A FEW THOUGHTS

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As it is the period for turning in the personal income tax report here in Norway I (once again) contemplate the tax rates. The tax rates are different in each country around the world, which is totally understandable as we for sure have different standards, social service systems, pensions and health care systems. A country with higher personal income tax usually have a higher degree of added social services in their community. Searching the web I find some statistics provided by the Paris-based think tank OECD (Organization for Economic Cooperation and Development). Looking at the graphics for 2005 I see for instance the range for personal income tax in Norway is up to 47,8% with an average of approx 37% while corporate tax is 28%. Looking at the range from lowest to highest personal income tax in other countries there is a gap from 0 and 1 % to the highest around 60%.  This is also dependent on your social situation, whether you are married or not, have children or not etc. Now, this is really outside my area of expertise so please forgive me if I miss any elements here. I have not had the chance to quality assure these numbers either.

My question is: Is there a universal interpretation and opinion on what the “right” tax rate should be?
For instance; living in Norway there are obviously some differences in opinion, depending on what side of the politic you are on. Some parties urge for a shift into lower taxes while some want to keep it as it is, or maybe also increase the taxes. The level of taxes surely affects the  standard of living in a country by elements of pension, health care and social services. It also has an effect on other parts of every day life like transportation, highways, urban development, cultural life, agriculture and industrialization.  So, with all types of different people in the world, all political point of views, opinions, cultural and social backgrounds the answer should be given, right? There are too many different people for us to have a joint understanding of this question. Or is there?

Many times I also see examples of how much a like people are, regardless of background and political opinions, and I am reminded of the Hierarchy of Needs described by Abraham Maslov. I am also quite sure that the majority of people see the need for a tax system where everybody contributes to a common good. I also think that, even though mankind is perceived as egoistic and self-centred, and some people don’t want to share with others at all, there is a common understanding that this is to be calculated from certain percent rates of income rather than fixed amounts. I certainly see the need for contributing by paying taxes and if I one year make more money I am also prepared to pay some more in taxes. But if my rate of 42% is appropriate I am not so sure. I think the rate is quite high, knowing that there are countries paying more than that, and would definately welcome a lower rate. That being said I also want to keep up a certain standard of living in my country, having a certain level of social services, but also maybe delegate parts of it for the tax payers to govern and prioritize. So, at the end of the day, it all boils down to the utilization of the taxes, prioritizing and politics

Anyway, I ask again: Is there a universal interpretation and opinion on what the “right” tax rate should be?  What do you want to pay?