Monday, November 17, 2008

The benefits of high taxation

Writing in the Guardian, Gwladys Fouché examines the UK's consensus on low taxation, and asks a subversive question:

But is this the best way to proceed in the long term, and would UK taxpayers get better value for money if they paid more, rather than less?

One way to examine the issue is to compare state help provided by the British government to one which traditionally charges much higher taxes: Sweden. Swedes support the second-highest tax burden in the world - after Denmark's - with an average of 48.2 per cent of GDP going to taxes. Yet Sweden, along with equally high-taxing Denmark and Norway, tops almost every international barometer of successful societies.

Swedes get a cradle to grave welfare system, hospitals that work, good schools, universal cheap early childhood education and generous paid parental leave which allows parents to better integrate work, life, and family, excellent unemployment benefits which provide security in the workforce, and at the end of it all, a generous pension which can be taken any time after age 61 (and is higher the later you take it). And their economy doesn't seem to suffer a bit: their per-capita GDP is the 8th highest in the world, and their real GDP growth rate seems pretty good. So why don't we emulate them, rather than the UK, or (worse) the US?

The answer, as usual, comes down to who benefits. Swedish style arrangements benefit ordinary people. UK-US arrangements (low taxes, and consequently poor public services, low welfare provisions) benefit the rich. And sadly, despite MMP, the latter still enjoy disproportionate political power in our society.