In a time where economic inequality and environmental challenges top the agenda, the Red-Green Alliance (Enhedslisten) has presented a new tax proposal that has sparked a great debate among politicians and economists. The party’s proposal includes a one percent one-time wealth tax on fortunes over 35 million Danish kroner as well as an extra tax on banks that achieve above-normal profits. These taxes are intended to finance green initiatives such as government support for electric cars and electric bicycles.
Pelle Dragsted, the political spokesperson for the Red-Green Alliance, has had to defend the proposal against sharp criticism from the right-wing parties, including Venstre and the Liberal Alliance, as well as from the economic think tank CEPOS, which has criticized the proposal for being poorly substantiated. Dragsted argues that it is “fair” and an expression of “solidarity” for the wealthiest individuals and profitable banks to contribute more to society, especially at a time when Denmark is facing significant green transformations.
Critics have argued, among other things, that a wealth tax could lead to capital flight, and that the bank tax will ultimately impact bank customers. Dragsted dismisses these concerns and points out that according to economic theory, there is only partial shifting of corporate taxes onto customers, and there is no evidence that customers pay tax on above-normal profits. Furthermore, Dragsted defends the taxation of above-normal profits by pointing out that two years ago, EU countries introduced a similar tax, which was also retroactive. He criticizes CEPOS’ chief analyst, Otto Brøns-Petersen, for overlooking the fact that taxing above-normal profits does not necessarily lead to the negative distortion effects that Brøns-Petersen claims.
The debate over the Red-Green Alliance’s tax proposal clearly demonstrates the ideological fault lines in Danish politics, especially when it comes to issues of economic inequality and financing the green transition. While the proposal has faced opposition from the right-wing, it seems that the Red-Green Alliance is standing firm on their vision of a more just and sustainable society.