We’ve all heard it- how much better Denmark is than the US on oh so many levels. I mean, take it from the Occupy Democrats meme below: Denmark has free healthcare, college, and childcare. To make matters worse those lucky Danes have a whopping $20/hr minimum wage and only have to work 33 hours a week. The conclusion- the US has got to be doing it wrong. So please, by all means lets learn about how awesome Denmark’s system is!! Are you ready!! I’m so excited!!
Let’s start with that free college. It’s free, but Danes do not get the same freedom of choice when it comes to what subject they want to study. Their choices are limited to what fields the Ministry of Education think that Denmark needs more graduates in. Want to be a writer? A teacher? You better hope the Minister of Education sees a need for more of those.
Now on to minimum wage. Actually, Denmark doesn’t have a “national” minimum wage, but we won’t split hairs. Due to union and other agreements they have an “effective” minimum wage of 110 DKK/hr (Danish Krone). The current exchange rate is 1 DKK= .15 USD. So, that’s $16.50 an hour- not $20, but still beats the heck out of the US minimum wage, right? Not so fast.
Denmark has a progressive tax structure, but the 2016 personal income tax rate listed on tradingeconomics.com is a whopping 55.8%. Talk about a chunk out of that paycheck! To add insult to injury, when you go shopping in Denmark, be ready to add a hefty 25% to your purchase (no matter what you’re buying) in the form of Denmark’s VAT tax. Want to buy a car? Get ready to shell out a 105% tax on your vehicle (up to a value of 82,800 DKK or $12,420 USD) and 180% tax on any value exceeding that 82,800 DKK mark- according to pwc Worldwide Tax Summaries. What did you pay for your last vehicle?
Do you want to own a TV, phone, or computer in Denmark? Be ready to fork over an additional 20% tax. Once you have your TV, phone, or computer you’ll probably want to be able to use it, right? Well then, you’re going to have to come up with extra cash to pay for your “licens” fee, which is the fee that you pay because you now have the ability (it doesn’t matter if you’ll actually tune in or not) to pick up the Denmark Radio signal. That amounts to 205 DKK per month.
For an eye opening glimpse into the financials of an actual Dane- H. Roland J. has been so nice as to share his for one month in 2015 in his blog post, Denmark- The Paradise of Fools.
- He has a monthly salary of 25,000 DKK or about $3,750 USD.
- Then comes the first portion of his personal tax at 8%.
- That amounts to 2,000 DKK or $300 USD leaving him with 23,000 DKK or $3,450 USD
- He then subtracts his “bundfradrag” or “bottom deduction”, which for him for 2015 came out to 3,433 DKK per month of non-taxed income (besides the 8% it was already taxed). Let’s subtract that amount to put into his pocket and see what he has left to pay more taxes with- 19,567 DKK or $2935.05 USD.
- His county tax was 24.9% leaving him with- 14,694.81 DKK or $2,204.22 USD
- Time out!! If he, at this point, made more than 37,000 DKK per month, he would be subject to an additional 15% “topskat” tax. He doesn’t, so let’s continue.
- He now pays a 4% “health tax”- leaving 13,784.32 DKK or $2,116.05 USD
- This adds up to, in this man’s tax bracket, an income tax rate of 44%.
- So, now he has 13,784.32 DKK or $2,116.05 USD left- before living expenses of course.
- I already mentioned that when paying bills, they also must add in the 25% sales tax. He paid his bills with the “disposable” income that was not taxed (3,433 DKK) and ended up with 10.34 DKK or $1.55 USD left over.
- This guy doesn’t want to pay for TV or phone so if you couldn’t live without those, you’d have even more to pony up.
- He then pays the “afgift” or extra tax on all utilities. He uses his power bill to illustrate how that works:
- His power bill was 994.64 DKK for a 3 month period, ($149.20 USD) in which he used 358 Kilowatt hours.-Charges from the electric company were 111.06 DKK plus 30 DKK for membership plus sales tax comes to 176.33 DKK ( $26.45 USD)
- The electric company charges .37 DKK per kilowatt hour, but the state imposes an “electricity transportation afgift” at .21 DKK per kilowatt hour (almost as much as the electric company charges for the electricity!) making his electric afgift 80.89 DKK for the period.
- THEN, the Denmark government adds a sales tax of 20% onto the afgift! So a government tax on a government tax, for those who are keeping tabs.
- SO- of the 994.64 DKK he paid for electricity, only 141.06 DKK went to the actual electric company and the bloated 853.58 DKK went to the government!
Sorry, but so far, the words “Awesome Deal!” are NOT what is coming to my mind when I take a good look at Denmark. Regardless, I know there are many people out there saying, “But they get free healthcare and that makes it ALL worth it!!” Well, in case you haven’t noticed- that health care AIN’T “free”. This healthcare better be awesome! Is it?
One interesting fact to note is that in addition to the “free” government health care provided, Danes have the option of purchasing separate “private” insurance- sort of makes you wonder why this is even needed if the government health care is “all that”. Two additional facts: in Denmark your doctor must refer you to a specialist or you don’t see one and your doctor must refer you to the hospital or you don’t go. An American expat who now lives in Denmark explains her experience with the Danish health care system in her blog post, Free-Health Care in Denmark- My First Hand Experience. Her article is definitely NOT a Denmark health care bashing article, but actually just an honest recounting of her personal experience, which has been both good and bad.
She explains from the outset that health care is a straight up 8% line item deduction of gross pay. Denmark’s “free” health care option does not cover physicals, vision or dental care, and only partially covers mental health services if the government covers it at all. Danes pay full price for prescriptions until a personal threshold is reached after which they are progressively discounted. She notes that, “In nearly six years, I’ve never had my total yearly prescription cost in Denmark come in below that of my $10-$20 US co-pay.” (You can tell she hasn’t lived in the US for a while- I’d kill for a $10 co-pay!!) She has actually crunched the numbers and admits that she pays roughly 6 times as much for her “free” health care in Denmark than she did for her employer sponsored plan in the US.
She then admits that her initial experience with Denmark’s heath care was abysmal. Her doctor was absolutely horrible and misdiagnosed her twice. The last diagnosis could have ended up causing her “irreversible damage” had she not moved and had access to a better doctor. Of course, she is currently very happy with her new doctor so she has changed her mind about the quality of Denmark’s health care. She also notes that Danes have the opportunity to purchase private insurance (which I mentioned earlier) and that this insurance allows you to “jump queue” if you need to see a specialist with a long waiting list or need access to mental health services. This of course implies that, those who pay more, get to “cut line” in front of those who receive the “free” health care when it comes to seeing a specialist. Hmmm…
By the way, in Denmark there is no such thing as a malpractice suit. As of 1992, Danes cannot sue a doctor for malpractice. You’ll be hard pressed to find any article on this topic that gives anything other than a glowing account(like this one, How Denmark Dumped Medical Malpractice and Improved Patient Safety) of how this is revolutionizing health care by being in the best interest of both doctors and patients, but I’m skeptical and I’ll tell you why. First, instead of taking your case before a jury of your peers, you must submit a claim to “medical and legal experts” for review. These “experts” review your claim based on two criteria:
- The “specialist rule”: How did the treatment you received compare to care an experienced specialist would provide? If it wasn’t equal, you are entitled to compensation.
- “Fairness rule”: If you experienced a severe medical event that occurs less than 2% of the time, you are eligible for a “reward.”
#1 strikes me as extremely subjective and I suppose according to #2 if you aren’t a medical anomaly you’re out of luck. Sounds totally “fair”. But worry not! If you aren’t happy with the decision you can appeal- to a seven member board of doctors, patient representatives, an attorney, and two representatives of the Danish health care system. I’m sure it’s not as susceptible to corruption as it seems…
If we’re going to follow Denmark’s cue, Forbes points out that we’re going to need to let up on our business regulations and decentralize our government. Wait, Democrats are not for either of those things! US businesses migrate overseas every opportunity they get, but the Danes apparently realize that they can’t support their “entitlements” without making Denmark business friendly- so they do. Denmark businesses are far less regulated than US businesses.
Denmark’s government is less centralized than the US government. For example, Denmark taxes are astronomical, but only 3.76% of income taxes are national. The large portion of income tax comes in at the community level. So the taxes they are paying benefit their communities rather than being directed through Washington like ours.
This is all well and good, but some people out there are still saying this is all worth it if the poor are better off in Denmark. Are they? The poorest 10% in the US have adjusted incomes almost exactly the same as the poorest 10% of Danes. The poor in Denmark do not enjoy any higher standard of living than the poor in the US. However, the rich in Denmark definitely aren’t as rich as the rich in the US. But Denmark’s poverty rate is lower, you say!! Did you know that the US is the only country in the world that calculates poverty before benefits are received? (Debt.org)Unless you take this into account you are comparing apples and oranges.
We’ve gone through all of this, and I haven’t even mentioned the fact that Denmark only has a population of 5.7 million compared to the US’s population of 325.8 million. To say that the Denmark government operates on a smaller scale is the understatement of the century.
So, the next time someone tells you that the US needs to learn from Denmark, you can ask- what lessons specifically? Denmark’s crushing 55% income tax rate, whopping 25% VAT tax, taxes on utilities, taxes on the taxes on their utilities, monthly license fees for TV, computer, and phones? No covered dental or vision benefits and limited mental health benefits? Paying full price for prescriptions up to their government imposed “deductibles”? No legal recourse for medical malpractice? Lack of educational free will? Or perhaps they are referring to Denmark’s decentralized government and their relaxed business regulation?