Taxation System in America and Denmark

In America, we do not follow strictly follow any one economic system. Instead, our system is a “mixed” economy”, where it contains aspects of socialism and capitalism. There are things in America that are publicly owned and privately owned. On the socialist perspective of America, there are things to be shared and organized by the government, such as: parks, libraries, schools, welfares, beaches, prison systems, etc. On the other hand the capitalist aspect involves things that are marketed, to be bought and sold, such as: homes, books, food, clothing, cars, etc. Having a system of “mixed economy” allows the people to have private economic freedom and still have centralized economy planning. In America, the “centralized economy planning,” involves taxes, money that is forced to be paid to the government in order for them to provide public services. Three major taxes in America are, income tax (% depends on an individual’s yearly income); social security tax (7.65%) and sales tax (8.25%). Amongst the types of taxes, there are: “flat tax” where everyone pays the same tax percentage, “regressive tax” where the poor people pay a higher tax, and “progressive tax” where the rich people pay more tax. Two major examples of progressive tax in America, would be the “marginal taxation system” where the amount of tax you pay depends on your income and the “bracket” that you passed (e.g. Income = $50000, Tax = 25% of 50000=$12,500) and the “effective taxation system,” which also depends on your income. However the effective taxation system is different in the sense that each bracket only applies to a portion of your money.

(e.g. Income = $50000
- $0-$10,000 = 0% | From $0 to $10,000, there is $10,000. So 0% of the $10,000 = $0 is the first tax bracket
- $10,000-$25,0000 = 20% | $10,000 to $25,000 = $15,000---20% of $15,000 = $3,000 [2nd tax bracket]
- $25,000-40,000 = 30% | 30% of $15,000 = $4,500 [3rd tax bracket]
- $40,000- $60,000 = 40% | Since, the income does not reach to $60,000, this bracket applies for the $10,000 between $40,000 to the income, $50,000--- 40% of $10,000 = $4,000 [4th tax bracket]
- $60,000+ = 50% | [Does not apply because the income does not reach this bracket]

Total tax = $0 (1st bracket) + $3000 (2nd) + $4,500 (3rd) + $4,000 (4th) = $11,500
Effective Tax Rate = 11,500/50,000 = 23%)

A portion of all these taxes goes towards public services and the socialist aspect of America. Meanwhile, everything else is capitalist and is owned privately by individuals.

Unlike America, Denmark runs with a “social democracy.” Having a social democracy guarantees everything required for a decent life. Most of everything that is needed for survival is organized by the government at a cost of a higher tax rate (in Denmark, it would be 60-65% if you exceed $60000). For example, rather than having an individual pay for insurance, a social democracy would provide free insurance that has been paid for by the taxes. The higher tax rate allows for more publicly shared schools, libraries, parks, etc. and provides various benefits for the people, such as: unemployment benefits, healthcare, insurance, higher education, etc. In Denmark, not only are most of the costs covered, but people are actually paid to do certain things, such as going to school. However, even with a social democracy, Denmark is still a mixed economy because there are still private ownership and businesses. Those people, who do own their own businesses often make more money, but receive fewer benefits. Either way, most necessities are provided by your greater income or by the government, and would be very difficult (but not impossible) to be poor.

I believe that moving towards a social democracy would be very beneficial. I think that it is better to pay higher taxes and receive more benefits, than to just pay directly with our income. Not only would that be cheaper (due to the additional money coming from the upper class), but it would also guarantee it. Most people argue that you do not know where your money goes when you pay taxes. However, if we kept that money in our pockets, we still would not know where it goes. Most people in America, or at least the people I’ve seen in my experience, cannot manage their money. The way that I see it is that by paying a higher tax, we are giving it to an accountant or an expert, and paying off what is required for survival in society first, then spending the excess money on your own desires. However, I do not think that this plan would be possible any time soon in America. Many people are already pissed off by the war and the fact that our money is going towards massacring people in another country. The people in America have already lost trust in the government, and do not want to contribute more to the evil deeds that are done with our taxes.