What Countries Get For Their High Taxes

Contrary to its famous advertising slogan, Disneyland may not be the "happiest place on Earth." According to studies conducted through the Blue Zones Project, that distinction belongs to the tiny country of Denmark. How is this possible when the Danes pay the highest taxes in the world? What they get in exchange for their money includes complete health care coverage and educational expenses. The government also spends more money on its youngest and oldest citizens per capita than any other country.

A model of the modern welfare state, Sweden boasts high taxes that pay for a variety of social programs. These include retirement pensions, sick leave, parental leave, universal healthcare and childcare, and education through to college level. When all the taxes are added together, the highest rates approach 80% of individual income. Despite this, most Swedes are quite content with what they get in exchange for their taxes. Like Denmark, a relatively small population of about 9 million people allows for efficient benefit distribution and management by the government.

Belgium is no exception when it comes to high taxes across Western Europe. It sports a 34% corporate tax rate, 21% VAT and upper limit of 50% on personal income. In spite of those rates, the country still ranked 18th in the world in GDP while exporting over $300 billion worth of goods annually. The people enjoy a high per capita income and standard of living, and the country consistently ranks high in the quality of life ratings published in the United Nations Human Development Report. The welfare programs funded with the high taxes have kept the poverty rate low. While the country has a wide social safety net, there are indications that the substantial cost is beginning to take a toll on economic prosperity.

Italy may be a classic case of what happens when the will to work is supplanted by a reliance on government benefits. Burdened with a 43.3% tax-to-GDP ratio, the country imposes a personal income tax rate as high as 45% and a 20% VAT.  While government benefits are generous, there are signs of trouble on the horizon. Italy has not yet experienced the banking and housing implosions that hit Ireland and Greece, but slow growth may result in tax revenues coming in well short of future expenditures. taly's debt is projected to exceed 118% of GDP in 2010, a level that is unsustainable over the long term.

The future of socialism in Europe is very much in doubt. Several countries are teetering on the brink of insolvency as a result of decades of excessive government spending for the welfare state. High taxes have handled the burden in the past, but people are now living longer, they are drawing longer pensions and healthcare costs have continued to escalate. The ultimate questions will be: At what point is a country no longer too big to fail and will the other European nations get tired of bailing them out?