Why David left

I recall David naming three reasons for leaving Denmark: Taxes, taxes, and taxes.



Well, it’s that time of year again: I just received my tax statement for last year, and I keep getting shell-shocked each year as I’m reminded of the marginal tax level around here.



For those of you unfamiliar with the numbers, I pay 61.5% tax on every additional dollar (kr) I make. That’s $385 to spend for every $1,000 I make. Another way to put it is that to buy that $5 beer at a bar, I have earn $13 pretax. And I’m not even accounting for the 25% sales tax which makes the $5 beer cost $6.50 (kr40).



Sure, I’m in the top bracket. Along with everyone else making more than $51.770 per year, or $4,314 per month.



Makes you want to follow David :)

15 comments

Taxes are certainly a big part of why you'd want to get out of Denmark. But there are many other reasons. If you're in upper-middle class or above, there's a huge difference is living standard. The health care is better (none of the patronizing, none of the waits), the schools are better/more accessible (no state monopolies), the food is better (much broader variety of especially organic and healthy food aka Whole Foods), the apartments are larger (~11K DKR for 160KM2 loft), the cars are sooo much cheaper (Audi S4 for what a Ford Focus 1.6 costs). It really does add up to a very apparent difference. Sure, the USA is screwed up in many, many ways, but Denmark is surely not without issues either. And I think that's the main realization you get from living here for a while. The notion of oh-so high Danish standards are often self-delusional. Convenient fairy tales that works well for the mediocrity. But still its hard to fault a country for optimizing for the center of the bell curve. The Danish system "works" better the more average you are. So by definition, the it works well for the majority.
By David Heinemeier Hansson on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Moving country is one of those things that "most people" (David's "average") don't do, because it's too hard. Put another way, in comparison, it's too easy to stay put, where you know how the system works, or, perhaps more importantly, know how to make the system work for you. However, I'll be encouraging my children (with UK, DK and NZ passports, amongst other things) to do so, and as much as they can handle, especially before kids arrive on the scene (children make it harder, but still manageable, Lars). David , I think your comment about "optimizing the bell curve" is spot on - very succinctly put.
By Robin Benson on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Yes, the bell curve comment is excellent. Outliers have a tough time. More so in small cities than in big cities, and I guess the same holds up for small countries as well. Believe me, I'm all too well aware of the differences, thanks to my 2.5 years in the states. Once you've had a sip of the freedom fountain, there's no going back ;) Health care and education are my main gripes -- they're both great if you can afford it. Health care in particular seems inefficiently structured, and that's a pity. Believe me, we haven't given up on moving just because we have a kid. I hear people have children in the US, too ;)
By Lars Pind on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
:o) I'm sure you have the practical side of it sorted out, and your exp in the US will see you right Lars, for sure. With kids, quite apart from the practical things (and anyway, bilingual kids are cool), the issues of family is a hard one, as invariably grandparents want a relationship with their children, and grandchildren. For parents - as I'm sure you're aware - it can be a huge help to have at least one pair of grandparents around. We have none, which adds to the challenge, but we just figure out ways to cope, so that's ok, just a little harder. I found your comments about "outliers", health system and education interesting. I thought you were talking about Denmark initially, when you were actually referring to the US. In DK both education and health have issues as well. Lots of trust in "the system", and they churn out thousands of Danish clones. Friskoler and Rudolf Steiner are an exception! That's where my kids would be going if we were in DK.
By Robin Benson on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Yeah, and then there's the additional tax on beer. And of course the vendor also pays high taxes. It's always nice to hear about people disagreeing with the system. I don't find it hard to fault the government for stealing peoples money and by force trying to design peoples life for them. Most people can support them selves, but because of the welfare state, many are reduced from being independant to being dependant on the system, to give back money and services, in return for the taxes. The state run education, media, and the state financed intellectuals and artists in general help educate people about how the danish system is superior. And you are forced to pay for this brainwashing! The healthcare in Denmark _is_ worse than in the US. The danish health care system is on par with those in the developing countries. When you pay for things yourself, you get a product better suited for you. When the state pays, they decide if your'e worthy of healing. Yeah, I don't like the system either. But I shouldn't have to move because of the mafia-state. But I probably will anyway at some point.
  Cancel
The depressing thing is that you can't easily escape. For me, if I could spend, say, 3 months each year in the US, that would probably satisfy my needs. But paying Danish taxes and then taken your post-tax money and spending them in the US, where you have to pay for health care and other services that come included in your taxes around here, just isn't a very good deal economically. So either you stay, or you get out for the long haul. There's no middle ground.
By Lars Pind on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Head off for five-ten years, making sure you change your tax domicile, make your money and then go home :O)
By Robin Benson on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Yeah, that sounds like a plan. Let's do it ;) Health care and education, I was talking about the US. Re health care: We had a great, friendly, professional experience last year when Caroline was pregnant and there were some mild complications. But we also euxperienced the side that wants you to come in for checkups over and over again, even though nothing's wrong, basically so the doctor can milk the insurance companies. And we experienced a surgeon who was so into pushing for surgery that he completely ignored potential complications. It's part of the system, and thata part isn't so great. Also the fact that there are so many uninsured. Re education: I think paying for your own education probably helps sharpen the focus, makes you want to get more out of your time and money while there, and makes you think harder about what happens after you're done. Maybe. On the other hand, the fact that it can be really hard for lower income people to get an education isn't so great. The downside to both in Denmark is that quality is lower and there's less choice. Although the warning that choice without adequate information is actually worse than no choice applies to both sides. What good does it do that you can choose your own doctor or health care plan, if you don't have the information you need to make a good choice? All it does is transfer blame to you. Re outliers, I was talking about Denmark. Denmark is, as David points out, optimized for the average, and so if you're not average, you face an uphill battle.
By Lars Pind on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
@Lars - I spend my first three months of my first visit to Denmark on Mors, Jylland. That wasn't even optimised for the average - it was optimised for farmers who talk funny. Apparently I speak - approximately - rigsdansk. So I wasn't lucky (!) enough to get a Morsingbo accent! @Lau - investigate Swedish domicile. I am no tax lawyer but there are some interesting rules that don't exist in DK.
By Robin Benson on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
One last (on-topic) thought ... Most Danes I know are very concerned about sticking to the path that they have either chosen - or that they have defaulted to - for their life. Stick to the path. Avoid risk. Be humble lest you stick out in a crowd. Mediocrity ... holy grail ... But occasionally I meet Danes who have ventured outside, and somehow "realised" something about the system they grew up with. Many travel and arrive home pretty much the same though.
By Robin Benson on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
@Robin: Part of this "not sticking out in a crowd" is a mentality that has existed in Denmark (and Norway, Sweden) for a long time. "Janteloven", you've probably heard about it. (scroll down on <a href="http://www.ling.gu.se/~hansv/berra3/janteloven.html">this page</a> to see the 10 "commandments" of janteloven) And the extensive welfare system and it rules in a way enforces "janteloven". To me, optimizing, as mentioned earlier, is a euphemism. The more mediocre you are, the less punishment you will get from the welfare system. If you don't fit into the socialdemocratic ideals, look out. For instance, you are taxed less being 2 working parents with medium income, than 1 working parent with a high income and 1 stay-at-home parent. The institutions for children are subsidized. You are still allowed to take care of your children yourself, send them to private schools etc. But again - it will cost you. Swedish tax rules aren't that great either. Cars aren't as expensive, though. Some people move from Copenhagen to Malmö for the cheaper housing, cars and living expenses in general (except alcohol ;). But it doesn't seem that attractive to me. If Malmö was a city like Stockholm, then maybe. In the 1970's some Swedish residents had to pay more than 100% in marginal taxes taxes! (Makes 62% seem moderate, right? ;) Including the popular Swedish childrens book author Astrid Lindgren (Pippi Langstrømpe, Ronja Røverdatter, Emil fra Lønnebjerg, etc.) I don't think people pay more than 100% marginal tax in Sweden today, but there is a reason, that for instance IKEA founder Kamprad lives in Switzerland. And then the socialdemocratic party has been in power for so long. There is too much political correctness, patronizing and censorship.
  Cancel
@Lau Yep I know about Janteloven - thanks for the mention though! Remember, Sandemose was from Nyk.M. I stayed (not for long, though) 15 minutes walk from where he lived. Regarding tax, I have a Swedish friend who earns income outside Sweden and it seems to be strangely beneficial for him to do so. Maybe he's not resident. Hmmm. Yes there are some interesting life (money, politics, etc.) perspectives in Scandinavia. Lots to discuss ...
By Robin Benson on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Aren't the income taxes separated from capital taxes in Denmark? I would be shocked if they weren't. In Finland the progression in income taxes is very high, but capital taxes are flat 29%. Therefore the richest people with huge fortunes often pay less taxes (even their marginal percent is lower) than those that earn a lot of "normal income". That kind of sucks, but it also is an opportunity for a freelancer: Build your own LLC. Pay only so much salary that makes the equation most profitable. Get the most of your income by paying yourself dividends that are taxed lighter (no progression, municipality tax or church tax).
By Jarkko Laine on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Not really. There's currently a small difference between the marginal tax and the combined tax of paying dividends, ie. the corporate tax (28%) plus the tax you pay on the capital gains (around 43%). The math is 1-(1-.28)*(1-.43) = 59%, compared to my marginal tax of 61.5%, so a savings of 2.5%. But then my accountant claims it's not legal to just do it that way, it would be "maskeret udlodning" -- "masked dividends"? To be honest, I don't see the logic of why there would be a problem, but then tax code isn't necessarily logical. And my brother-in-law, who is also an accountant, thinks it's bogus. The one opportunity there is, is that the first kr43,300 (~$7000) are taxed at a lower rate of 28% for a combined tax of 1-(1-.28)*(1-.28) = 48%, for a savings of kr6.496, or roughly $1000. When you're married, you can use your spouse's allowance, too, for a total of $2.000. You'd be stupid not to take it, but it doesn't change the equation that much. It's just one more of those things where you have to speculate in tax code instead of your business, ie. tax revenue and exports.
By Lars Pind on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel
Well it worth a trip and the experiance - having been born in the USA and working for 15years in the american system, I question all the blue sky - "freedom" talk. yes it is true to an extent taxes are less than 60% - can be very low if yor are clever but the average joe pays about 40% and get not much - no public heath, limited paid holidays a minimum wage - 2.85$ per hour for resturant workers. 45 million people without healthcare millions of homeless people who roam the streets, many homeless are so because of a illness. Fine you say I'm not one of them- but for me the idea of high living while people are suffering and actually begging outside the resturant, sickens me -the fact that my friends and society has grown so selfish- the usa has the second highest rate of child death. As free as it appears most people in the usa live in fear of loss of job,healthcare and violence. enjoy it but be carefull its not all like on the movies.
By charles on Wed, Mar 22, 06 at 19:43 · Reply
  Cancel

Leave a comment