those with sizable capital to leave Finland, or do we make it possible for them to stay here, invest and consume?

And yes, they will leave! I know quite a few wealthy people who will never come back, due to financial reasons. Some have nice vacation properties here, a big flat in a nice part of Helsinki, so they can visit relatives, etc.

But their tax home and primary residence is elsewhere, so Finland gets nothing—no tax revenue, no consumption and the talent is lost. And, more importantly, for many, their businesses are also oversees, so no jobs get created here. And, naturally, they want their heirs to benefit from their efforts, so inheritance taxes are yet another reason for them to stay away—of course, there’s been talk of eliminating inheritance taxes completely anyway, so that might be a positive step.

In my opinion, we have always chase-out the talent here, and therewith goes any chance for Finland to benefit. Whether we like it or not, we are in competition with a very dynamic world. Anyone can take advantage of it these days. Our question is: How do we respond to this competition?

I’ll post later today with some more concrete ideas…..

“But then again, this is Finland; 100% could be true”

They aren’t. Never have been, never will.

“My simple answer is 0%. It makes no sense to have taxes on food. As far as I know, even the recipients of welfare pay this tax. In my opinion, 17% is bizarre. I’ve tried to think of a reason for it….”

It’s possible that it (the VAT) is not correct on e.g. food. I believe what is the reason behind it is purely simplicity. Basically one VAT level that covers all activities. And it surely is what economics text-books suggest one to do.

“I suppose if it brings a desired effect, then it’s ok. But, I’m not sure if it’s good to encourage people to take more risk (assuming that high-risk investments are taxed lower). Is this what you
mean?”

No. I simply say that with high-risk investment – you play a higher risk game. You might win more, but you might lose also. You were the one who brought potential risk into the discussion as an explanation for flat tax for capital income. I simply noted, that there are differences in risk, so why the flat tax based on that observation?

But I don’t see why investment should automatically – except as with VATs, due to simplicity – be treated with a flat tax. Why COULDN’T capital incomes be taxed the same way as salaries? I mean – it is often said that salaries should be flat taxed, because capital incomes are. Why can’t one simply turn the argument around?

“Aha! Here we encounter the issue of “fairness.” ”

Well, FAIRNESS is a key word for most political movements, including those that claim to be foremostly based on liberty (e.g. libertarians – I mean according to them absolute freedom brings FAIRNESS, e.g. like equality under law etc.).

“We have discussed our concern about people taking their wealth and investing it outside of the country—I think you previously mentioned Switzerland. Well, what I would like to know is: Why doesn’t someone from Switzerland invest in Finland?”

I do NOT think I’ve mentioned Switzerland. And I do not believe I’ve discussed foreign investments with you.

“It might be a bit pretentious to think that we could someday resemble Switzerland—and despite Switzerland’s wealth and modern infrastructure, maybe we wouldn’t want to resemble it entirely—but a few steps in that direction probably wouldn’t hurt…..”

I will not adress all yor points, I will simply mention a few basic facts.

1) The tax-havens in Europe (and I’m not talking about Switzerland here) are a big problem, in the sense that they create opportunities for certain people, to benefit in ways that – imho – are not acceptable. I think the EU should do something about this. NON-EU tax havens are of course difficult to deal with on one hand, but there are measurements against that as well. If the EU wants to act. But I’m sure there are certain groups that do not want any activity on this part.

2) When we talk about taxes on wealthy people – those who earn a capital income and pay capital income tax – I do not think that Finland is really – as it is today – any problem for these people. In fact I believe capital tax is fairly low in Finland (?).

Otherwise, when it comes to people you know leaving the country etc. this is beyond anything that I can rationally comment on, since this is simply “hearsay”, without any further base in observable facts, and thus very hard to relate to.

I’ve been looking at Swiss tax rates. They have an interesting tax structure. Taxes are collected by federal, canton and municipality sources. Apparently, the overall rate at the top level is only about 30% to 35%, depending on location.

For a 50Ke income, the overall percentage for a single person is only about 11% to 22% overall, depending on location. That’s if I converted the currency correctly and understood the chart.

There VAT rates are 7.6% / 3.6%(reduced)

No capital gains tax.

This seems like my kind of tax scheme

Tax chart is at the bottom of page….
http://www.swissnetwork.com/?page=ViewArticle&id=35
http://switzerland.isyours.com/S/impuestos/personal/

Generally, I think we need to get rid of the obvious regressiveness in our system—food VAT, car tax, and probably even lower the regular VAT. Municipal taxes could be made progressive….or at least stepped-progressive.

Then, we can see about lowering the overall rate structure. I wouldn’t mind seeing a 35% top rate, like Switzerland. It might get some money and talent flowing this way for a change

Just my opinion….

But I don’t see why investment should automatically – except as with VATs, due to simplicity – be treated with a flat tax. Why COULDN’T capital incomes be taxed the same way as salaries? I mean – it is often said that salaries should be flat taxed, because capital incomes are. Why can’t one simply turn the argument around?

That’s a good point. Progressively taxing investments would be much fairer than flat-taxing income. Seems like a good idea, especially since a low-income person would probably have less investments.

As for people leaving to invest somewhere else, the US has always been the traditional destination. Not sure if it’s true now or not. Here’s the US capital gains scheme…

http://en.wikipedia.org/wiki/Capital_gains_tax#United_States

Overall taxes are also very low—lower than Switzerland at all levels, I think. Low-income earners pay almost nothing.

I do NOT think I’ve mentioned Switzerland. And I do not believe I’ve discussed foreign investments with you.

Post #36 lol

Incidentally, I’m not saying we need to copy Switzerland. It’s just an example of alternate tax schemes. I find such places interesting because they attract investment, yet maintain a modern infrastucture and pretty good social equity. I have some relatives who live there; generally, I’ve always had a high opinion of Switzerland. Spent lots of time there when I was young.

Kristian:

First of all. Switzerland nad e.g Finland CANNOT be compared directly, due to the fact that Switzerland is conveniently situated in the middle of things EU-wise, and Finland is “on the border of civilasation.

As for specific points you say that (#47):

“No capital gains tax.”

yet one of the sources you SITE says the following:

“The concept of taxable income is wide and includes the following four categories of income:

* earned income, i.e. income derived from any lucrative activity (including employment income, professional and business income);
* investment income;
* compensatory income (like social security payments), and
* income form other sources (sundry income).”

Thus there does seem to be a “capital income tax”, contrary to what you claim. Or did you mean that since “investment income” is treated within the “income taxation” there is no capital gain income tax?

“Generally, I think we need to get rid of the obvious regressiveness in our system—food VAT, car tax, and probably even lower the regular VAT. Municipal taxes could be made progressive….or at least stepped-progressive.

Then, we can see about lowering the overall rate structure. I wouldn’t mind seeing a 35% top rate, like Switzerland. It might get some money and talent flowing this way for a change”

You MIGHT (yet it’s very difficult to know these things in advance – and concerning cars I’m strictly against you) have a point there, BUT BUT. Things like lowering VAT on certain goods/services is STRICLY against what the neo-classic economics text-book says. You know, the one Sailas and all the the rest of the gang believe in like it was the bible (if you are inclined to believe in that kind of garbage – excuse my language). Maybe you should bark at these “economisist-believers” hardly.

“As for people leaving to invest somewhere else, the US has always been the traditional destination. Not sure if it’s true now or not. Here’s the US capital gains scheme…”

I don’t know whether wikipedia (as much as like it for information about most NON-POLITICAL matters) is right in this aspect. Could be? I don’t know, I think I’ve seen some statistics according to which capital income tax in the U.S. is relatively high. This could be dependant on the fact that e.g. company profit is treated differently in the U.S. tax-wise. But then again I might be wrong. Still, my impression is that capital gain taxes are generally low in Finland.

As for the U.S.:

“Overall taxes are also very low—lower than Switzerland at all levels, I think. Low-income earners pay almost nothing.”

Sure, they pay NOTHING. But their children and grand-children WILL PAY. Look at the debt figures, which are – conveniantly usually – conversely proportional to the general tax level.

“Post #36 lol”

Laugh as loud as you like, but I thought – maybe I should not take anything for granted – that the concept of a doing a good old ““invest” in your swiss account”-trick was known to you. It doesn’t actually refer to Switzerland that much these days, although there might be some truth to Switzerlands economic power being boosted by “swiss accounts” (isn’t that where e.g. the “nazi investments” seem to lure). And the phrase ““invest” in your swiss account” doesn’t really refer to “investment” in a CONSTRUCTIVE manner, that’s why I used the quotation marks. “Investment” done solely to hide assets, is not what I would call INVESTMENT, although it will – of course – end up INVESTED somewhere, somehow.

“Incidentally, I’m not saying we need to copy Switzerland. It’s just an example of alternate tax schemes. I find such places interesting because they attract investment, yet maintain a modern infrastucture and pretty good social equity.”

Now tell me, how should we – in a manner compliant with what the E.U. stipulates – achieve the reputation of the Swiss, and become the (trusted) bankers of all kinds of more or less shady business interests, in order to be able to achieve the income tax salary level of Switzerland? In this day and age, I assume it’s possible, given Internet and all, but but…..

Furthermore (I don’t claim to know anything about this, if you have the energy look it up, do it) you yet again seem to fail to acknowledge e.g. medical insurance costs in your tax report. I don’t know about Switzerland, but from what I heard (i.e. good old “hearsay” – not to be taken as a claim of fact) medical insurance costs are a fairly large addition to the things you HAVE to pay on-top of your (tax-relieved) salary. What is the situation in Switzerland?

“First of all. Switzerland nad e.g Finland CANNOT be compared directly, due to the fact that Switzerland is conveniently situated in the middle of things EU-wise, and Finland is “on the border
of civilasation.“

That’s true, but I think it was a bigger distinction in the past. These days, it’s probably a big advantage that one can fly into Finland and drive to any destination without too much traffic. That’s not always possible in central Europe.

Also, although Finland is probably more expensive than much of Europe, it’s much cheaper than Switzerland—at least from an outsider’s perspective. I go to Switzerland about once or twice per year. Very glad I can stay with relatives, because hotels and food are extremely expensive considering exchange rates. The Swiss have good purchasing power for themselves though.

But, I agree with the premise that it can’t be compared directly.

“As for specific points you say that (#47):

Thus there does seem to be a “capital income tax”, contrary to what you claim. Or did you mean that since “investment income” is treated within the “income taxation” there is no capital gain income
tax?“

If I understood correctly, then it means: If you buy a stock and sell it for a higher price, you are not liable for capital gains tax. Same goes for other assets that are purchased for lower prices than for what they are sold. And I if I remember correctly, investment income IS taxed as regular income. I don’t remember all the details….it gets very tedious to read it all.

Anyway, I wasn’t trying to make a grand statement about this. I just copied what I read. In practice, I assume that Swiss business income is taxed roughly the same as ours. If I find out otherwise, I’ll mention it. Until then, here’s some insight….

http://www.ocra.com/solutions/taxation_switzerland.asp

“…and concerning cars I’m strictly against you…“

That’s fine, but let me tell you about my case: I moved back from Germany early this year (I was there for about 5-years). I bought a car in 2005 for 7K and drove it for about 5-months in Germany.

To bring it to Finland, they would have taxed me 7K—a tax equal to the purchase price in this case. I didn’t have 7K to spend on Finn-taxes, so I sold the car before coming back.

To purchase an equivalent car in Finland would cost over 15K or more (all taxes included). To me, it’s not worth it, so now I don’t have a car in Finland. That’s fine for now, because I can save money by not needing insurance and gas, etc.

I’m waiting for the EU decision regarding Finland’s registration tax. If I understand the issue correctly, it is against EU principles to charge a higher registration tax on imports than on domestic vehicles. Makes sense to me, of course

http://europa.eu/rapid/pressReleasesAction.do?
reference=IP/06/918&format=HTML&aged=0&language=en&guiLanguage=en

If nothing changes, then it’ll likely preclude me from obtaining work here. Our public transit is ok, but too sparse for my purposes and considering my location. Therefore, I will probably accept
another work assignment in Germany.

If I purchase a car in Germany and keep it for 6-months or 1-year (I forget which) then I can bring it into Finland without paying the import registration tax. It’s a worthwhile endeavor because I can save over 10K in Finn-tax (assuming I buy a vehicle for around that much). And, while in Germany, I can also benefit from lower cost consumer goods and services (food, clothing, restaurants, etc.).

The issue will be resolved for me. It’s possible for me to do this (and perhaps others with equal flexibility) but maybe not for the average person. Of course, the government could close the loophole, but then some would probably choose to leave Finland permanently—after all, who’s got 10K, 12K or even 20K sitting around just to pay a Finn-tax for re-entering the country?

I think the government realizes this; hence they’ve left the loophole in-place.

“ have a point there, BUT BUT. Things like lowering VAT on certain goods/services is STRICLY against what the neo-classic economics text-book says.“

Could be. I’m not sure about it myself. I suppose some things should probably remain higher than others.

“ Still, my impression is that capital gain taxes are generally low in Finland. “

Probably true. We seem to attract some big firms, so we must be doing it right.

“As for the U.S.: Sure, they pay NOTHING. But their children and grand-children WILL PAY.
Look at the debt figures…“

I don’t think America lacks revenue. Much of that debt probably came from the latest wars. Fiscally, I’m sure those wars will be seen as being very irresponsible undertakings. I’ve heard cost figures in the trillions. But, I don’t know how anyone arrives at such figures.

Just imagine what *could* have been accomplished with all that money—reduced debt, more healthcare, improved schooling etc. It would have all been possible.

Nevertheless, they’re still sending shuttles into space; all kinds of stuff that Europe could only dream of. But that’s always been the case. Europe always seems to ride on America’s coat tails.

“Laugh as loud as you like, but I thought – maybe I should not take anything for granted – that the concept of a doing a good old ““invest” in your swiss account”-trick was known to
you.“

Yes, I knew what you meant

“Now tell me, how should we – in a manner compliant with what the E.U. stipulates – achieve the reputation of the Swiss…“

Difficult question. We probably can’t match them point for point, but I’m sure we can do better than we are doing now.

“Furthermore (I don’t claim to know anything about this, if you have the energy look it up, do it) you yet again seem to fail to acknowledge e.g. medical insurance costs in your tax report. [...] What is the situation in Switzerland?“

Ok, I read a few things about it. And then, I called my cousin who lives in Switzerland (actually, I have lots of family there). We discussed several income scenarios; according to her, my aforementioned numbers were correct. That is, one might expect about 20% for all taxes and retirement fund contributions. The highest rate would be around 30% for large incomes.

Health insurance is mandatory. There are a variety of insurance funds from which to choose. Doctors negotiate fees with the funds. Those fee schedules are then approved/disapproved by the government (I think, at the Canton level). You can read it here….

http://www.medicalnewstoday.com/medicalnews.php?newsid=37544&nfid=rssfeeds

My cousin says it costs about 2300e/person/year, but high-deductible plans (e.g. 1000e deductible/year) are also available at reduced cost. Families get generous subsidies, so there is no ‘penalty’ for having children. She says it’s quite reasonable overall. And poor people get outright subsidies.

But, most importantly, it’s NOT a two-tiered system like ours; everyone gets the same level of care. Of course, a rich person can still pay a physician directly for services, but, according to my cousin, it’s not really necessary. Also, supposedly, there aren’t waiting lines like here in Finland.

She told me a story of her uncle here in Finland; he’s been waiting for years (?) to have surgery—I think she said it’s for his knee. Obviously nothing life-threatening, but a quality-of-life issue nonetheless. She suspects they think he’s too old, so they want to save costs. She also told me that particular operation is done with very little waiting in Switzerland—the insurance companies are obligated to pay, irrespective of a person’s age. I guess those types of things are negotiated between the Cantons and the insurers.

So, I know my share of Finns in Switzerland. The don’t have plans of coming back anytime soon. That’s especially true for this particular cousin; her husband has a very high income and it wouldn’t make sense for them to get taxed at Finnish rates. In fact, she just laughed when I mentioned it. According to her, it’s better just to have a mökki in Finland

“That’s true, but I think it was a bigger distinction in the past. These days, it’s probably a big advantage that one can fly into Finland and drive to any destination without too much traffic. That’s not always possible in central Europe.”

What I meant was more like cultural differences. But also travel time differences. It’s a shorterway from Munich to Switzerland, than to Finland. And the same goes for almost any central-europe city.

“If I understood correctly, then it means: If you buy a stock and sell it for a higher price, you are not liable for capital gains tax.”

The page you talked about mentioned “investment income” as a source of tax. Now, if what you describe above, is not investment income, then what is?

“Could be. I’m not sure about it myself. I suppose some things should probably remain higher than others.”

But then – if you don’t believe this – you shouldn’t believe any other crap the neo-classical mainstream economists say – beacause it’s all equally wrong!

“I don’t think America lacks revenue. Much of that debt probably came from the latest wars. Fiscally, I’m sure those wars will be seen as being very irresponsible undertakings. I’ve heard cost figures in the trillions. But, I don’t know how anyone arrives at such figures.”

What about the current account deficit then? Only due to wars? Hardly? War expenditure mainly goes to the homeland.

“My cousin says it costs about 2300e/person/year, but high-deductible plans (e.g. 1000e deductible/year) are also available at reduced cost. Families get generous subsidies, so there is no ‘penalty’ for having children. She says it’s quite reasonable overall. And poor people get outright subsidies.”

2300e per person, that means a 5 person family pays roughly 14000e
a year. Now, if you forget about subsidies, and thinkabout this for a moment. In order for 14000e to acoount for less than 10% of EXTRA taxation on a family (household), they would have to have an yearly income of more than 140000e. How likely is that e.g. in Finland? Even if these cost are “deducible” it is simply unfair to compare taxataion on these grounds.

And if you look on the situation of most “normal” wage earners, if you have a couple, with no “subsidises” 4600e a year, means you have to have a combined yearly income of more than 46000e (net) a year in order for this “minor add-on to your taxes” to be less than 10% of your income.

“The page you talked about mentioned “investment income” as a source of tax. Now, if what you describe above, is not investment income, then what is?“

I think they meant interest and dividend payments are investment income. But, selling e.g. stocks at a higher price than purchased isn’t subject to tax. I believe there is an exception if the individual is a professional speculator though; he would be liable for capital gains.

I’m not going to re-read it now; but that’s what I remember. I don’t know if it’s significant to our discussion or not.

“But then – if you don’t believe this – you shouldn’t believe any other crap the neo-classical mainstream economists say – beacause it’s all equally wrong!“

Yeah, I don’t want to place myself in any particular camp, whether Neo-Classical or Keynesian. I suppose if a sales tax can be used, then that’s fine. Of course, if wealthy people don’t consume, then it’s kind of useless. In any case, it seems like we should be closer to the European norm. Right now, we’re among the highest.

“What about the current account deficit then? Only due to wars? Hardly? War expenditure mainly goes to the homeland.“

Sure, much of it goes to the homeland. But it only goes to a narrow segment of industry. This type of spending *should* catalyze an economic multiplier effect. Not sure if it works very well in this case.

America has many problems. Its government structure allows for corporate interests to control the government. In particular, the two-party system. It creates a difficult condition for making good spending decisions.

“In order for 14000e to acoount for less than 10% of EXTRA taxation on a family (household), They would have to have an yearly income of more than 140000e. How likely is that e.g. in Finland? Even if these cost are “deducible” it is simply unfair to compare taxataion on these
grounds.

True, but my cousin told me that low-income families also get subsidies; not just deductions. Otherwise, no one could afford to have children. Also, insurance for children is cheaper, but I don’t know the exact amount. Nevertheless, I don’t doubt that it’s still more difficult for families with lower incomes. But, in the average case—or at least, in many cases, it’s still possible for the husband to work and wife to stay home. I wouldn’t mind if more people could take advantage of that here in Finland.

Anyway we look at it, the per-capita cost for healthcare is roughly the same for Switzerland and Finland. In fact, there’s a new report that states Finland is a bit cheaper. I haven’t looked at the report, so I don’t know how to interpret it. For example, ‘cheaper’ might sound good, but if there are long waiting lines and poor service, then maybe it’s not better. I don’t know if that type of criteria is considered in the report.

There seems to be consensus among most Swiss that private insurance is better. They don’t want government bureaucracy involved in their personal business. It also keeps the employer out of their personal business. There’s lots of flexibility to visit any doctor. The doctor sees the patient in a different light when the doctor’s employment contract isn’t made with the state; state workers everywhere are notorious for bad service—apparently there’s a psychological component to consider. Another reason is that people can choose between plans; the only disadvantage is that there are too many choices!

I don’t necessarily mind the idea of paying supplementary insurance to augment KELA—I don’t think KELA alone could ever provide good service. And most employers offer additional insurance anyway, probably including Nokia.

But, generally, I see us gravitating toward a system that is mainly privatized. It seems like the trend, whether we like it or not. It’s probably most important that our government can adapt to the new way of doing business. For example, I’d want the government to be capable of providing good oversight, so insurers can’t rip us off. That’s a problem in the US—many products, but the consumer/employer needs to research any prospective plan in-depthly and carefully.

Of course, I would also want subsidies, on a graduated scale, according to income. By the way, here is an interesting thing about the US tax system. The numbers are a bit outdated, but they are still relevant. I saw other, albeit more confusing presentations, that showed the same thing. As we can see, the richest 20% in America pay over half of all taxes….

http://www.allegromedia.com/sugi/taxes/#Head-3.htm

I assume Switzerland is roughly the same, despite its regressive nature.

Kristian:

“I think they meant interest and dividend payments are investment income. But, selling e.g. stocks at a higher price than purchased isn’t subject to tax.”

I guess you might be right (if one believes wikipedia).

Interesting way of handling “capital income”. In some sense it would feel natural, that if all interests and dividends are taxed flatly, “capital gains” (the win you make when selling stock, or such) should be treated similarly.

At first sight, one could think that someone could make use of this for profit. But then, when you think about it more carefully, is there any profit for anyone there. The investors or the tax authorities. Now, “economic theory” steps in again. As you know, the stock market (or the “asset markets” in general) is what is most like the “perfect markets” of the text-books. In those text-book “perfect markets” prices are always right. Prices also take into account such things as taxation etc. – i.e. there is no shortage of information, a.k.a. information assymmetry.

What I’m driving at is the fact that there is a theory about stocks losing value the day after “the last day you should hold on to stock in order to recieve dividend”. Often (if dividends and gains for selling stock are treated equally) it is thought that the price of stock goes down EXACTLY (ok, theory and practise don’t meet 100% – it never does when it comes to economy) by the same amount as the dividend per each unit of stock (all other factors being – as usually in economics – counted out). This makes sense in a situation where capital gains and dividends are treated equally. But it doesn’t make sense if they aren’t.

What would be the consequence. One might think that if markets – such as the swiss – worked like markets where capital gains and dividends are treated equally – you could make a killing by selling all your stock the day before “the last day you need to hold on stock in order to receive dividend” and buy it back the day after. But – and this is my point – the markets will probably take this into account, and therefore I believe this is simply a zero sum game. Removing capital gains taxes from the loop might in fact make markets more volatile, and in that sense make owning stock “simpler”. But I don’t think that it really makes investors richer, and the tax authorities poorer.

“Yeah, I don’t want to place myself in any particular camp, whether Neo-Classical or Keynesian.”

There ARE other economic theories except Neo-Classical and Keynesian. And – I might be wrong – I believe Keynes was quite (Neo-)Classical in his views, although his idea about state intervention to avoid extreme “cycle swings” (Keynes great inspiration – I believe – was the great depression in the 30s) in the economy, was a red cloth to many “market fundamelist” neo-classicans.

“This type of spending *should* catalyze an economic multiplier effect. Not sure if it works very well in this case.”

You seem somewhat Keynesian after all. Wasn’t the multiplier effect something Keynes used to argument for HIS theories?

But in any case, this multiplier effect to an extent ALSO goes into the homeland, so in what sense do you mean this explains the current account deficit?

“But, in the average case—or at least, in many cases, it’s still possible for the husband to work and wife to stay home. I wouldn’t mind if more people could take advantage of that here in Finland.”

From the point of the GDP, how do you think your ideas are an ADVANTAGE?

“There seems to be consensus among most Swiss that private insurance is better.”

OK. Let them do whatever they like best. But what swiss people prefer MAY not be what finnish people prefer. So why should we take advice from them? 50.000.000.000 flies can’t be wrong – eat shit?

“The doctor sees the patient in a different light when the doctor’s employment contract isn’t made with the state; state workers everywhere are notorious for bad service—apparently there’s a psychological component to consider.”

This is something I simply do NOT believe. I believe this is just crap, and typical “libertarian” prejudice. A doctor who works for “the state” vs. a doctor who works for “your employer”? I can see potential interests of conflict in both cases. A doctor who works for “the state” vs. a doctor who works for “your employer or your employers/your own insurance company” (and here I include doctors who receive funding from insurance companies one way or the other)? I can see potential interests of conflict in both cases.

Common to both of the comparisons above is that I think the interest of the individual is better served by the ‘doctor who works for “the state”‘ since there is less direct financial interests involved in his/her judgement. Thus, its probably more objective. OK, I agree that “the state” can put pressure on doctors to save etc. But then again, I don’t see why a doctor paid by “the state” would AUTOMAGICALLY start acting against their “customers” best interests, and the same goes for state employees in general.

“I don’t think KELA alone could ever provide good service.”

Why is that?

“And most employers offer additional insurance anyway, probably including Nokia.”

And this “insurance” covers what? Weekly drug tests? Great way to “keep the employer out of their personal business” as the “ever-intelligent” swiss people thought?

“But, generally, I see us gravitating toward a system that is mainly privatized.”

Hallelujah. Thank you, to voters like you .

“It seems like the trend, whether we like it or not.”

It seems like THE trend because the MAJORITY seems to want it – whether its in their INTEREST is another story.

“It’s probably most important that our government can adapt to the new way of doing business. For example, I’d want the government to be capable of providing good oversight, so insurers can’t rip us off.”

Ever heard of the KULUTTUJAVIRASTO. They have an insurance-”asiamies”, who gave me (or actually my wife) very good advice (for free, mind you) on one matter a few years back. But of course, they are state employed and quoting you “state workers everywhere are notorious for bad service”. So let’s privatize this business as well and sell their services at MARKET PRICES. Then everybody will be happy. Not!

“I saw other, albeit more confusing presentations, that showed the same thing. As we can see, the richest 20% in America pay over half of all taxes….”

And your point is? The “richest 20% in America” remain the “richest 20% in America” year after year, despite this “extremely unfair” treatment, that’s eating up the foundations of their whole economic existance? Or?

Thomas:

I’m very sorry for the long delay. I needed to gather my thoughts a bit. Hope you don’t mind…

You seem somewhat Keynesian after all. Wasn’t the multiplier effect something Keynes used to argument for HIS theories?

Yes, I suppose he did. However, the multiplier effect seems to be a generally accepted principle these days.

But in any case, this multiplier effect to an extent ALSO goes into the homeland, so in what sense do you mean this explains the current account deficit?

I can’t prove that this has a significant impact on the budget deficit. But it seems to be accepted that the spending of all dollars/euros spent are not equal. For example, when government spends, there is less of a multiplier effect. Conversely, private investment has significantly more of an effect.

In this case, I don’t think the multiplier effect is used effectively because: 1). It is government spending; and 2). The spending is in a very narrow segment of industry, and I suspect it is designed to make only a small group of people rich. Therefore it won’t catalyze economic growth enough to increase productivity. Hence the government collects less revenues.

In my opinion, the money should have been spent across a wider base of the population. I can’t say what the impact on the budget deficit would have been, but it probably would have helped.

Of course, the deficit contributes to national debt. Generally, the US seems to have a policy of maintaining sizable national debt, relative to GDP. I suppose we could think of many strategic reasons why it is better to owe someone money, rather than the other way around.

http://en.wikipedia.org/wiki/Image:National_debt_as_a_%25_of_gdp.jpg

“But, in the average case—or at least, in many cases, it’s still possible for the husband to work and wife to stay home. I wouldn’t mind if more people could take advantage of that here in Finland.”

From the point of the GDP, how do you think your ideas are an ADVANTAGE?

As I stated earlier in our discussion, I’m not in favor increasing labor supply. Perhaps, at some point, we should reap some benefits, instead of just focusing on productivity

OK. Let them do whatever they like best. But what swiss people prefer MAY not be what finnish people prefer. So why should we take advice from them? 50.000.000.000 flies can’t be wrong – eat
shit?

Good metaphor. But, I’m not really saying that we should take their advice….although, it probably doesn’t hurt to look at as many examples as possible.

This is something I simply do NOT believe. I believe this is just crap, and typical “libertarian” prejudice. A doctor who works for “the state” vs. a doctor who works for “your employer”?

I don’t think that one needs to be a libertarian to arrive at such a conclusion. And, I don’t consider myself to be a libertarian regarding medical care—and many other things for that matter. But, according to my experience, _some_ Finnish doctors have a strange attitude—especially at the health clinics. I compare them to German and American doctors.

Actually, in my opinion, American doctors are the best. They will actually listen and discuss matters with patients. Sometimes I think the public doctors in Finland see the patient more as a
nuisance. Whether this is due to the state vs private issue, I don’t know for sure. But, it’s, atleast, a pretty solid coincidence.

I can see potential interests of conflict in both cases. A doctor who works for “the state” vs. a doctor who works for “your employer or your employers/your own insurance company” (and here I include doctors who receive funding from insurance companies one way or the other)?

I see conflicts of interest in both cases too. Maybe that’s why the Swiss unanimously opt for private insurance, with no interference from employer or state. Insofar as conflicts of interest
between insurance companies and doctors go…….

Generally, insurance companies’ official policies should be made transparent to the public. In the US, there are rating services that allow consumers to compare potential insurers. In our case here
in Finland, I would hope for our government to set high standards for insurers beforehand.

For example, the insurer should have a policy of encouraging doctors to get specialist diagnosis, without delay. It actually helps the insurance company too. In my experience, the American ones understand the benefits.

OK, I agree that “the state” can put pressure on doctors to save etc. But then again, I don’t see why a doctor paid by “the state” would AUTOMAGICALLY start acting against their “customers” best interests, and the same goes for state employees in general.

They might want to act according to the patients’ best interests, but there could be guidelines—e.g. a patient is too old, therefore less priority is given. With private insurance, there is a solid contract that the insurer must fulfill.

I have a 72-y/o acquaintance who was recently flown to Florida, for a special operation by a world-renown specialist. It was important to have this special procedure done (without full anesthesia), due to her age. Insurance paid for almost everything. Would KELA have paid for a 72-y/o?

“But, generally, I see us gravitating toward a system that is mainly privatized.”

Hallelujah. Thank you, to voters like you.

Don’t blame me—I’m not purposefully voting for- or against- anything regarding healthcare! I have nothing against KELA—in fact, it might help us save money in some cases—but, I could never trust it for everything. I say that because I remember it from the 70′s and 80′s—and so do my parents! I lived in various countries while growing-up, so I suppose I had a basis to compare. And, I think there’s still a big difference.

Generally, I don’t mind hybrid solutions. I’m relatively healthy now, but I have older relatives to worry about. KELA could never help them retain good quality of life under any circumstances. I’m convinced of that and so are they.

Ever heard of the KULUTTUJAVIRASTO. They have an insurance-”asiamies”, who gave me (or actually my wife) very good advice (for free, mind you) on one matter a few years back.

But, that’s exactly where the state SHOULD stay involved. This service exists in Germany and the US too.

And your point is? The “richest 20% in America” remain the “richest 20% in America” year after year, despite this “extremely unfair” treatment, that’s eating up the foundations of their whole economic existance? Or?

I didn’t mean to imply that it’s unfair (but, perhaps the article implied it). It just makes me wonder if maybe we should invite a few rich bastards to live in Finland. We could levy a competitively-priced tax on their worldwide earnings—maybe 15% or 20%—and then maybe we could all pay less ourselves

Kristian:

“Yes, I suppose he did. However, the multiplier effect seems to be a generally accepted principle these days.”

Keynes is NOT a “generally accepted principle”, in ANY sense among those people you seem to connect with. And definately not among Phils friends.

“For example, when government spends, there is less of a multiplier effect. Conversely, private investment has significantly more of an effect.”

What a load of crap. How do you prove this? In any sensible manner?

“As I stated earlier in our discussion, I’m not in favor increasing labor supply. Perhaps, at some point, we should reap some benefits, instead of just focusing on productivity”

What PRODUCTIVITY do we gain from 50% of the potential work force NOT WORKING? And where do we “reap benefits” if a large number of potential “benefit-producers” are excluded from the work-force simply due to their gender?

“But, according to my experience, _some_ Finnish doctors have a strange attitude—especially at the health clinics. I compare them to German and American doctors.”

OK, but? YOU have this experience, in comparison to German and American doctors. So? What does this prove? Maybe you are just a “self-hating” finn? Or, maybe you met the right doctor in Germany and the wrong one in Finland. Or, or, or,…

Generalising, based on ones own (and friends, neighbours, relatives…) experiences, is sometimes called being prejudiced, some other times even more “negatively sounding” adjectives are used to describe this disease.

“Sometimes I think the public doctors in Finland see the patient more as a nuisance”

In what sense have you compared private/public doctor nuisance feelings towards you, since you claim this is a symptom of the public health care? Is your “sample” representative, or is this just hearsay.

“I see conflicts of interest in both cases too. Maybe that’s why the Swiss unanimously opt for private insurance, with no interference from employer or state.”

All right. But how does this system actually manage the well known “insurance problems”. I mean if it´s equally covering (basically covering EVERYBODY – regardless of “risk behaviour”) as KELA.

“For example, the insurer should have a policy of encouraging doctors to get specialist diagnosis, without delay. It actually helps the insurance company too. In my experience, the American ones understand the benefits.”

Maybe, but the american health-care costs twice as much as ours (per capita) and doesn’t provide – statistically – better care.

“Would KELA have paid for a 72-y/o?”

First of all, KELA is tightly controlled by law. They cannot make judgements based on somebodys age, unless law permits them. I do not think there are any laws that stipulate that KELA can decide whether a certain person is young enough to undergo certain treatments, and get KELA “insurance coverage”.

Secondly, when you talk about “guidelines” for doctors, what does KELA have to do with that? This is more a question of hospitals (and the organisations controlling them) trying to save money (so that taxes for FREEDOM lovers can be lowered once again) and lowering pressure one way or another, although I do not know (despite having heard rumours) that age is used as a base for decisions whether treatments are given or not. I still think that doctors base their decisions on whether treatments will be effective or not, rather than the age of their patients.

“Don’t blame me—I’m not purposefully voting for- or against- anything regarding healthcare! I have nothing against KELA—in fact, it might help us save money in some cases—but, I could never trust it for everything.”

Without being in any way connected to KELA, I think you in your post already have shown your misconceptions w.r.t. KELA quite clearly.

“It just makes me wonder if maybe we should invite a few rich bastards to live in Finland. We could levy a competitively-priced tax on their worldwide earnings—maybe 15% or 20%—and then maybe we could all pay less ourselves”

Yeah. Keep on dreaming. Even if we had a 0% tax on “world-wide earnings” I do not think that those who would use this option would spend very much time in Finland. So what would the benefit be?

Thomas, I thought we put this to rest. But I guess not. Fine.

You can have KELA healthcare if you want. But, keep in mind that the Finnish government publishes your financial tax records for the entire world to see. Anyone in Somalia, Nigeria or any place in the world, can see your julkiset verotiedot from their computer or with a mobile phone.

If we can’t trust the government with our personal financial information, then why should we trust those bastards with our health?

Think about that.