Cradle-To-Grave System Gets Rocky in Denmark

In addition to free education and universal health care, the linchpins of the welfare state model, Denmark provides an extensive list of social benefits enjoyed during a lifetime regardless of income. These include government-sponsored child-care checks, student stipends, unemployment benefits, early retirement funds, elder care and a state-funded pension program.
But in recent weeks, in light of the credit crunch and a growing public debt problem, Denmark’s generous public spending has come under scrutiny. Specifically, the state-funded pension program — which costs 96 billion kroner, or $16 billion, annually, an estimated 5.5% of gross domestic product — has fueled a discussion about the paradox of Denmark’s high earners receiving many of the same social benefits as the very neediest citizens.
The comments come as Denmark, long heralded as a model for economic and social stability, scrambles to reduce a public expenditure that last year surpassed 59 percent of G.D.P., clocking in at over 1 trillion kroner, while working to decrease a public-sector debt equal to 42% of G.D.P.
Mr. Bendtsen has suggested that anyone receiving more than 500,000 kroner annually from a private pension should be excluded from the state-funded program. The Danish Insurance Association, an industry group, calculates that there are only 4,000 people who fall into this category, or 1 percent of the 400,000 Danes who have private pensions.
Mr. Bendtsen’s trial balloon has attracted responses from several quarters of Danish society, and the comments have a similar thrust: Something must be done, but not at the expense of the social model.
Denmark has the highest overall tax burden of all O.E.C.D. member countries, with taxes to G.D.P. reaching 48.2% in 2009. Furthermore, numbers from the O.E.C.D. show that Denmark has one of the highest marginal tax rates for high earners — 67% — when consumer taxes are included.

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