Nordic economic systems would not work for America, expert says

Aug 24, 2023, 3:49 PM | Updated: 4:53 pm

WASHINGTON (AP) — Lawmakers broke for their August recess this week with work on funding the gove...

FILE - The Capitol Dome and East Front of the of the House of Representatives is seen in Washington, Wednesday, April 19, 2023. This year's projected government budget deficit has jumped by $130 billion, due in part to a proposed change to student loan repayment plans and a series of bank rescues organized by federal regulators, the Congressional Budget Office said Friday.(AP Photo/J. Scott Applewhite, File)

(AP Photo/J. Scott Applewhite, File)

SALT LAKE CITY — Adopting Nordic economic policies would cause the United States to spend even more, according to Brian Reidl, a senior fellow at the Manhattan Institute. 

Reidl told Inside Sources that progressives who propose adopting Nordic economic policies rely on a caricature of what the countries actually do.

“They are portrayed as these tax-the-rich utopias where everything is free. Healthcare is free, family leave is free, benefits are free, infrastructure is free and everything is funded by taxing the rich,” said Reidl. 

Scandinavian tax structures

Nordic systems are not as generous as American progressives think, according to Reidl. 

The difference between the tax structure in America and Scandinavian countries lies in the middle class. Payroll taxes and value-added taxes, which are like national sales taxes, comprise 90% of additional tax revenues compared to the U.S. 

“They tax the middle class at rates not even close to anything in America,” said Reidl. Corporate capital gains and estate taxes are higher in the U.S. than in Scandinavia, which means the U.S. taxes the rich more. 

Payroll taxes in the U.S. is 15%. In Scandinavia, on average, that tax is 30%, or double. Value-added taxes are about 25% in Scandinavian countries, according to Reidl. Collecting tax revenues like those in Scandinavian countries would require raising payroll taxes and establishing a national sales tax. This would affect the middle class the most, according to Reidl. 

The U.S. outspends Scandinavian countries on certain functions, according to an article Reidl authored. Healthcare is the most expensive government function in the U.S.

Healthcare systems

Reidl also said the U.S. healthcare system is much bigger than Scandinavian systems. The U.S. has a bigger infrastructure — bigger hospitals, more technology and more drug research. 

“[Combining] Norweigan and Swedish generosity [with] American healthcare inefficiencies … you get the worst of both worlds,” Reidl said. Charging Scandinavian healthcare prices for a larger infrastructure would end up costing more, according to Reidl. 

“In these countries, their corporate taxes are lower than America. Their estate taxes are lower than America, their capital gains taxes are lower than America, and they got there because they … learned how destructive some of those high tax rates can be,” said Reidl. 

American system flawed

The case can be made that the American system has a lot of inefficiencies. Reidl thinks that there are certain upper-income taxes that can be raised without damaging growth and that loopholes can be closed to ensure corporations don’t escape paying taxes.

Additionally, Reidl thinks the U.S. healthcare system is “wildly inefficient” and needs to be reformed.

“Particularly the third-party payments that result in people not being very cost-conscious,” Reidl said. 

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Nordic economic systems would not work for America, expert says