TANSTAAFL

The story is titled Denmark’s generous child care and parental leave policies erase 80% of the ‘motherhood penalty’ for working moms. The story begins with this premise: motherhood tends to depress women’s wages, something social scientists call the “motherhood penalty.”

Then it goes on to point out Denmark policies intended to help mothers stay full time employed.

• subsidized child care is available for all children from 6 months of age until they can attend elementary school. Parents pay no more than 25% of its cost.
• payments made to parents of children under 18. These benefits are sometimes called a “child allowance.”
• housing allowances, that are available to all Danes, but are more generous for parents with children living at home.
• In the year they first gave birth to or adopted a child, women received over $7,000 more from the government than if they had remained childless. 
• the Danish government offset about 80% of the motherhood earnings penalty for the women we studied. While mothers lost about $120,000 in earnings compared with childless women over the two decades after becoming a mother, they gained about $100,000 in government benefits, so their total income loss was only about $20,000.

What the article is saying is every woman who has a child receives $10,000 a year, simply because they had a child. Where does that money come from?

Denmark has one of the highest personal income tax burdens in the world. It includes:

• State income tax
• Municipal income tax
• Labor market contribution (AM-bidrag) – an 8% tax on gross income
• Optional church tax (if a member of the Church of Denmark)

Altogether, income-related taxes make up the largest share of total government revenue, with VAT taxes being the second largest share.

The median worker in Denmark makes about $89,000 per year, before taxes. Here is what happens to that:

• $33,000 is taken in payroll taxes
• an average of $3500 per year in VAT tax
• $4500 in a mandatory pension payroll deduction
• there are also other taxes for Capital gains, electricity, food, alcohol, etc. These other taxes average another $2000 per year.

In all, taxes take about 53% of the median Dane’s income. At any given time, roughly 30–35% of Denmark’s population receives some form of public transfer payment. That includes:

• Early retirement programs
• State pensions (old-age pension)
• Disability benefits
• Unemployment benefits
• Student grants (SU)
• Social assistance

With all of that, among working-age adults (roughly ages 18–64):

• About 15–20% receive some form of income transfer in a given year.
• A smaller share (often under 5–7%) receive long-term social assistance.

Another advantage Denmark has, is they have a different racial makeup.

If translated loosely into U.S. census-style categories:

• ~80–85% White
• ~5–8% Middle Eastern/North African
• ~3–5% Asian
• ~2–3% African

Now compare that to the US: In the US, about 45% of citizens are receiving government payouts, but in Denmark, college and healthcare are free of charge to the user.

So how does Denmark afford it? No one is excluded from income taxes. In the US, more than half of the country doesn’t pay income taxes.

Now imagine the howling if the US announced “free health care” and college, but changed to a simpler, no deduction, everyone pays income tax of more than 50%, up from the US average of about 30%. Yeah.