See Obama promise:

But now starting July 1, 2010, a new 10% federal tanning salon tax goes into effect. This tax is part of the new health care law.

So in fact, this is yet another example of the welfare state being supported by people other than “the rich.” A major theme on this website is that it’s impossible to support a large welfare state without putting the heavy burden on the middle class. Yet in every election cycle the Socialists/Democrats keep claiming just that and people somehow buy into this deception!

The tanning tax is just the tip of the iceberg. There’s a slew of new taxes (on non-rich people) coming up in 2011 as the “Bush tax cuts” expire in addition to more “Obamacare” taxes down the line.

New Jersey cannot solve this problem by raising taxes. “[W]e have revenue going down, not up even though we’ve raised taxes every year,” says NJ Gov. Chris Christie.

A major contributor to New Jersey’s bloated budged is state worker benefits. A state worker could retire after 25 years at age 49, contribute $124,000 toward retirement, and get back $3.8 million in pension and health benefits over the rest of his lifetime.

The money to finance this excessive retirement plan isn’t exactly money that’s going to save the poor from the evils of capitalism. Then why is a liberal state such as NJ spending it? Could this be because of socialist greed? Or perhaps it’s because once a state acquires money in the name of the poor it just spends it which ever way…

Watch the interview with Gov. Christie here:

The core explanation for why this is so, is that a tax increase discourages people from engaging in the taxable activity, (earn income in the case of income tax,) and it encourages them to avoid the tax (by shifting money around, taking it out of the country, etc.) or even illegally evade it, thereby reducing the tax base. At some point, the increase in tax rate is not enough to compensate for the reduction in tax base, resulting in a reduction of tax revenues despite the rate increase.

Now, it is debatable at which point tax revenues start decreasing with increasing rates. However, it is apparent, that there is no tax rate for “the rich” sufficient to support a significant expansion of the welfare state. The evidence is the tax structure of the social democracies in Europe, whose tax rates are considerably higher than those in the U.S. for lower income brackets. In addition, sales taxes, which are paid by all regardless of income, are considerably higher in Europe than in the U.S. Those tend to hover around 20% in most of Europe, a figure which is twice as large as that of the highest sales tax state in the U.S., California. If anyone could figure out how to support a large welfare state by soaking the rich, it surely is a Western European socialist, but no one did!

Therefore, any politician claiming he/she will soak the rich for “social justice” is being very dishonest, to put it delicately.

To learn more about the Laffer curve, watch the following series of videos. They do a great job explaining these concepts.

Here’s a Fox News segment chronicling the event, with Charles Krauthammer’s version of the answer:

Denmark, as you may know, is a country with quite a lot of social programs. And so the argument goes: Denmark has a lot of socialism and is a successful country, therefore socialism is good.

There are two main problems with this argument:
1. Is socialism the cause of Denmark’s relative success? Or are there other more significant contributing factors? (Answer: Yes there are.)
2. Is Denmark really such a smashing success? (Answer: No, it’s not.)

Let’s look at problem #1:

Denmark’s population consists of no more than two guys named Bjorn for crying out loud! Yet people are so ready to use it as a general example with comparisons to the U.S.

Thought Experiment: Let’s just try Denmark’s policies in the U.S. and see how it all works out… will it work out the same way?

Denmark is a tiny country with a homogeneous society, which has been settled in the same place for many generations. It’s of a specific European culture and ethnicity, and has a uniform mindset with strong collectivist tendencies that look down upon extraordinary success.

Now, *WITH SARCASM* I can’t possibly imagine why similar collectivist welfare policies won’t work the same in the U.S.?

The United States, in contrast to Denmark, is a huge country with an extremely diverse population. It has very large population segments originating from very poor 3rd world countries, and a much more individualistic mindset. Therefore, any socialist program implemented in the U.S. has a much greater potential of becoming an unsustainable burden on (the productive part of) society.

Comparing Denmark to the U.S. is essentially equivalent to cherry-picking the best working tiny part of European socialism and facing it off with the whole U.S. This is like taking stats for just American Jews, for example, and comparing those to stats of Europe as a whole. Who do you think is going to come out ahead?

And now for problem #2:

Is Denmark really that successful? Despite its clear cultural advantages over the U.S. (from the perspective of making socialist policies work), and its “cherry picked” tiny size, it’s far from being a clear winner in standard of living and economics… to say the least!

The arguably most successful part of European socialism isn’t as great as many make it out to be.

Here are some stats:

The average (2007) full time wage in Denmark is $39,143. In the U.S. it’s $49,483. 26% more. (Source: Wikipedia)

It is also true that in the U.S. the average worker works 25% more hours than in Denmark. (Source: Wikipedia) So one may argue that most of the increase in earnings is due to more work and hence less free time. However, it’s also indicative of greater opportunity for full employment or more work if one should choose to. And furthermore, the total household income in the U.S. is more than that of Denmark’s over and above the 25% increase in working hours…

The average (2004) household income in Denmark is $22,524. In the U.S. it’s $32,195. 43% more. (Source: Wikipedia)

In Denmark people receive more services and assistance from the government than they do in the U.S., however, they also pay WAY more taxes, and material things are WAY more expensive.

The income tax in Denmark goes up to 63%, the highest rate in the world. (Source: Wikipedia) And don’t think that it’s only a few rich people who pay that tax rate. The highest tax bracket in Denmark starts at 347,200 DKK (2009), which is about $66,000 per year. (Source: TaxInDenmark.com)

Denmark has a value added tax (a.k.a VAT, which is similar to sales tax) of 25%, again the highest in the world. By comparison, the highest sales tax levied in the U.S. is about 10%. (Source: Wikipedia) But it doesn’t end there. In addition to the general VAT, citizens are required to part with more of their money for special things the government targets for extra taxation. Cars, for example, are taxed at around a 200% level, making 2/3 of the cost of a car in Denmark go to taxes. This is effectively like paying for a luxury car and getting a compact.

So first the major portion of your income is taken away, and then to add insult to injury, the government makes sure that whatever you can buy with the measly remnants of your money is much more expensive.

Now, with all that in mind, I think it’s instructive to watch Oprah’s profile of “wonderful” Denmark. Notice how when Oprah visits a “typical” Danish family’s apartment, she keeps repeating stuff like, “this is your whole bedroom?”, “that’s your whole refrigerator?”, “this is the whole bathroom?”, “this is the bed?”, etc. Oprah is shocked at how small and spartan everything is. And that apartment is actually rather upscale as far as Copenhagen apartments go.

Here is a link to the video of Oprah’s Danish apartment tour on her Web site.

In addition to the austere, but supposedly happy lifestyle of its people, Denmark is facing long term problems.

The citizens of Denmark are reportedly among the happiest in the world. They are so happy, in fact, that young educated people who have a shot at earning a good salary are leaving Denmark in large numbers to work and earn elsewhere.

They get a government paid education in Denmark, and then leave to work where taxes are lower. How can this possibly be sustainable? This New York Times article describes the ramifications of the problem, which include a skilled labor shortage.

Hawaii is not the only state doing so. And if such laws were enacted by all 50 states, a situation could arise that would require companies that do not operate in multiple states to deal with the burden of 50 separate state tax bureaucracies.

Rather than deal with Hawaii’s bureaucracy, Internet retail giants Amazon and Overstock decided to sever relationships with all affiliates in Hawaii, and thereby prevent anyone who wishes to earn from referring Web traffic to retailers, from doing so.

Due to Hawaii governor’s veto, Amazon announced it would resume its relationship with affiliates in the state. Amazon and Overstock also pulled the plug on their affiliates in North Carolina and Rhode Island, states which enacted similar laws to Hawaii’s, and hinted they would reestablish ties if those states’ new tax collection laws were repealed.

The moral of this story is that governments, especially democracies, are extremely limited in the amount of revenues they can raise from increasing taxes. This is because people will adjust, or avoid the taxed activity altogether, which is particularly easier for the walthy to do.

For some reason, the socialists either don’t understand it, or purposefully ignore this fact in their delusional pursuit of a government that takes care of all the needs of everyone.

In the following video, Dick Morris discusses the forthcoming Obama taxes on the middle class: