(Bloomberg) -- A former culture minister and one of Denmark's richest Cabinet members wants to bring about a socioeconomic revolution by targeting the nation's welfare addiction.
Brian Mikkelsen, now Denmark's business minister, this week presented measures designed to persuade households to put more of their savings in the stock market and to work longer hours. The proposals being pushed by the center-right government represent some of the biggest tax cuts in a generation.
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The initiatives will reduce the rich world's heaviest tax burden (the latest OECD figures show Danish taxes were about 47 percent of GDP in 2015) and encourage a spirit of risk-taking and self-reliance not normally associated with Scandinavian welfare states.
“We want to move toward a culture where people are more independent," Mikkelsen said in an interview in Copenhagen on Wednesday. "We want to reward those who start their own businesses and provide better conditions for them."
It's not the first time a Danish government has tried to cut taxes. In 2001, former NATO leader Anders Fogh Rasmussen set the economic agenda with a tax freeze that the opposition Social Democrats still blame for eroding the Danish welfare state. But Mikkelsen says a more market-based economy is the only way to save Danish welfare.
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"The fuel that propels the welfare society is people going to work every day," he said. "We want to have good hospitals and fund those unable to support themselves, but we can only do that if people want to work." He says the argument that you can't have both tax cuts and better welfare is “completely crazy."
Denmark already does well in ease of doing business rankings. And some economists question whether now is the time to cut taxes. Interest rates have been negative for half a decade, house prices are approaching pre-crisis peaks and there are bottlenecks forming in the labor market.
Economists including Jacob Graven at Sydbank suggest that adding fiscal stimulus to that cocktail could be dangerous. The government will raise its economic outlook for this year and the next, according to documents seen by Bloomberg and due to be published on Thursday. It will also need to borrow more via the bond markets to cover the gap left by less tax revenue, according to the finance ministry.
Meanwhile, Danes have displayed some pretty risk-averse behavior, placing record amounts of cash in deposit accounts that pay virtually nothing. Mikkelsen says that money would be put to better use in the stock market, which is why he's creating tax incentives to redirect savings. The goal is to spur job growth, he says.
"The point of this reform is to increase the advantages of working compared to not working," he said.“These numbers are all very clinical, but we believe this should also create a mental change, as the incentive to work becomes so much bigger."
To contact the reporters on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net, Nick Rigillo in Copenhagen at nrigillo@bloomberg.net.
To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Tasneem Hanfi Brögger, Christian Wienberg
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