Danish Property over-taxation keeps Youth from Buying Property

In a new report, the National Audit Office of Denmark criticizes the Danish tax agency for over-taxation of properties. According to the audit office, three out of four properties have been wrongly evaluated. The overtaxation on top on already-high taxes risks keeping young people from buying property and starting families.

A new report has shocked Denmark. According to it, 41% of all properties in Denmark have been overtaxed. Incidences like those make it very difficult to trust a tax agency, especially since Danes already suffer from one of the world’s highest tax burdens (49% of GDP is used on governmental spending). For property taxes alone, an average homeowner in some of the wealthier municipalities pays about DKK 45,000 (6,000 EUR) a year.

This is, simply put, a scandal. And while it hits property owners the hardest, high property taxes also lead to both higher rent rates and prevents young people from buying property. This is a problem on a multitude of levels. First of all, there is the risk that the public stipend of around 5,000 DKK (670 EUR) monthly to Danish students, which is already among the highest in the world, is too low to help pay rent, pushing taxes even higher to raise the stipend. Secondly, for most people, buying your own property and starting a family go hand in hand.

Unfunded liabilities in the social security system (especially in healthcare and the pension system) are indicators for a potential collapse of tax- or contribution-funded pay-as-you-go systems. Our generation is aware of the lack of inter-generational justice in Denmark and tries to build up private savings for our retirement. Raising the price of acquiring and owning property, which also serves as a private way of saving, in no way helps solving the problem of an uncertain future of the public pension system.

We Danes already have very low trust in our taxing agency after many previous scandals and this might be the drop that makes the bucket overflow. There is a huge need for both a simplification of the taxes and for cutting taxes in general. One of the most important things would also be to lessen the rights of the tax agency that, for example, last year gained the right to walk into people’s private property without a warrant if they suspect fraud.

Being taxed for owning property is already economically and morally questionable. Being overtaxed due to government-caused over-evaluation of properties is definitely a violation of the principles of the rule of law and illustrates how tax authorities act as if they were above the law.

This is why my generation demands that overtaxation of property ends. This would lower rents and to help us achieve the dream of homeownership.

If you’d like to speak with or book Rasmus or any of our other Advocates, please contact Young Voices now.

How Lehman Brothers’ Crash Five Years Ago Made Me Appreciate Markets

Five years ago this coming Sunday, Lehman Brothers failed and with it the Great Recession accelerated. For me it had been the start of something wonderful! I have discovered my passion for ideas. In 2007/2008 I did not understand what was happening. I could not find any convincing arguments as to how the crisis happened. Blaming greed or capitalism in itself seemed too simplistic to me.

Thus, I started researching financial deregulation, Fannie Mae and Freddie Mac, fair-housing policies, mortgage-backed securities, and the role of central banks. Eventually, I stumbled across the business cycles theory of the economists Ludwig von Mises and Friedrich von Hayek. Their body of work made sense to me and gave me a whole new perspective. I have not stopped studying markets and governments since.

According to Mises and Hayek, when central banks artificially lower interest rates it leads to increased liquidity in the banking system, which is meant to increase the availability of loans. With lower interest rates more investments become realizable. Projects get started, workers get hired, consumption and taxes are rising. The economy is doing well, so what is the problem?

The problem is that all the investment projects depend on real savings; on goods and services available within the economy. A mere increase in paper money cannot replace a lack of savings. At some point investors realize that their projects cannot be finished since there are not enough savings in the economy, prices will go up, and investments become unprofitable. The bubble bursts. This is what happened in the last financial crisis and during many other periods of financial distress. Artificially low interest rates fueled a boom, millions of unneeded houses were built, and the phony wealth disappeared. Admittedly, there are many facets to a crisis and no theory can explain it all. However, the briefly outlined business cycle theory by economists associated with the Austrian School has a lot of merit and explanatory power.

Opponents of the “free market” are correct when arguing that deregulation and some inventions within the financial system contributed to the crisis. However, what they often fail to recognize is the interwoven nature of the system of modern day “capitalism.”

Deregulation of these financial assets was being tackled under the pretext of giving every American the chance of owning his or her own home. That these policies also benefitted powerful interests in finance made it the perfect policy storm.

In and amongst the crash, Lehman Brothers failed. It was supposed to fail. There should have been more bankruptcies. These were prevented by the interlinked nature of big finance and big government. The results were bailouts, regulation and an economy that after five years is still very slowly recuperating. What are the underlying problems that led up to this situation? Is it the greed of bankers or the political power? Most people nowadays want to see tighter controls on markets, capital controls, and more regulation. Bigger government is the proposed solution to big business. What no one has explained to me so far is how big business can be refrained from capturing this regulatory process once again. Many of the presented answers are piecemeal approaches that lead, if thought through, to a spiral of interventionism to make the fixes air-tight.

What a prosperous society needs is a system that rewards behavior which benefits the whole and punishes undesired actions. Of course, no feedback system is perfect, since human beings are imperfect. However, the profit and loss system is a beneficial feedback system which has enabled us to live in a world with laundry machines, with phones that are more powerful than older computers, and a world in which pencils are being created even though no single person has all the knowledge needed to build one.

Within politics we do not have such a feedback mechanism. The people crafting fair housing policies did not pay for their mistakes. Maybe some got replaced by other politicians but where do we see changes? Interest rates have been at 0.25% for four years. Banks are even bigger now than they used to be. Politically connected businesses make huge profits. Unemployment is only going down because more and more people are exiting the labor force and economic growth is lagging behind.

These are the results of a system that gives few people power to steer a complex society. The Pretense of Knowledge to believe that society can be molded via the swift hand of the regulatory pen into any shape desired is a mirage. Studying markets and ideas have made me more humble in terms what politicians can achieve and more excited about what peaceful cooperating individuals can accomplish under the stability of the rule of law and a non-invasive government. The collapse of Lehman Brothers opened up a whole new world to me. For this I am thankful and I hope that more people start questioning the status quo without having another major crisis.

If you’d like to speak with or book Wolf or any of our other Advocates, please contact Young Voices now.

Young Voices Advocate Radha Gordon Writes About Immigration for the Daily Caller

On September 11th Young Voices Advocate Radha Gordon got published in the Daily Caller, stating that “Young people understand amnesty is a right, and a benefit.”

On Monday Caroline May reported that the National Association of Former Border Patrol Officers opposes amnesty because it will lead to greater numbers of people immigrating to the U.S., both documented and undocumented.

The story quotes NAFBPO chairman Zach Taylor extensively, who complains that immigration laws are not being enforced aggressively enough. Perhaps that’s because the web of laws and procedures surrounding legal immigration are arcane, unreasonable, and unworkable.

Read the rest here.