Finland’s link between taxes and prosperity

Imagine living in a relatively small nation, where per capita income is $11,000 less than in Washington state, and the only natural resources are timber, water and ice. People pay a 31 percent tax on personal income in excess of $82,000, a value-added tax of 14 percent on food and restaurants, and 24 percent on most other goods. How could anyone possibly do well there, much less run a business and prosper?

And yet, looking at living conditions — such as education, health care, quality of life, economic dynamism and political environment — this nation actually does much better than we’re doing in the U.S. Fewer people are poor, and more people there live longer, are more productive, and are … well, happier.

This place isn’t Arendelle of the movie “Frozen.” It’s Finland. Finland has a highly industrialized, largely free-market economy. The conservative Heritage Foundation rates Finland and the U.S. 74th and 76th, respectively, in terms of “economic freedom.”

In Washington state, our per capita income is close to $50,000 per resident. By that measure, we’re a rich state. But we’re underfunding our schools from pre-K through higher education; too many people are homeless, while many more face stagnating incomes and diminishing public services; and we’re all facing more uncertain economic futures.

So how do the Finnish people prosper with so much less, ostensibly, than we have? The answer is, they make shared investments to build their kids, families and communities.

Look at the economy in terms of peoples’ lives: When a baby is born in Finland, the family gets a baby box with clothes, diapers, bedding, towels, a picture book, a teething toy and other items. Paid family leave kicks in for at least a year, at 80 percent compensation with a guarantee you can return to your job. When mom or dad decides to go back to work, the cost of day care is subsidized so the maximum monthly payment is $322.

As kids grow up, their parents can devote real time to them. Every worker gets five weeks vacation, and the family budget is enhanced with a monthly stipend of $110 for the first child. The stipend increases with each child, so the stipend for the fifth child is almost $200. Pre-kindergarten is universal and free for all children. Schools provide meals for all children. In school, children are immersed in a system focused on creativity, teacher and student autonomy, foreign languages, math and music. No surprise: 15-year-old Finns are the top in the world in education. And when a student goes to technical college or the university, there is no tuition. Instead, the student gets a living allowance!

The Finnish health care system covers everyone. A friend of mine recently had surgery which required two nights in the hospital. His total bill: $103.74, inclusive of surgery, hospitalization, care and medicines!

In retirement, people receive about 55 percent of their average earnings along with a $560 monthly housing allowance. The average pension, including the housing allowance, comes to about $29,000 a year. Full pensions start at age 63. It’s guaranteed, like our Social Security, so the Finns don’t have to worry and hope that their 401(k) performs well. They don’t need 401(k)s! How is this financed? The Finns pay 5.7 percent of their wages into the pension system, and 7.2 percent after age 53. Compare that to our 6.2 percent tax for our Social Security. Employers pay more: 23 percent.

So sure, taxes are higher in Finland. But it’s a shared investment the Finns use to build their economy. The Finns have figured out that once you provide a universal platform of educational opportunity and health and social security, then businesses can just focus on doing business, being innovative, creating new products and systems.

That is what the Finns do. It has a dynamic private sector, ranked third in the world by Grant Thornton accounting (the U.S. is ranked 12th). There are double the number of small and medium enterprises per 1,000 people in Finland compared to the U.S.

And the Finnish people don’t have to scrimp to pay $1,500 a month for child care, worry about how to take time off from work when they have a child, wonder how to pay $12,000 yearly tuition for a public university tuition, or risk bankruptcy in a medical emergency, or wonder about having enough to eat when they retire.

That means that they can grasp their future with hope. Can we?

John Burbank is the executive director of the Economic Opportunity Institute, www.eoionline.org. Email him at john@eoionline.org.

Talk to us

More in Opinion

toon
Editorial cartoons for Monday, Oct. 19

A sketchy look at the news of the day.… Continue reading

Courtney Normand, director of the Planned Parenthood-affiliated political group Safe & Healthy Youth Washington that is supporting a sex education requirement for public schools, poses for a photo Thursday, Sept. 24, 2020, in Arlington, Wash. Democrats in the famously liberal state say they want to protect young people from sexual abuse, diseases and infections. But the increasingly outnumbered and aggrieved Republicans have taken issue with the content of the standards as they rally for local control. The resulting referendum on the November ballot marks the first time in the country that such a decision on sex ed will be decided by voters. (AP Photo/Elaine Thompson)
Editorial: Yes on Ref. 90 serves parents’ choice, kids’ health

It assures — at parents’ option — all K-12 students can get age-appropriate sexual health education.

Housing Hope Sequoia project
Editorial: Project will aid education of homeless students

Housing Hope’s proposal to serve families of homeless students respects the concerns of neighbors.

Washington state Attorney General Bob Ferguson, center, speaks as King County Prosecuting Attorney Dan Satterberg, left, and Thurston County Prosecuting Attorney Jon Tunheim look on during a news conference about Ferguson's lawsuit challenging a Trump Administration practice of ICE arrests at courthouses Tuesday, Dec. 17, 2019, in Seattle. Washington state has sued the Trump administration over its practice of arresting people at courthouses for immigration violations, saying it interferes with the state's authority to run its own judicial system. (AP Photo/Elaine Thompson)
Editorial: Ferguson clear choice to lead state’s ‘law firm’

The AG has a proven record on issues of criminal justice, Trump’s over-reach and consumer protection.

Election vote icon for general use.
Editorial: Stanford, Duerr, Kloba for 1st Legislative District

The three Democrats have shown their ability to move useful legislation through both chambers.

Jay Inslee (left) and Loren Culp
Editorial: Tested by pandemic, Inslee deserves third term

The governor’s leadership and trust in science has saved lives and ultimately the state economy.

The candidates for Washington State Treasurer are incumbent Duane Davidson, a Republican; and state Rep. Mike Pellicciotti, D-Federal Way.
Editorial: Pellicciotti best choice for state’s treasurer

Current Treasurer Duane Davidson has many accomplishments but a poor committee attendance record.

Commentary: Debunking 5 myths about mail-in ballots

For starters, they don’t favor either party and the process isn’t rife with fraud.

Graham column on stuggles with depression was helpful

Thank you for bringing Ciera Graham to The Herald’s opinion page. I… Continue reading

Most Read