![]() In fact, the United States’ top personal income tax rate is higher than Norway’s top rate, at 43.7 percent (federal and state combined). However, tax rates are not necessarily the most revealing feature of Scandinavian income tax systems. Denmark’s top statutory personal income tax rate is 55.9 percent, Norway’s is 38.2 percent, and Sweden’s is 52.3 percent. Top personal income tax rates are rather high in Scandinavian countries, except in Norway. Instead, it uses a share of its individual income tax revenue for these programs. Only Denmark does not impose social security contributions to fund its social programs. This compares to 14.6 percent in the U.S. ![]() In Norway and Sweden, social security contributions-employer and employee side combined- account for 18.8 percent and 29.2 percent of the total labor costs of a single worker with no children earning an average wage, respectively. In the United States, social security contributions ( payroll taxes) raise revenue of about 6 percent of GDP. ![]() Social security contributions are largely flat taxes and tend to be capped.īoth Norway and Sweden levy high social security contributions, raising revenue amounting to approximately 9 percent of GDP in 2021. Social security contributions are levied on wages to fund specific programs and confer an entitlement to receive a (contingent) future social benefit. tax wedge of 28.4 percent and the OECD average of 34.6 percent. The tax wedges of the Scandinavian countries are now higher than the U.S. In 2021, the tax wedge for a single worker with no children earning a nation’s average wage was 35.4 percent in Denmark, 36.0 percent in Norway, and 42.6 percent in Sweden. One way to analyze the level of taxation on wage income is to look at the so-called “ tax wedge,” which shows the difference between an employer’s cost of an employee and the employee’s net disposable income. This compares to 17.5 percent of GDP in individual taxes in the United States. In 2021, Denmark (24.7 percent), Norway (19.7 percent), and Sweden (21.3 percent) all raised a high amount of tax revenue as a percent of GDP from individual taxes, almost exclusively through personal income taxes and social security contributions. ![]() So how do Scandinavian countries raise their tax revenues? A first breakdown shows that consumption taxes and social security contributions-both taxes with a very broad base-raise much of the additional revenue needed to fund their large-scale public programs. This compares to a ratio of 24.5 percent in the United States. In 2021, Denmark’s tax-to-GDP ratio was at 46.9 percent, Norway’s at 42.2 percent, and Sweden’s at 42.6 percent. High levels of government spending naturally require high levels of taxation. Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required if the gross estate of the decedent, increased by the decedent’s adjusted taxable gifts and specific gift tax exemption, is valued at more than the filing threshold for the year of the decedent’s death, as shown in the table below.Scandinavian countries are well known for their broad social safety net and their public funding of services such as universal health care, higher education, parental leave, and child and elderly care. The tax is then reduced by the available unified credit. The value of some operating business interests or farms may be reduced for estates that qualify.Īfter the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate." These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. ![]() The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. It consists of an accounting of everything you own or have certain interests in at the date of death ( Refer to Form 706 PDF). The Estate Tax is a tax on your right to transfer property at your death. ![]()
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